Search Results

If you're looking for reliable investment options as you get closer to retirement, you've probably heard of ETFs or Exchange-Traded Funds. These handy investment tools can be a great way to potentially grow your nest egg. But did you know that some ETFs can also provide you with a regular income stream through dividends? Dividends are a portion of a company's profits that are paid out to shareholders. They can be a fantastic way to generate extra income, especially as you approach retirement. So, the big question is: Can an ETF pay dividends? Let's dive in! See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Understanding ETFs Before we explore the world of dividend-paying ETFs, let's understand the basics. An ETF is a basket of investments, like stocks or bonds, that trade on an exchange, just like stocks do. Some of the primary benefits of ETFs from an investment standpoint include the ability to easily diversify your portfolio, add liquidity to your investments, and improve your tax efficiency. Here's how ETFs are different from some other investments: Mutual Funds:  Unlike mutual funds, which are typically priced at the end of the trading day, ETFs trade throughout the day, giving you more flexibility. Stocks:   When you buy an ETF, you're essentially buying a tiny piece of many different companies or assets in a single transaction. This built-in diversification lowers risks. ETFs have become incredibly popular with investors of all kinds because of their convenience, cost-effectiveness, and ease of trading. What are the Benefits of Dividend Income? Dividend income offers investors several compelling advantages, making it a valuable component of many investment strategies: Inflation Hedge:  Companies that consistently pay and grow their dividends may help your income keep pace with inflation to some degree. As companies grow their profits, they often increase dividends over time, helping offset the rising cost of goods and services. Companies may also reduce or eliminate their dividends which can be an added risk. Steady Income Stream:  Dividend-paying stocks and ETFs may provide a predictable source of income, especially during retirement. This regular cash flow can supplement other sources of income or be used to cover living expenses. Reduced Volatility:  Stocks that pay dividends often exhibit lower price volatility compared to non-dividend-paying stocks. This is because they tend to be established, mature companies with stable earnings. Automatic Reinvestment:  Many brokerage platforms offer Dividend Reinvestment Plans (DRIPs), which allow you to automatically purchase additional shares of the stock or ETF with your dividend payments. This effortless compounding can lead to significant growth over time. Long-term Growth:  While dividends provide immediate income, they may also contribute to long-term wealth building. Reinvesting dividends can accelerate compound growth, leading to a larger portfolio value over time. Additionally, companies that consistently increase their dividends tend to demonstrate financial health and solid business models . Tailored Cash Flows:  Investors can strategically choose dividend-paying stocks and ETFs with different payout schedules (monthly, quarterly, etc.) to create a customized income stream that aligns with their specific needs. For example, a retiree may prefer monthly dividend payments to match their regular expenses. The Mechanics of Dividends in ETFs Now, let's unpack dividends. Companies often share a portion of their profits with their shareholders as dividends. This is a reward for investing in them. But, can ETFs pay dividends? Here's the exciting part: Yes, ETFs that hold dividend-paying stocks can pass these dividends on to you, the ETF investor! Here's how it works: Collection:  The ETF collects all the dividends paid by the individual stocks it holds within its portfolio. Distribution:  The ETF then distributes those dividends to its shareholders, usually on a quarterly basis (but schedules can vary). Types of Dividend-Paying ETFs There's an amazing variety of dividend-paying ETFs to choose from: Dividend-Focused ETFs:  These ETFs specifically track stocks of companies with a history of paying out strong and consistent dividends. Bond ETFs:  Some ETFs invest in bonds, which offer interest payments rather than dividends. REIT ETFs:   Real Estate Investment Trusts (REITs) are required to pay out a large portion of their income as dividends and are often found in dividend-paying ETFs. Some popular dividend-paying ETFs include the Vanguard High Dividend Yield ETF (VYM) and the Schwab US Dividend Equity ETF (SCHD) . "Dividend yield" is an important term to know. It's a percentage that tells you how much an ETF pays in dividends each year compared to its price. Benefits of Dividend-Paying ETFs So, why consider dividend-paying ETFs? Here's the scoop: Income Generation:  The most obvious benefit is an added stream of regular income, which can be especially useful during retirement. Cash Bucket: Refill cash in your portfolio to help with systematic distributions and withdrawals to help fund your lifestyle. Diversification:  ETFs naturally diversify your investment across different companies or sectors, reducing your overall risk. Tax Considerations:  In some cases, qualified dividends can be taxed at a lower rate than ordinary income, giving you potential tax advantages. Considerations Before Investing in Dividend-Paying ETFs Dividend-paying ETFs can be a smart addition to your portfolio, but it's important to be aware of a few factors: Fees:  All ETFs have management fees. These fees can eat into your returns from the dividends. Payout Schedule:  Understand how frequently the ETF pays dividends, and consider how that aligns with your income needs. ETF Holdings and History:  It's wise to check out the performance history of an ETF, as well as what specific stocks or holdings it contains. Concentration Risk: Too much allocation of your portfolio toward dividend stocks may limit your exposure to other types of stocks that can also be a valuable component of your retirement income plan. How to Invest in Dividend-Paying ETFs Here are some key things to think about when you're choosing ETFs for your investment strategy: Your Goals and Risk Tolerance:  Do you need consistent income? Are you comfortable with some degree of risk? Match the ETF to your specific needs. Monitor Your Dividends:  Remember that companies can change their dividend payouts, so keep an eye on the performance of your dividend-paying ETFs. Financial Advisor:  It's always a great idea to consult with a financial advisor to create a personalized strategy that's just right for you. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Conclusion So, in answer to the big question, yes! ETFs can definitely pay dividends. If you're searching for a way to create an income stream and diversify your investments, including dividend-paying ETFs in your portfolio could be a savvy move. By understanding how these ETFs work and choosing those that align with your investment goals, they can add a valuable income component to your retirement planning. If you want a personalized investment plan, including recommendations for dividend-paying ETFs, consider reaching out to the expert advisors at Covenant Wealth Advisors. Contact us for a free retirement assessment today! Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Part of this content was aided by AI tools. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

You've worked hard your entire life to save for retirement, and the last thing you want is for those funds to run out while you're enjoying your post-working years. Naturally, there are ways to budget for retirement that can ensure you cover both your needs and wants. However, if you don't have a solid understanding of how to make your money last in retirement, there's a risk of depleting your funds. Planning for retirement is absolutely crucial as you approach and enter your golden years. It involves diligent saving and wise investing to secure your financial future. One of the main concerns for retirees is making their investments last throughout retirement. This calls for careful consideration of factors such as withdrawal rates, investment returns, and the impact of inflation. If you want help making the right decisions for retirement, be sure to download our free retirement cheat sheets with hundreds of tips on making your money last. After all, transitioning from a regular paycheck to relying on investments can bring about concerns regarding the longevity of those funds. It's important to strike a balance between enjoying your retirement and ensuring that your money doesn't run out prematurely. Failing to plan accordingly can result in financial stress and a lower quality of life. That's why it's so important to know: How long will my investments last in retirement? See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Working with a financial planner can greatly assist you in creating a retirement plan that aligns with your unique financial situation, goals, and risk tolerance. This personalized approach can help maximize the potential of your retirement savings and investments. If you're interested, you can even get a free consultation with a financial advisor at our