March 10, 2025 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage. Here are this week’s items:

The High Net Worth Guide to Secure Your Retirement

Murs discuss the essential steps to creating a comprehensive financial plan designed for high-net-worth retirement. Joined by Nick Hymanson, CFP®, they walk through the emotional and financial transition from accumulating wealth during your working years to distributing that wealth to fund your retirement. …..

The High Net Worth Guide to Secure Your Retirement

When you’ve spent your life building wealth, transitioning from work to retirement can feel overwhelming. At Peace of Mind Wealth Management, we specialize in financial planning for retirement, and through our years of experience, we’ve seen what works—and what doesn’t—when preparing for this major life milestone. In this retirement planning guide, we’ll explore the key strategies high net worth individuals should consider……

A High Net Worth Guide to Secure Your Retirement

When you’ve spent your life building wealth, transitioning from work to retirement can feel overwhelming. At Peace of Mind Wealth Management, we specialize in financial planning for retirement, and through our years of experience, we’ve seen what works—and what doesn’t—when preparing for this major life milestone. In this retirement planning guide, we’ll explore the key strategies high net worth individuals should consider, including managing sequence of returns risk, structuring your retirement investment strategy, planning for long-term care, and optimizing retirement withdrawal strategies.

So, whether you’re wondering “is it time to retire?” or trying to decide “when should I retire?“, this comprehensive guide will walk you through what it takes to secure your retirement.

The Shift From Work to Wealth

For many high-net-worth individuals, the hardest part of retirement isn’t financial—it’s emotional. After decades of saving, shifting from earning a paycheck to relying on your wealth can feel uncertain. The fear of running out of money or not having enough for the lifestyle you envisioned is real, but with the right strategy, it doesn’t have to define your retirement.

Along with the fear of running out of money comes questions like:

  • What if the market crashes early in my retirement?
  • How can I protect my wealth from unexpected downturns?
  • What’s the best way to create income in retirement?
  • How do I protect myself from rising costs like healthcare and inflation?

These concerns are valid. Fortunately, there are proven strategies to protect against these risks.

Managing Sequence of Returns Risk

One of the most significant but least understood dangers to high net worth retirement is sequence of returns risk. This risk refers to the impact that the timing of poor market returns can have on your retirement savings, especially when you’re making regular withdrawals.

Consider this: Two retirees each start with $1 million. They withdraw the same amount annually and average the same return over a decade. But one retiree experiences negative returns in the early years of retirement, while the other experiences those negative returns later. Even with the same average return, the retiree who faced early losses may run out of money much faster.

This is why managing sequence of returns risk is critical. Having a retirement investment strategy that prepares for market downturns from the start helps protect your assets, ensuring you can keep paying yourself for decades to come.

The Three Bucket Strategy: Building a Solid Investment Foundation

To mitigate sequence of returns risk and stabilize your retirement income, we often recommend the Three Bucket Strategy. This retirement investment strategy divides your assets into three distinct categories:

  1. Cash Bucket: This is your easily accessible money. It’s held in high-yield savings or money market accounts and is designed to cover emergencies and short-term expenses. For some, this might be $20,000. For others, several hundred thousand dollars. The right amount depends on your comfort level and cash flow needs.
  2. Safety and Income Bucket: Designed to provide predictable income with limited or no market risk, this bucket covers your essential expenses. The goal is to generate a stable return—typically in the 4% to 8% range—to fund your retirement withdrawal strategies without worrying about market volatility.
  3. Growth Bucket: This is your long-term growth engine. Invested in the market through stocks, ETFs, and alternatives, this bucket is meant to outpace inflation and support your financial needs 10, 20, or even 30 years into retirement.

By strategically allocating your assets into these buckets, you create a system where your essential income is protected while your long-term assets continue to grow.

Long-Term Care Planning for High Net Worth Individuals

Another major concern for retirees is long-term care. Costs for assisted living, nursing homes, and in-home care have risen dramatically and show no signs of slowing down. For high net worth individuals, long-term care planning is essential—not just to cover costs, but to protect your estate from being drained by healthcare expenses.

We work with our clients to create long-term care planning solutions that align with their overall retirement income planning goals. This may include hybrid long-term care insurance, self-funding strategies, or incorporating long-term care costs into the safety bucket of the Three Bucket Strategy.

