If you’ve dreamt about early retirement, then you may have heard of a Roth IRA conversion ladder as one way to provide income. But what does this entail and how do you know whether it’s right for you? If your retirement plans include retiring early, and you want to access some of your hard-earned savings without paying taxes on withdrawals or paying early withdrawal penalties, then you’ll want to understand the Roth IRA conversion ladder. Roth IRA: The Basics As you probably know, there are multiple types of IRAs (investment retirement accounts). A Roth IRA is one type that Read More
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We recently covered a Roth IRA conversion ladder as one potential strategy for converting 401(k) or traditional IRAs to a Roth IRA. But there are some other key strategies that are good for high-income earners to know. First, why (and why not) a Roth IRA? There are quite a few tax benefits to a Roth: funds grow tax free, you can take tax-free withdrawals in retirement, and there are zero required minimum distributions (RMDs). Another perk is that Roth income is not considered in the income calculation when it comes to taxation of Social Security benefits and in determining Read More
Will you outlive your retirement savings? That’s the big question posed by longevity risk. Here’s what you need to know about this risk and how it could affect you financially. For retirees, there is a real risk that you will live longer than expected and deplete the funds you’ve saved. Not only is it impossible to project how long you’ll live (more than half of Americans in a Society of Actuaries study underestimated this), it’s also difficult to gauge just how long your savings will last. Part of this has to do with increasing life expectancy in the United Read More
Unlike your commute or those conference calls, income taxes don’t go away once you hit retirement. In fact, income taxes can be your single largest expense in your retirement years, which means it’s important to have a sense of what’s coming, so you can plan for it. However, many retirees don’t have a good grasp on what exactly qualifies as taxable income during retirement and how large a tax bill they can expect. In addition, many find they’re not actually in a lower tax bracket than when they were working. This can feel counterintuitive, but in retirement, you may Read More
Calculating how much you can safely spend in retirement means knowing your retirement withdrawal rate. Here we address some common questions about how you can avoid running out of money in retirement. What is the withdrawal rate? This is simply the rate you withdraw each year for living or other expenses throughout retirement, and it is typically expressed as a percentage of your initial balance. It’s often called a sustainable withdrawal rate (SWR) or the 4% Rule. This rule of thumb was based on historical stock and bond returns from 1926 to 1976, and is indicative of how long Read More
Married couples have more options than single people do when it comes to Social Security benefits. That’s because each member of a couple can opt to claim at different ages and may also have access to spousal benefits. To maximize Social Security, you and your spouse need to work together to identify the claiming strategy that’s best. Here are a few potential strategies for you to know about and to discuss with your wealth advisor, who can help you understand the complexities of each and how they may apply to your financial plan. Strategy #1: Delay filing for benefits Read More
Investing isn’t just about how much money you have to invest or where to invest it. A good investment strategy takes in another important component: Time. What is the investment time horizon? The time horizon for an investment refers to how long you will have the money held in the investment before you need the funds, whether for retirement or some other purpose, like a child’s college tuition. The length of time you’ll be invested will vary depending on the ultimate financial goal. Where risk tolerance comes into the picture Generally speaking, the longer the time horizon, the more Read More
If you have (or anticipate having) significant family wealth and would like to ensure that you’re able to create a family legacy and ensure family members receive the wealth, you may want to set up a trust. What is a family trust? A family trust is a legal, documented way to ensure that your wealth is managed according to your wishes on behalf of your beneficiaries. You can use a family trust to specify what share of assets your family members can access and when (for example, a child can access their share on their 30th birthday). There are Read More
Have you worked hard and find yourself in a solid financial situation? Feeling pretty good about your net worth? Guess what: Wealthy people need the scoop on secrets to financial success, too. You likely didn’t get to this point of not worrying whether there’s money in your bank account without some smart money management, but that doesn’t mean you can’t benefit from learning a new financial lesson or two. Here are seven financial “secrets” you should know. Invest early and often It can’t be said enough: There’s enormous power in beginning to invest early, thanks to compound interest. There’s Read More
Is the so-called “Great Wealth Transfer” on your radar? You might have heard this term, but what does it mean — and more importantly, what does it mean for you? The baby boomers are retiring, and it’s this generation that holds a substantial majority of wealth in our country. They are said to be the first generation in United States history to do better than their children, the Gen Xers and Millennials. It’s estimated that their assets are valued in the trillions of dollars, anywhere from $15 trillion to $68 trillion, thanks in part to the fact that they came into the Read More