firm, Covenant Wealth Advisors, to start shaping your retirement budget. Understanding Retirement Investment Longevity When you think about your ideal life in retirement, can you make it work financially? How can your investments provide a steady stream of income for you as long as you need it? This planning should take into account factors such as inflation, market risks, your withdrawal rate, and expenses, such as healthcare and taxes. Below are some of the most common expenses for retirees which can impact your nest egg: Healthcare Healthcare expenses are often one of the biggest concerns, as medical costs increase with age. Medicare can help cover some expenses, but you may still need to budget for premiums, deductibles, and out-of-pocket costs. Long-term care is another expense to consider, as it can be costly and isn’t covered by Medicare in most cases. Housing Housing is another big expense for retirees. While you may have paid off your mortgage, you’ll still need to budget for property taxes, insurance, maintenance, and possibly renovations to accommodate changing needs. Leisure Leisure activities are an important part of retirement for many people, but they can also be a big expense. Travel, hobbies, dining out, and entertainment can all add up, so retirees should budget accordingly. It's good to strike a balance between enjoying retirement and ensuring that expenses are sustainable over the long term. Of course, your expenses will be largely dependent upon the state you reside and the taxes you pay. Here's our in depth analysis of the most tax-friendly states for retirees . How Inflation Affects Retirees Inflation is like a sneaky thief that can slowly take away your money’s buying power. When you’re retired, this can be a big problem because you’re usually living on a fixed income, like Social Security or retirement savings. If prices keep going up, the same amount of money buys less and less over time. This means that what you used to spend on groceries, healthcare, or other necessities might not be enough in a few years. Think of it this way: if a loaf of bread costs $2 today but goes up to $3 in a few years, your money won’t stretch as far. This is why it’s important to have a plan to deal with inflation during retirement. How Inflation Affects Healthcare Healthcare expenses can move up with and even outpace inflation. As a result, retirees need to budget more for medical expenses as they age. This can include higher premiums, deductibles, and out-of-pocket costs for healthcare and medications. Long-term healthcare inflation has averaged 5.13% per year according to y-charts . How Inflation Affects Housing Housing costs such as property taxes, insurance, and maintenance costs tend to increase over time. If you own your home you may find that these expenses eat into your budget more than expected. The S&P/Case-Shiller index is an important measure of national housing prices. The chart below uses the 20-city index. As you can see, home prices are back near historic levels even though there have been fewer transactions. How Inflation Affects Leisure Inflation can impact the cost of many activities, as prices for travel, dining out, and entertainment can rise. You may need to adjust your spending or find more cost-effective ways to enjoy retirement. Over the past several years, air travel has rebounded as travels bans have been lifted. Activity is now back to pre-pandemic levels which is good news for economic growth but bad news for retirees looking to splurge on a great trip. Whether travel expands further will depend on business activity and personal travel. Retirement Budgeting Best Practices Many retirees underestimate their expenses and may end up running out of money. However, a budget can help you estimate and plan for these expenses. It's also important to account for unexpected expenses, such as home repairs or medical emergencies. Here are a couple of best practices to consider: 4% Rule: The 4% rule is a guideline used to determine a safe withdrawal rate from retirement savings. It suggests that if you withdraw 4% of your retirement savings each year, your savings should last for at least 30 years. 25x Rule: The 25x rule is a simple way to estimate how much you need to save for retirement. It suggests that you should aim to save 25 times your annual expenses by the time you retire. For example, if your annual expenses are $50,000, you would need to save $1.25 million (25 x $50,000) to have enough money in retirement. Explore our 15 Free Retirement Planning Checklists to help get ahead of your retirement planning. Estimating Retirement Income Estimating your maximum withdrawal rate over a 30 year retirement period can be a bit daunting. This is because there are so many different variables to consider. Moreover, stock and bond market returns can differ drastically depending upon when you retire. In the chart below, we illustrate the maximum withdrawal rate for a hypothetical portfolio made of 60% stocks and 40% bonds. This chart shows the 30-year safe withdrawal rates for a hypothetical 60% stock (S&P 500 Index) and 40% bond (Bloomberg Aggregate Bond Index) portfolio. No fees or expenses are included. You cannot invest directly in an index. The safe withdrawal rate is calculated as the inflation-adjusted maximum share of the initial portfolio that can be withdrawn at year end for each of the 30-years without the portfolio value dropping to zero. The portfolio is rebalanced annually at year end. The estimated bars, where a 30-year period of realized returns is not available, use as many years of real returns as is available to calculate the safe withdrawal rate. Missing periods are assumed to have a nominal 60/40 portfolio return of 10% and annual inflation of 3.5%. Date Range: 1900 to 2015. Source: Clearnomics, Robert Shiller Over time, the inflation adjusted maximum safe withdrawal rate has ranged from near 4% to over 12% based on a 60/40 stock/bond portfolio. The variance in safe withdrawal rates shows how the average returns over a retirement period impact how individuals can draw down on their portfolios. The 4% rule may act as a good starting point but should only be used as a simple rule of thumb! That's where Monte Carlo Analysis comes in handy. Monte Carlo Analysis is a way to simulate a range of possible outcomes for your retirement. It can also help you estimate your investment income and it’s named after the famous Monte Carlo area in Monaco, known for its gambling. Similar to these games of chance, Monte Carlo Analysis relies on sampling to generate a range of possible outcomes. For retirement planning, advisors can use Monte Carlo Analysis to simulate different scenarios. This can help assess the likelihood of meeting financial goals. It can run simulations based on various assumptions, such as investment returns, inflation rates, and spending levels. Each simulation represents a possible future scenario, and by running thousands of simulations, the analysis can provide a range of outcomes. Monte Carlo Analysis can help investors and planners understand the risks with their financial plans. It allows them to assess the impact of different variables and adjust their strategies to improve the likelihood of achieving their goals. How Does Monte Carlo Analysis Work? Monte Carlo Analysis works by simulating possible future scenarios based on different variables. These can include: Initial savings Annual savings rate Expected rate of return Inflation rate Retirement age Life expectancy Other variables can include your income growth rate, spending goals, and other income or expenses such as taxes in retirement . For each simulation, Monte Carlo Analysis selects values for these variables from specified ranges (e.g., ±1 standard deviation from the mean for the expected rate of return). It can then calculate the projected retirement savings at the end of each year, taking into account contributions, returns, and withdrawals. By running thousands of simulations, Monte Carlo Analysis gives a distribution of possible outcomes. This can help you find the probability of achieving your retirement goals. This helps you understand potential outcomes and make better decisions about your retirement planning. Benefits of Monte Carlo Analysis Monte Carlo Analysis can offer many benefits when planning for your retirement: Highlighting Range of Outcomes: It can give a clearer picture of the range of possible outcomes for your retirement savings. It can help consider factors such as market volatility and other uncertainties. Assessing Likelihood of Success: By running many simulations, Monte Carlo Analysis can assess the likelihood of achieving your retirement goals. It can help you find potential risks and take steps to mitigate them, such as adjusting your savings rate or investment strategy. Scenario Planning: Monte Carlo Analysis allows you to test different scenarios and assumptions to see how they might impact your retirement savings. Quantifying Risks: It quantifies the risks with your retirement plan, giving you a better understanding of the probability of falling short of your goals. Limitations of the Monte Carlo Analysis Monte Carlo Analysis, while a valuable tool, has limitations to be aware of: Market Assumptions: It assumes that future market returns will follow a certain distribution, such