Tax Strategies in Retirement

A major piece of risk management for high net worth individuals is managing taxes. Many retirees hold significant assets in pre-tax accounts like 401(k)s and IRAs. Without proper tax strategies in retirement, you may pay far more than necessary in taxes over your lifetime.

Tax planning should be integrated into your retirement checklist and considered before you retire. Strategies may include:

  • Roth conversions during lower income years
  • Tax-efficient withdrawal strategies
  • Managing Required Minimum Distributions (RMDs)
  • Coordinating Social Security and pension income with other taxable income

 

Crafting Your Peace of Mind Pathway

At Peace of Mind Wealth Management, our process for planning retirement revolves around what we call the Peace of Mind Pathway. Think of it as a GPS for your retirement journey. We help you define where you are today, where you want to go, and how to navigate the bumps along the way.

The Peace of Mind Pathway has three key phases:

  1. Roadmap: We analyze your current financial picture, define your retirement goals, and identify the best path forward.
  2. Implementation: We put your custom plan into action, from investment adjustments to cash flow planning and risk management.
  3. Nurture: We continue monitoring your plan, adjusting as life changes, tax laws shift, and markets evolve.

This process ensures your plan is not only set up correctly but remains optimized for your evolving needs.

Is It Time to Retire? How to Know You’re Ready

Whether you’re five years away from retirement or contemplating if now is the time, having a clear plan is essential. High net worth individuals have more moving parts in their retirement strategies, which means more opportunities—but also more complexity. The earlier you start planning, the more options you have to protect and grow your wealth.

At the end of the day, retiring comfortably isn’t about hitting a magic number. It’s about having a strategic plan that provides reliable income, protects your lifestyle, and gives you peace of mind.

To learn more, read the article “Is It Time to Retire? Key Considerations”.

 

Ready to Secure Your Retirement?

By building a thoughtful plan that includes strategies for retirement income planning, risk management, long-term care planning, and tax strategies in retirement, you’ll be well on your way to retiring comfortably and living the life you’ve worked so hard to create

Schedule your complimentary 15 minute call with us if you have any questions about A High Net Worth Guide To Secure Your Retirement.

November 18, 2024 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for November 18, 2024

How Much Money Do I Need Saved to Spend 10,000 Per Month in Retirement?

Radon and Murs discuss the question many retirees and pre-retirees ask: “How much money do I need saved to spend $10,000 per month in retirement?” This is a highly specific question that requires a tailored approach to retirement planning. Radon and Murs reverse engineer this scenario…

 

How Much Money Do I Need Saved to Spend 10,000 Per Month in Retirement?

Retirement is something many of us dream about after years of hard work and diligent saving. One of the biggest questions that might come to mind as retirement approaches is, “How much do I really need to save to enjoy the lifestyle I want?” Specifically, you might be wondering how much money you’d need in savings and investments to spend $10,000 per month in retirement….

How Much Money Do I Need Saved to Spend $10,000 Per Month in Retirement?

Retirement is something many of us dream about after years of hard work and diligent saving. One of the biggest questions that might come to mind as retirement approaches is, “How much do I really need to save to enjoy the lifestyle I want?” Specifically, you might be wondering how much money you’d need in savings and investments to spend $10,000 per month in retirement.

We’re here to help answer that question by breaking down the numbers, exploring different planning strategies, and addressing key factors that could affect your savings goal. From Social Security to inflation, sequence of returns risk, and more, we’ll guide you through the considerations to help you build a reliable retirement income. By the end of this blog, you’ll have a clearer picture of the steps needed to secure your retirement and achieve peace of mind.

Understanding Your Spending Needs

The first step is to determine your retirement spending goals. Let’s say you’ve worked hard, saved consistently, and want to spend $10,000 monthly in retirement. To achieve this goal, you’ll need to factor in Social Security, other income sources, and your savings strategy. For example, if Social Security benefits cover $6,000 of that total, you’ll need to find a way to generate the remaining $4,000 monthly. This is where personalized retirement planning becomes essential.

How Much Do You Need to Save?

To figure out how much to save, we can apply the 4% rule for retirement. This rule suggests that retirees can withdraw 4% of their retirement portfolio per year without depleting their savings over a 30-year retirement. It’s a good starting point, though not a one-size-fits-all solution.