as a normal distribution. However, actual market returns can vary widely and may not always adhere to these assumptions. Efficient Markets: Monte Carlo Analysis assumes perfectly efficient markets, which may not reflect the real world. Market inefficiencies, unexpected events, and other factors can impact investment returns and outcomes. Complexity: Monte Carlo Analysis can be complex and may require expertise to interpret and apply. No Guarantees: Like any financial tool, Monte Carlo Analysis cannot guarantee outcomes. It provides probabilities based on the assumptions and inputs, but actual results may vary. Given these limitations, it’s best to use experts to help with Monte Carlo Analysis. A financial advisor can help interpret the results and provide context based on your financial situation. Experts can give guidance on how to incorporate the analysis into your retirement planning. If you wish to perform a Monte Carlo Analysis on your retirement plan, request a free retirement assessment from one of our financial advisors. Strategies for Maximizing Retirement Income To maximize retirement income, retirees can use several strategies. One approach is delaying Social Security benefits, which can increase monthly payments for each year postponed. Another option is to annuitize a portion of retirement savings, providing a guaranteed income stream for life or a specific period. Part-time work can supplement retirement income and bridge the gap before claiming Social Security benefits. Even an extra $20,000 to $40,000 per year can make a tremendous impact on making your retirement savings last. Additionally, tax-efficient withdrawal strategies, such as strategically timing withdrawals from different accounts, can also maximize income. Health Savings Accounts (HSAs) are also valuable, offering tax-deductible contributions and tax-free withdrawals for qualified medical expenses. Reviewing and adjusting strategies based on life changes can also help maintain financial health in retirement. Life events, market conditions, and personal goals can all change over time. This can affect the suitability of your investment strategies. By regularly reviewing your portfolio and adjusting it as needed, you can better align with your goals and risk tolerance. Advisory firms, like Covenant Wealth Advisors in Virginia, can help you develop an investment strategy tailored to your circumstances. They can also provide ongoing monitoring and adjustments to your portfolio, taking into account changes in the market and your personal situation. If you are looking for insights and guidance to help you make better financial decisions, speak with one of our financial advisors today and get a free retirement assessment. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Conclusion Effective retirement planning requires an approach that considers many factors. This includes investing, budgeting, and income strategies. Understanding risks with markets, inflation, and longevity is also key to planning for a financially secure retirement. Asset allocation, diversification, and regular portfolio reviews can help you manage investment risks and maximize retirement income. Tools like Monte Carlo Analysis can also help you estimate retirement outcomes by simulating market scenarios. Consulting with a financial advisor can provide valuable guidance and help you navigate complex financial decisions. By planning for retirement today, regularly reviewing and adjusting your strategies, and seeking professional advice, you can improve your financial security. We hope that you’ve found this article valuable when it comes to learning about “How Long Will My Investments Last in Retirement?” Do you want to retire without running out of money? Request a free retirement assessment today! Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

Estate planning is a crucial aspect of managing your wealth and ensuring that your assets are distributed according to your wishes after you pass away. Two of the most common tools used in estate planning are wills and trusts. While both serve the purpose of outlining your intentions for your assets, they have distinct differences that make them suitable for different situations. In this article, we'll dive deep into the world of a will vs trust, exploring their key features, advantages, and disadvantages, to help you determine which estate planning tool is right for you. Key Takeaways Wills and trusts are both estate planning tools, but they have distinct differences in terms of simplicity, cost, privacy, and control over asset distribution. Wills are simpler and less expensive to create, but assets are subject to probate, which can be time-consuming and costly. Wills also become public record. Trusts, such as revocable living trusts and irrevocable trusts, offer advantages like avoiding probate, maintaining privacy, and providing greater control over asset distribution. Special purpose trusts, such as Special Needs Trusts and Charitable Trusts, can address specific situations and needs. When choosing between a will and a trust, consider factors like estate size, privacy concerns, and control over assets, and consult with a financial advisor and estate planning attorney to make informed decisions based on your unique circumstances. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... What is a Will? A last will and testament, commonly known as a will, is a legal document that specifies how you want your assets to be distributed upon your death. It allows you to name beneficiaries , designate specific inheritances, and appoint an executor to oversee the probate process. Additionally, a will enables you to nominate guardians for minor children and make provisions for their care and upbringing. Advantages of a Will: Simplicity: Wills are generally more straightforward to create and maintain compared to trusts. The process of drafting a will is often less complex and requires fewer formalities. Cost-effective: Preparing a will is usually more affordable than establishing a trust. It typically involves lower legal fees and fewer ongoing maintenance costs. Naming guardians: One of the key advantages of a will is the ability to appoint legal guardians for your minor children. This ensures that your children will be cared for by the individuals you trust most. Flexibility: Wills can be easily updated or amended as your life circumstances change, such as the birth of a child, marriage, or acquisition of new assets. Disadvantages of a Will: Probate: One of the main drawbacks of a will is that the assets distributed through it are subject to the probate process. Probate is a legal procedure that involves validating the will, settling debts, and distributing assets. It can be time-consuming, costly, and emotionally draining for the beneficiaries. Public record: Once a will enters probate, it becomes a matter of public record. This means that the details of your estate, including the value of your assets and the identity of your beneficiaries, become accessible to anyone who seeks the information. Limited control: Wills offer less control over the distribution of your assets compared to trusts. With a will, your beneficiaries receive their inheritance outright, and you have limited ability to specify conditions or restrictions on how the assets are used. Potential contests: Wills can be contested by dissatisfied family members or individuals who believe they have a claim to your estate. Will contests can lead to prolonged legal battles and strain family relationships. What is a Trust? A trust is a legal arrangement in which a trustee holds and manages assets on behalf of the beneficiaries. The person creating the trust, known as the grantor or settlor, transfers ownership of their assets to the trust. Trusts come in two main categories: revocable living trusts and irrevocable trusts. Revocable Living Trusts: A revocable living trust, also known as a living trust, is a type of trust that can be modified or terminated by the grantor during their lifetime. The grantor retains control over the assets placed in the trust and can serve as the initial trustee. Upon the grantor's death, the successor trustee distributes the assets to the beneficiaries according to the trust's terms. Advantages of a Revocable Living Trust: Avoiding probate: One of the primary benefits of a revocable living trust is that the assets held within it bypass the probate process. This means that the distribution of assets can be done more quickly and with less expense compared to a will. Privacy: Unlike wills, trust documents are not part of the public record. This ensures greater privacy for your estate and keeps the details of your assets and beneficiaries confidential. Flexibility: Revocable living trusts offer flexibility during the grantor's lifetime. The grantor can amend or revoke the trust as their circumstances or preferences change. Incapacity planning: A revocable living trust can include provisions for managing the grantor's assets in the event of their incapacity. The successor trustee can step in and make financial decisions on behalf of the grantor, avoiding the need for a court-appointed conservator. Irrevocable Trusts: An irrevocable trust is a type of trust that cannot be easily modified or terminated once it is established. When the grantor transfers assets into an irrevocable trust, they relinquish ownership and control of those assets. Irrevocable trusts offer unique advantages, such as asset protection and potential tax benefits. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Advantages of an Irrevocable Trust: Asset protection: Assets placed in an irrevocable trust are generally protected from creditors and lawsuits. This can be particularly beneficial for individuals in high-risk professions or those concerned about potential legal claims. Estate tax minimization: Irrevocable trusts can be structured to minimize estate taxes . By removing assets from the grantor's taxable estate, irrevocable trusts can help reduce the overall tax burden on the estate. Medicaid planning : Certain types of irrevocable trusts, such as Medicaid Asset Protection Trusts, can be used to protect assets while still allowing the grantor to qualify for Medicaid benefits. This can be valuable for individuals who anticipate needing long-term care in the future. Special Purpose Trusts: In addition to the basic types of trusts, there are special purpose trusts designed to address children with special needs and give away your money intentionally. Special Needs Trust: A Special Needs Trust is created to provide financial support for a beneficiary with disabilities without jeopardizing their eligibility for government benefits. The trust assets can be used to enhance the beneficiary's quality of life while preserving their access to essential public assistance programs. Charitable Trust: A Charitable Trust allows you to support charitable causes that are important to you while potentially receiving tax benefits. There are two main types of Charitable Trusts: Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs). CRTs provide income to the grantor or other beneficiaries for a specified period, with the remainder going to charity. CLTs provide income to charity for a specified period, with the remainder going to the grantor's beneficiaries. Determining the Right Estate Planning Tool for You: When deciding between a will and a trust, it's essential to consider your unique circumstances, goals, and priorities. Here are some factors to keep in mind: Estate size: If you have a substantial estate or own property in multiple states, a trust may be more advantageous. Trusts can help avoid the need for probate in each state where you own property, saving time and expenses. Privacy concerns: If maintaining privacy is a top priority for you, a trust may be the better choice. Trusts keep your estate details private, while wills become public records during the probate process. Control over assets: Trusts offer greater control over how and when your assets are distributed to beneficiaries. You can specify conditions, such as age milestones or educational requirements, that beneficiaries must meet before receiving their inheritance. Complexity and cost: Wills are generally simpler and less expensive to create and maintain compared to trusts. However, the long-term benefits of a trust, such as avoiding probate and providing greater control, may outweigh the initial costs. Will Vs. Trust: Hypothetical Example To illustrate the practical application of wills and trusts, let's consider the hypothetical case of John and Sarah, a married couple in their 60s with an estate valued at $5 million. They have two adult children and a vacation home in another state. After consulting with their financial advisor at Covenant Wealth Advisors, they decided to an estate planning attorney to draft a revocable living trust. By transferring their assets, including their primary residence and vacation home, into the trust, John and Sarah can ensure a smooth transition of ownership upon their passing. The trust allows them to avoid probate in multiple states, which may their children time and money. The trust also maintains privacy, as the details of their estate will not become public record. Furthermore, John and Sarah include specific provisions in their trust to guide the distribution of assets to their children. They stipulate that each child will receive their inheritance in stages, with a portion distributed at age 30 and the remainder at age 40. This ensures that their children have time to mature and gain financial responsibility before receiving the full inheritance. In addition to the revocable living trust, John and Sarah also create a pour-over will. This type of will acts as a safety net, ensuring that any assets not transferred to the trust during their lifetime will be "poured over" into the trust upon their death. They also use their will to nominate guardians for their minor grandchildren, providing peace of mind knowing that their grandchildren will be cared for by trusted individuals. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Conclusion: Choosing between a will and a trust for your estate planning needs requires careful consideration of your unique situation, objectives, and family dynamics. While wills are simpler and more affordable to create, trusts offer advantages such as avoiding probate, maintaining privacy, and providing greater control over the distribution of your assets. Consulting with a knowledgeable financial advisor, like those at Covenant Wealth Advisors, can help you navigate the complexities of estate planning and make informed decisions. We can assess your specific needs and recommend the most appropriate tools to protect your assets, minimize taxes, and ensure that your wishes are carried out. Remember, estate planning is not a one-time event. It's crucial to review and update your plan regularly to reflect changes in your life circumstances, such as marriages, divorces, births, or deaths. By staying proactive and working with trusted professionals, you can create a comprehensive estate plan that provides security and peace of mind for you and your loved ones. Schedule your free consultation today. Author: Matt Brennan, CFP ® Matt is a Financial Advisor with Covenant Wealth Advisors and a CERTIFIED FINANCIAL PLANNER™ practitioner. He has over 19 years of experience in the financial services industry in the areas of financial planning for retirement, tax planning, and investment management. Schedule your free retirement assessment today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

Do you have an IRA, 401(k), or 403(b)? If you do, a Roth conversion could be a smart financial move for your retirement planning. By converting some or all of your funds to a Roth IRA, you can take advantage of tax-free growth on investments. It can also lead to tax-free withdrawals in retirement without forced distributions. Before deciding whether a Roth IRA conversion is right for you, consider factors such as your current and expected tax situations, along with your financial needs. A financial advisor skilled at tax planning for retirement can help you evaluate the benefits and drawbacks of a Roth IRA conversion. This can help you determine the best strategy for your retirement plan. In this article, you’ll see what the Roth conversion process looks like, along with the pros and cons, and potential benefits of a Roth conversion. Be sure to download our Should I Consider Doing a Roth Conversion?  flowchart to help find out if a conversion is the move for you. Let's dive in! See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... What is a Roth Conversion? A Roth conversion is the process of transferring funds from a retirement account, such as a traditional IRA  or a 401(k) plan, into a Roth IRA. This changes the tax treatment of the funds from tax-deferred to tax-free. Why is this important? Because you pay taxes upfront on the converted amount. However, qualified withdrawals in retirement are then tax-free. Here's a bit more detail: Lower Taxes Paid Upfront:  When you convert your funds, you'll owe income taxes on the converted amount in the year of the conversion. This amount is added to your taxable income for that year, potentially increasing your taxes. Ideally, the conversion is done in a year when your taxable income is low. Tax-Free Withdrawals in Retirement: Qualified withdrawals from a Roth IRA are tax-free. This includes both contributions and the Roth account’s investment growth. To qualify for tax-free withdrawals , the Roth IRA must have been open for at least five years and must meet certain conditions, such as withdrawals being made after age 59½. Tax-Free Growth:  Unlike traditional retirement accounts, where investment gains are tax-deferred and taxed upon withdrawal, gains in a Roth IRA are not subject to taxes as long as the withdrawals are qualified. No Required Minimum Distributions (RMDs):  Roth IRAs are not subject to RMDs during the account owner's lifetime. This means you're not required to take withdrawals from your Roth IRA at a certain age. This allows your investments to continue growing tax-free for as long as you wish. Keep in mind that while qualified withdrawals are tax-free, non-qualified withdrawals may be subject to taxes and a 10% early withdrawal penalty . You can convert to a Roth account directly within most big brokerages. Or you can convert directly from one brokerage to another. This direct approach can help avoid early withdrawal penalties. Consult with one of our professional financial advisors  today. You can