Based on this rule; to generate $48,000 annually ($4,000 per month) after Social Security, you would need a retirement portfolio of roughly $1.2 million. This calculation assumes a 4% withdrawal rate. However, due to factors like market volatility and inflation, some experts recommend using a more conservative withdrawal rate, like 3% or 3.5%, which would increase the savings requirement to around $1.4 million.

Factors that Impact Your Monthly Budget

When planning to spend $10,000 per month in retirement, consider how factors like taxes, inflation, and market volatility will affect your financial security. Here’s a closer look at each:

  1. Taxes: Whether you aim for a gross or net $10,000 can significantly impact your strategy. Funds from sources like a traditional IRA are taxed as ordinary income, while long-term capital gains from brokerage accounts might be taxed at a lower rate. Roth IRA distributions, on the other hand, can be tax-free, making your tax plan a key element in reaching your monthly income goal.
  2. Inflation: Inflation gradually erodes purchasing power, making it essential to account for it in your retirement plan. A 3% annual inflation rate, based on a historical average, is typically used to project future expenses. This means that the $10,000 you aim to spend today will need to grow over time to maintain the same lifestyle. Personalized retirement planning can help you adjust for inflation and avoid underestimating your income needs.
  3. Market Volatility and Sequence of Returns Risk: Market volatility can have a lasting impact, especially early in retirement. When you retire, a market downturn can reduce your portfolio’s value and make it challenging to sustain your desired income without overspending. This risk, known as sequence of returns risk, is why some retirees use a diversified approach to protect their income, such as combining “growth” and “safety” buckets.

Mitigating Sequence of Returns Risk

Sequence of returns risk refers to the potential loss of funds due to withdrawals during a market downturn, especially early in retirement. Imagine you’ve saved $1 million and are withdrawing 4% each year. If the market declines by 20% shortly after you retire, the impact could be lasting, as you’re drawing from a declining balance without time for recovery.

One effective way to combat this is through a two-bucket approach: a growth bucket and a safety bucket.

  • The growth bucket contains market-exposed investments that grow over time but come with some risk. This bucket can yield higher returns but should be left untouched during market downturns.
  • The safety bucket is for short-term needs, holding principal-protected assets that grow steadily. By drawing from this bucket during market lows, you avoid selling assets at a loss, preserving your growth bucket’s potential.

Balancing Your Retirement Goals with Lifestyle Needs

Personalized retirement planning isn’t solely about math. It’s also about aligning your savings strategy with your desired lifestyle. For instance, if you want to travel extensively in the first decade of retirement, you might initially need a higher budget. Many retirees anticipate a decrease in spending as they age, assuming they’ll eventually travel less. Adjusting your spending expectations over time can be a valuable approach to retiring comfortably.

Creating Your Peace of Mind Pathway

Retirement planning involves more than setting a savings goal. It’s a retirement checklist that includes investment planning, tax planning, and estate considerations. With a comprehensive and structured approach, you can optimize each part of your retirement to secure your peace of mind. Our Peace of Mind Pathway simplifies retirement planning into clear, actionable steps, allowing you to focus on your priorities, like family, travel, and personal goals. This pathway considers:

  • Investment Planning: Ensuring a well-diversified portfolio to balance risk and growth.
  • Tax Planning: Creating tax-efficient withdrawal strategies to minimize liabilities.
  • Healthcare Planning: Addressing potential medical costs and insurance needs.
  • Estate Planning: Protecting your legacy and ensuring your assets are distributed according to your wishes.

When to Start Thinking About Retirement

If you’re wondering, “Is it time to retire?” or “When should I retire?”, a good starting point is an analysis of your financial readiness, lifestyle goals, and health. Retirement planning is a personal journey, and having a strategy that adapts to your needs is vital to secure your retirement.

The Role of Professional Guidance

Every retiree’s situation is unique, which is why personalized retirement planning is essential. There’s no universal answer to questions like “What is the 4% rule of retirement?” or “How do I manage budgeting on social security?” Consulting a professional to help analyze your expenses, determine optimal withdrawal rates, and implement strategies to address risks like inflation and market downturns is a good start for many in retirement planning.

If you have some questions about how this may fit your situation, schedule a 15 min call with us on our website. If we can’t answer all your questions in just 15 minutes, we’ll guide you to the next steps to find the answers you need.