find out if converting your retirement funds to a Roth IRA is a good idea. Who Should Consider a Roth Conversion? If you’re considering a Roth conversion, that’s great! But keep in mind that a Roth conversion isn’t for everybody . If you are nearing retirement and anticipate your taxable income to drop, Roth conversions can make sense. However, if you are early in your career and earning a high income, Roth conversions may not be as beneficial. If you fall into one of the categories below, a Roth conversion might be a good move for you: Expecting Higher Tax Rates in Retirement:  By paying taxes on the converted amount at your current tax rate, you might end up paying less over your lifetime. With a Roth conversion, you can lock in tax-free growth and withdrawals in retirement. This avoids potentially higher taxes on withdrawals from traditional retirement accounts in the future. Long-Time Horizon Before Retirement:  More time can lead to more tax-free growth. By converting funds early while your income is low, you can pile up and compound your tax-free retirement savings. Diversify Tax Exposure in Retirement:  By converting some of your traditional retirement funds, you can create a tax-diversified portfolio. This allows you flexibility in retirement to withdraw from both traditional and Roth accounts based on your tax situation at the time. potentially minimizing your tax liability. Ok, now that you know who’s best suited for a Roth conversion, let’s look at some examples to show when a Roth conversion may be a good move: Exiting Business Owner: Alex, 54, Engineering Firm Financial Situation: Alex recently sold his company. He is still young, at 54, and has many years ahead in retirement. His taxable income has dropped off substantially even though he has substantial liquid assets that he received from the sale of his business. Advantageous Scenario:  A Roth conversion may be a benefit for Alex. By converting some of his traditional 401(k) funds to a Roth IRA, he can pay taxes at his current, lower rate. As Alex continues to be in a lower tax bracket in his 50s and 60, he can keep converting his Roth IRA at the 12% tax rate. This can build up his tax-free retirement savings over time. Pre-Retiree: Sarah, 62, Marketing Manager Financial Situation:  Sarah plans to retire this year. She has a traditional IRA with $1.3 million and other investments including $300,000 in cash. She considered taking social security at 62, but decided to delay until age 70 to keep her taxable income low. Advantageous Scenario:  Sarah may benefit from a Roth conversion. By converting a portion of her traditional IRA to a Roth IRA until she turns age 70, she can spread out the tax liability and reduce her future tax burden. She is able to convert her IRA at the 22% tax bracket. This strategy could also provide her with income and tax diversification in retirement. Retiree: Mary, 65, Retired Teacher Financial Situation:  Mary is retired and receives a pension. She also has a traditional IRA and owns her home outright. She has not started social security. Advantageous Scenario: Mary's situation may not be as straightforward for a Roth conversion, as her income may already be stable in retirement and she is squarely in the 24% tax bracket. However, if Mary expects to leave a tax-free inheritance to her heirs, converting a portion of her funds to a Roth IRA could be beneficial. Her heirs could receive the Roth IRA tax-free, providing them with a valuable asset. Once again, these examples highlight how people in different life stages and financial situations can benefit from a Roth conversion. It can be a useful strategy for retirement and tax planning. Want to find out if Roth conversions could potentially be right for you? Explore our free flowchart to learn more . Factors to Consider Before a Roth Conversion If you want to do a Roth conversion, you should first look at the whole picture and understand more factors. This can help you determine how it aligns with your financial plan and retirement goals. Here are several factors to consider: Tax Impact of Conversions:  Analyze the impact of current and future tax rates on the decision to convert. If you expect to be in a higher tax bracket in retirement, a Roth conversion may be a good move. You can pay taxes on the converted amount at your current, lower rate. Cash Flow and Liquidity:  Assess the availability of your funds to pay taxes on the converted amount. You'll need to have enough cash on hand or other funds to cover the taxes. Be Aware of IRMAA: IRMAA stands for Income-Related Monthly Adjustment Amount. It's an additional amount that some people must pay for their Medicare Part B and Medicare Part D coverage if their income exceeds certain thresholds. If you're not careful, too much money converted to a Roth can trigger the IRMAA penalty. Potential Advantages: Tax-Free Withdrawals:  Qualified withdrawals from a Roth IRA are tax-free. This can help lower your overall taxes in retirement. Diversification of Income:  Roth conversions allow you to diversify your income and reduce taxes in retirement. No RMDs:  Roth IRAs are not subject to RMDs during the account owner's lifetime. This provides flexibility in retirement income planning. Potential for Tax-Free Growth:  Investments in a Roth IRA grow tax-free. This can enhance your long-term portfolio growth. Estate Planning Benefits:  Roth IRAs can be passed on to heirs tax-free. This can provide a tax-efficient wealth transfer strategy. Flexibility in Withdrawals: Contributions to a Roth IRA can be withdrawn without taxes or penalties. This can provide more flexibility than traditional retirement accounts. However, the earnings in the Roth IRA would still need to meet withdrawal rules to avoid taxes and penalties. Potential Drawbacks: Immediate Tax Liabilities: Converting funds to a Roth IRA involves paying taxes on the converted amount in the year of the conversion. Reduced Funds in the Short-Term:  Once funds are converted to a Roth IRA, you cannot withdraw them penalty-free for five years, so you'll need to consider your liquidity needs. Potential for Higher Taxes in Retirement:  While Roth withdrawals are tax-free, if your tax rate in retirement is lower than when you made the conversion, you may have paid more in taxes. Impact on Government Benefits:  A large Roth conversion could increase your taxable income and impact eligibility for government benefits tied to income. Still unsure if a Roth conversion is right for you? Download our guide Should I Consider Doing a Roth Conversion? See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Conclusion If you’re looking to limit your taxes in retirement, a Roth conversion might be a great move. It offers tax-free growth, flexibility with withdrawals, and potential estate planning benefits. However, it’s important to consider many factors before making a decision. This includes current and future expected tax rates, cash flow needs, and other pros and cons of a conversion. Consulting with a financial or tax advisor can help you determine if a Roth conversion is right for your retirement goals. Remember, the decision to convert to a Roth IRA should align with your overall financial plan. We hope that you’ve found this article valuable when it comes to learning about “What is a Roth Conversion?” Want to find out if you should do Roth conversions in retirement? Contact us for a free retirement assessment. About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors  and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free retirement assessment today   Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Part of this content was aided by AI tools. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

Retirement is often seen as a time to relax and enjoy the fruits of one's labor. However, for many retirees, the question of where to settle down and enjoy their golden years can be a significant concern. If you're on the lookout for a tax-friendly state that will stretch your retirement dollars, look no further. In this article, we unveil the most tax-friendly states for retirees. Before you continue reading, be sure to download our free retirement cheat sheets to help you potentially save time and money in retirement. When it comes to picking a retirement destination, taxes can play a crucial role in your financial health. Some states are notorious for being retirement havens, offering a range of tax benefits and incentives specifically tailored to retirees. From states with no income tax to those with a low cost of living (and thus lower consumption tax), we delve into the top contenders for retirees seeking a tax-friendly haven in retirement. Join us as we dive into the details of each state's tax policies, analyzing everything from income taxes to property taxes and sales taxes. We even adjust our findings to account for higher or lower costs of living. Make an informed decision for your retirement and discover the states that offer the most favorable tax breaks for retirees.  Say goodbye to tax worries and embrace your retirement bliss in the most tax-friendly state for retirement that suits your needs. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Factors to consider when choosing a retirement destination Deciding on a suitable place to retire often hinges on tax considerations, which can have a significant impact on your financial well-being. Of course, other aspects like access to healthcare services and the local weather pattern are important, but grasping the nuances of tax requirements and the cost of living in a particular region is crucial. Choosing a state with a hospitable tax environment is something we strongly advocate for retirees and those nearing retirement—it can stretch your budget further and enhance your lifestyle. To compile a lineup of the most benevolent tax states for retirees, we poured over information from all 50 states and the District of Columbia. We focused our investigation on four main criteria: Income Tax Rates (ITR) Property Tax Rates (PTR) Sales Tax Rates (STR) Cost of Living Index (COLI) In our analysis, a pivotal component was each state's income tax rates. While many states impose an income tax, a handful do not, offering a substantial benefit for retirees reliant on a steady income. In fact, the presence or absence of a state income tax was the most influential factor in our study. For the purposes of our research, we looked at the top marginal state income tax rate using a hypothetical couple's profile—married and filing jointly with an annual gross income of $150,000. This tax rate was given a larger relative importance of 50% since it generally reflects the bulk of state taxes paid or saved. Property tax rates , a key concern for homeowners, were also factored in with a significant weight of 26%. This metric accounts for both asset value and potential tax liability. Next, we integrated sales tax rates  into our analysis, attaching a weight of 24%. This helps identify states that can offer savings on everyday spending. Another critical indicator in our review was the cost of living index , which assesses the value you get for each dollar you spend—a fundamental consideration when planning for retirement. How we calculated the most tax-friendly states for retirement The four essential criteria above were combined and scrutinized to assemble a definitive list of the most tax-beneficial states, utilizing Covenant Wealth Advisors' proprietary formula showcased below. Tax Efficiency Score = ((Weight x ITR) + (Weight x PTR) + (Weight x STR)) x COLI Multiplier Here's how we calculated Virginia's tax efficiency score as an example: 4.63 = ((50% x 5.75%) + (26% x 0.87%) + (24% x 5.77%)) x 1.031 This formula was applied to all fifty states plus the District of Columbia, culminating in a ranked list according to the individual scores calculated. A smaller score in the study implies a more advantageous tax climate, while a larger score denotes a less desirable one. It's worth noting the study's constraints when considering our rankings of most tax-friendly states for retirees: We did not account for individual state-specific tax exemptions or deductions that could substantially decrease the tax burden. Our analysis assumes the uniform taxation of social security benefits across all states for the sake of simplicity. We used the projected 2024 combined state and local sales tax rates, which may vary depending on specific locales within a state. Estate and inheritance tax ramifications were excluded from our study as they generally affect successors more than the taxpayer themselves. However, considering these factors may benefit your long-term planning. With a clearer understanding of how we formulated our rankings, let's explore the most tax-friendly states for retirees! Top 10 tax-friendly states for retirees Here’s a detailed summary of the top 10 tax-friendly states for retirees, taking into account climate, income tax rates, property tax rates, sales tax rates, and the cost of living index: New Hampshire Climate: Characterized by cold winters and warm, humid summers. Income Tax: No state income tax on wages, though dividends and interest are taxed. Property Tax: 1.93% on average and ranks among the third highest in the U.S. Sales Tax: No sales tax. Cost of Living: Approximately 15% higher than the national average. 2. Alaska Climate: Very cold winters and cool summers, with significant regional variations. Income Tax: No state income tax. Property Tax: Varies by locality and averages about 1.04% as of 2021 data. Some areas offer exemptions for seniors. Sales Tax: No statewide sales tax, but localities may impose their own. Average local sales tax is 1.82%.  Cost of Living: 24.4% higher than average, especially due to transportation and heating costs. 3. Wyoming Climate: Semi-arid and continental, cold winters and warm summers. Income Tax: No state income tax. Property Tax: Relatively low property tax rates at 0.56% as of 2021 data. Sales Tax: 5.44% which is lower than the overall average of 6.60%. Cost of Living: Approximately 7.2% below the national average. 4. South Dakota Climate: Continental climate with four distinct seasons, harsh winters, and hot summers. Income Tax: No state income tax. Property Tax: Moderate property taxes at 1.17% with relief programs for seniors. Sales Tax: Moderate statewide sales tax at 6.11%. Cost of Living: 6.2% below the national average. 5. Florida Climate: Tropical in the south, subtropical in the north. Hot summers and mild winters. Income Tax: No state income tax. Property Tax: Middle-range, with exemptions such as the homestead exemption for residents. Sales Tax: Statewide sales tax plus county-level additions. C ost of Living: Varies widely, higher in metropolitan areas. Averages about 2.4% above the national average.   6. Nevada Climate: Mostly desert and semi-arid; very hot summers and mild winters. Income Tax: No state income tax. Property Tax: Relatively low property taxes at 0.91%. Sales Tax: Higher than average sales tax rates at 7%. Cost of Living: Generally above average, especially in Las Vegas. 7. Tennessee Climate: Generally humid subtropical with warm summers and mild winters. Income Tax: No wage income tax, but interest and dividends are taxed (being phased out by 2021). Property Tax: Generally low property taxes at 0.59%. Sales Tax: High sales tax rates at 8.24% including on groceries. Cost of Living: Slightly above the national average by 1.3%.  8. Texas Climate: Ranges from arid in the west to humid in the east. Hot summers and mild winters. Income Tax: No state income tax. Property Tax: Relatively high property tax rates at 1.68%. Sales Tax: State sales tax with additional local taxes averaging about 8.2%. Cost of Living: Meaningfully below the national average by 7.0%. 9. North Dakota Climate: Continental with cold winters and warm summers. Income Tax: Low to moderate income tax rates at 1.95% for a family earning $150,000 per year. Property Tax: Average property tax rates at 0.98%. Sales Tax: Moderate sales tax rates at 7.08%. Cost of Living: 5.4% below the national average. 10. Washington Climate: Marine west coast climate leading to mild, wet winters and warm, dry summers. Income Tax: No state income tax. Property Tax: Below the national average at 0.87% Sales Tax: High sales taxes at 9.38%. Cost of Living: High, especially in urban areas like Seattle. Currently 15.1% above the national average.  Top 10 least tax-friendly states for retirees Based on our proprietary formula and tax study, here's a summary of the top 10 least tax-friendly states for retirees detailing their climate, income tax rates, property tax rates, sales tax rates, and cost of living index: 1. Hawaii Climate: Tropical climate with mild temperatures year-round. Income Tax Rates: Progressive rates from 1.4% to 11%. Top rate is 8.25% for individuals filing jointly with income of $150,000. Property Tax Rates: Among the lowest in the U.S. at 0.32%, but offset by high home prices. Sales Tax Rates: General excise tax of about 4.5%. Cost of Living Index: Very high at 79% above average, particularly in housing and groceries. 2. California Climate: Diverse, from Mediterranean to desert and coastal. Income Tax Rates: Progressive rates from 1% to 13.3%, the highest top rate in the country. Top marginal rate is 9.30% for individuals filing jointly with an income of $150,000. Property Tax Rates: Capped by Proposition 13 at about 0.75% of home value, but high property values escalate costs. Sales Tax Rates: Base state rate is 7.25%, with local additions that can make it over 10%. Cost of Living Index: High at 34.5% above national average, especially in major cities like San Francisco and Los Angeles. 3. District of Columbia Climate: Humid subtropical, with hot summers and cold winters. Income Tax Rates: Progressive rates from 4% to 10.75%.Top marginal rate is 8.50% for individuals filing jointly with an income of $150,000. Property Tax Rates: Lower rates at 0.62% but high property values increase overall tax burden. Sales Tax Rates: 6% general sales tax. Cost of Living Index: Very high at 48.7% above national average, driven by housing and transportation costs. 4. New York Climate: Humid continental and humid subtropical, with cold winters and hot summers. Income Tax Rates: Progressive rates from 4% to 10.9%. Top marginal tax rate is 5.5% for married filing jointly earning $150,000 per year. Property Tax Rates: Some of the highest in the U.S. at 1.4% on average. Sales Tax Rates: State rate is 4%, but local rates push the average to 8.53%. Cost of Living Index: High at 25.1% above average, particularly in New York City. 5. Massachusetts Climate: Continental with cold winters and warm summers. Income Tax Rates: Flat rate of 5%. Property Tax Rates: High average rates at 1.14%, with high property values compounding the effect. Sales Tax Rates: 6.25% state rate. Cost of Living Index: Very high at 48.5%, especially around Boston. 6. Vermont Climate: Humid continental, with cold winters and mild summers. Income Tax Rates: Progressive rates from 3.35% to 8.75%. Property Tax Rates: High, with education tax rates significantly increasing the burden. Sales Tax Rates: 6% state rate, with some municipalities adding 1%. Cost of Living Index: Above average, with higher food and heating costs. 7. New Jersey Climate: New Jersey experiences a generally humid climate with cold winters and warm to hot, humid summers. Income Tax Rates: Progressive rates from 1.4% to 10.75%. Property Tax Rates: Highest average property tax rates in the country. Sales Tax Rates: 6.625%, lower than many states but not offsetting other high taxes. Cost of Living Index: High, particularly due to housing costs. 8. Connecticut Climate: Humid continental, with cold winters and warm summers. Income Tax Rates: Progressive rates from 3% to 6.99%. Property Tax Rates: High property taxes with rates varying significantly by locality. Sales Tax Rates: 6.35% state rate. Cost of Living Index: High, driven by housing and energy costs. 9. Oregon Climate: Mostly oceanic, with mild, cool summers and wet winters. Income Tax Rates: Progressive rates from 5% to 9.9%. Property Tax Rates: Moderate, but increases are capped by state law, leading to funding challenges. Sales Tax Rates: No sales tax. Cost of Living Index: Increasingly high, especially in Portland and surrounding areas. 10. Minnesota Climate: Continental, with very cold winters and warm, humid summers. Income Tax Rates: Progressive rates from 5.35% to 9.85%. Property Tax Rates: Moderate to high, depending on the area. Sales Tax Rates: 6.875% state rate, with some localities adding more. Cost of Living Index: Above average, particularly in urban areas. These states, while offering many amenities and quality of life benefits, come with a higher tax burden which can significantly impact retirees with fixed or limited incomes. States with no income tax rates for retirees When considering a retirement destination, it's essential to evaluate the state's income tax rates for retirees. Some states have a progressive income tax system, meaning the tax rate increases as income levels rise. Other states have a flat tax rate, which means the tax rate remains the same regardless of income. However, several states have no income tax at all, making them highly attractive for retirees. The states that do not levy a personal income tax are: Alaska Florida Nevada South Dakota Texas Washington Wyoming Tennessee (phased out income tax on interest and dividends in 2021) New Hampshire (taxes interest and dividends, but this is set to be phased out by 2027) Sales tax considerations for retirees Sales tax is another important factor to consider when choosing a tax-friendly state for retirement. A higher sales tax rate can increase the cost of living, affecting retirees' purchasing power. Some states, however, have lower sales tax rates or provide exemptions for certain goods and services, making them more attractive for retirees. Other states have a sales tax that will make a meaningful negative impact on your spending. Top 5 states with lowest sales tax rates:  Oregon: 0.00% Montana: 0.00% New Hampshire: 0.00% Delaware: 0.00% Alaska: 1.82% Top 5 states with the highest sales tax rates: Louisiana - 9.56% Tennessee - 9.55% Arkansas - 9.45% Washington - 9.38% Alabama - 9.29% Property tax exemptions and deductions for seniors Property taxes can be a significant expense for homeowners, especially for retirees on a fixed income. However, many states offer property tax exemptions and deductions specifically tailored to seniors, making home ownership more affordable during retirement. Hawaii : While Hawaii is known for its stunning beaches and tropical paradise, it also offers property tax benefits for seniors. The state's Senior Exemption program allows eligible seniors to receive a significant reduction in their property taxes, making it an attractive option for retirees. Arizona : Arizona is another state that provides property tax relief for seniors. The state's Property Tax Assistance Program offers assistance to qualified low-income seniors, helping them reduce their property tax burden. With its warm climate and diverse landscapes, Arizona is a popular retirement destination for many seniors. Delaware : Delaware offers property tax relief for seniors through its Senior School Property Tax Credit program. Eligible seniors can receive a credit against their school property taxes, reducing their overall property tax burden. With its charming coastal towns and low property tax rates, Delaware is an appealing choice for retirees. Estate and inheritance tax implications While we did not include estate and inheritance taxes as part of our study, they can have a significant impact on retirees' financial planning, especially for those with substantial assets. Some states impose estate and/or inheritance taxes, while others have no such taxes in place. Understanding the implications of these taxes is crucial when selecting a tax-friendly state for retirement. States with Inheritance Tax Only Tennessee : Tennessee does have an inheritance tax, which applies to certain beneficiaries. Retirees considering Tennessee as a retirement destination should carefully evaluate the state's inheritance tax laws to ensure they align with their estate planning goals. Pennsylvania:  Pennsylvania imposes an inheritance tax on the value of most assets that are passed to beneficiaries after someone dies. The tax rate depends on the relationship between the decedent and the beneficiary: States with Estate Tax Only These states impose a tax on the estate itself before assets are distributed to heirs. These taxes are based on the estate's total value, with varying exemption levels and rates. Connecticut:  The estate tax ranges from 10% to 12%, with an exemption threshold that aligns with the federal exemption. Hawaii:  Similar to federal estate tax structures, with rates up to 20% and an exemption threshold that matches the federal level. Illinois: Taxes estates exceeding $4 million at rates up to 16%. Maine:  Has an exemption threshold of $5.8 million and a top rate of 12%. Massachusetts:  One of the lowest exemption thresholds at $1 million, with tax rates up to 16%. Minnesota:  The exemption threshold is $3 million, with rates up to 16%. New York:  Features a cliff tax mechanism; if the estate value is more than 105% of the current exemption threshold ($5.93 million), the entire estate is subject to tax, not just the amount over. Oregon:  Exempts the first $1 million, with tax rates up to 16%. Rhode Island:  Exemption threshold of $1.6 million and a top rate of 16%. Vermont: Has an exemption threshold of $5 million, with rates ranging up to 16%. Washington:  Notably high top estate tax rate of 20%, with an exemption threshold of $2.193 million. District of Columbia:  Exemption threshold of $4 million with rates up to 16%. States with Estate and Inheritance Tax Maryland: Unique among states, Maryland imposes both an inheritance tax and an estate tax. The estate tax has an exemption of $5 million and a top rate of 16%. The inheritance tax, generally flat at 10%, exempts close relatives such as spouses, children, siblings, and parents. This dual system can lead to significant tax implications for estates, particularly those with non-exempt beneficiaries. Other retirement-friendly benefits and amenities While taxes are an essential consideration when choosing a retirement destination, retirees should also evaluate other retirement-friendly benefits and amenities offered by each state. These can include healthcare facilities, recreational opportunities, cultural attractions, and quality of life factors. Colorado : Colorado is known for its stunning natural beauty and outdoor recreational opportunities, making it an ideal retirement destination for nature lovers. The state also offers excellent healthcare facilities and a high quality of life, ensuring retirees can enjoy their golden years to the fullest. North Carolina : With its mild climate, beautiful coastal areas, and vibrant cities, North Carolina offers retirees a diverse range of retirement options. The state boasts world-class healthcare facilities and a thriving arts and culture scene, providing retirees with a fulfilling retirement experience. Virginia : Virginia is another state that offers retirees a mix of natural beauty, historical attractions, and cultural amenities. The state's healthcare system is highly regarded, ensuring retirees have access to top-notch medical care. With its charming towns and close proximity to major cities like Washington, D.C., Virginia is an attractive retirement destination. How to decide which tax-friendly state is right for you Choosing the right tax-friendly state for retirement is a personal decision that depends on individual preferences and financial circumstances. When evaluating different states, consider the following factors: Financial situation : Assess your financial situation and determine how taxes will impact your retirement income and assets. Consider your sources of income, such as retirement accounts, pensions, and Social Security benefits, and evaluate how each state's tax policies will affect your overall tax liability. Income tax rates, property tax rates, and sales tax rates are all important factors. Cost of living : While taxes are important, the cost of living is also a crucial factor to consider. Evaluate the cost of housing, healthcare, transportation, and other essential expenses in each state to ensure it aligns with your budget and lifestyle. Lifestyle preferences : Consider your lifestyle preferences and retirement goals. Do you prefer a warm climate or four distinct seasons? Are outdoor recreational opportunities important to you? Do you want to be close to family and friends? These factors can help narrow down your choices and determine which tax-friendly state aligns with your desired lifestyle. Consult professionals : When making such an important decision, it's always wise to consult with professionals, such as financial advisors and tax experts. They can provide personalized advice based on your specific circumstances and help you make an informed decision. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Conclusion: Finding your retirement bliss in a tax-friendly state Choosing a tax-friendly state for retirement can have a significant impact on your financial well-being and overall quality of life. By considering factors such as income tax rates, property tax exemptions, sales tax considerations, and estate and inheritance tax implications, retirees can make an informed decision that aligns with their financial goals and preferences. Whether you dream of relaxing on Florida's beaches, immersing yourself in the natural beauty of Wyoming, or enjoying the vibrant city life of Nevada, there is a tax-friendly state that suits your retirement needs. Evaluate the pros and cons of each state, consult professionals, and make a decision that will allow you to embrace your retirement bliss to the fullest. With careful planning and research, you can find the perfect tax-friendly state for your golden years. Are you interesting in finding out how we can help you design, implement, and protect a financial plan for retirement? Request a free retirement assessment today! About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors  and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free retirement assessment today   Data Disclosure: Additional Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

For many Americans nearing retirement age, one of the biggest financial concerns is whether Social Security will still be there for them. It's a valid question, given the program's well-publicized long-term funding challenges. However, while the future of Social Security is not certain, understanding how the program works and its current financial status can help you plan for retirement with greater confidence. Before reading further, be sure to download our free retirement cheat sheets to help avoid mistakes and optimize your plan for retirement. Now, let's answer the question: Will social security be around when I retire? See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Social Security Basics First, let's review the basics of how Social Security works. The program is primarily funded through payroll taxes. Employees and employers each pay 6.2% of wages up to the taxable maximum, which is $160,200 in 2023 . Self-employed individuals pay the full 12.4% themselves. These taxes go into trust funds that are used to pay benefits to current retirees, disabled workers, and their families. Social Security's Financial Challenges The Social Security program is facing long-term funding shortfalls. There are a few key reasons for this: Demographics: As the large baby boomer generation retires, there are fewer workers paying into the system relative to the number of beneficiaries. In 1960, there were about 5 workers for every Social Security beneficiary. Today, that ratio is around 3 to 1, and it's projected to fall to 2.3 to 1 by 2035 . Longer life expectancies: People are living longer, which means they're collecting benefits for a longer period. Lower birth rates: Birth rates have declined, meaning there will be fewer workers paying into the system in the future. According to the most recent Social Security Trustees report, the combined assets of the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund will be depleted by 2035 . At that point, ongoing tax income would be sufficient to pay about 80% of scheduled benefits. What This Means for Your Retirement While these projections sound alarming, it's important to understand what they really mean. Even if no changes are made to address the funding shortfall, Social Security won't disappear entirely. The taxes paid by current workers will still fund a majority of benefits. However, relying solely on Social Security for your retirement income is generally not advisable, regardless of the program's long-term financial status. Social Security is designed to replace only a portion of your pre-retirement income - about 40% for the average worker . A rule of thumb is to aim for a retirement income that's 70-80% of your pre-retirement income to maintain your standard of living. But this figure can differ depending upon your personal situation. Regardless, this means that personal savings , such as 401(k)s, IRAs, and other investments, need to play a significant role in your retirement plan. Working with a financial advisor , like those at our firm, Covenant Wealth Advisors, can help you develop a comprehensive retirement strategy that takes into account your unique financial situation and goals. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Potential Solutions to Sustain Social Security Benefits While the long-term challenges facing Social Security are significant, they are not insurmountable. Policymakers have proposed various solutions, including: Raising the payroll tax rate: This would increase revenue coming into the system. Increasing the taxable maximum: As of 2024, wages above $168,600 are not subject to social security taxes. Social Security taxes: Raising or eliminating this cap could bolster the program's finances. Raising the full retirement age: The age at which you can receive full Social Security benefits is already ag 67 for those who were born in 1960 or later. Further increases could be considered. Modifying the benefit formula: This could involve slowing the growth of benefits for higher earners. Ultimately, the specific mix of changes will be up to lawmakers to decide. Many experts believe that a combination of measures will be necessary to put the program on a sustainable path. Conclusion While the long-term financial challenges facing Social Security are real, the program is not on the brink of collapse. Even under current projections, Social Security will be able to pay a majority of promised benefits for the foreseeable future. However, it's crucial not to rely solely on Social Security for your retirement income. Building your own savings through vehicles like 401(k)s, IRAs, and other investments is essential. Working with an experienced financial advisor, such as those at Covenant Wealth Advisors in Richmond, Reston, and Williamsburg VA , can help you navigate the complexities of retirement planning and develop a strategy that takes into account your unique needs and goals. With proper planning and a strategic approach to maximizing your income, you can look forward to a financially secure retirement, even in the face of uncertainty around Social Security. Get help planning for social security and retirement by requesting a f ree retirement assessment today . About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors  and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free retirement assessment today   Disclosure: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional with the assistance of AI. Advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. If used, hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

You've worked hard your entire life. You've been appreciated at times. You've failed other times. And, looking back, you might even be proud of what you've accomplished. But, what will you accomplish in retirement? What will be your identity? Will you recreate yourself or simply wither away? If you don't know the answers, I implore you to think harder. You haven't poured sweat and tears into the first two thirds of your life just to be unremarkable the latter one third. I'm not trying to be negative. Actually, it's quite the opposite. My goal is to motivate you to think bigger and more creatively about making your life remarkable in retirement. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... It's going to take some thinking, hard work, and vision. If that makes you shiver, then stop reading. For the rest of you, here are my ten thoughts on how to live a remarkable retirement. 1. It Won't Happen By Chance The first step to a remarkable retirement is to understand that it won't happen by chance. You can't coast into it, hoping that the momentum from your working years will carry you through. It's a new phase, a new beginning. Embrace it. Plan it. 2. Live Your Values A remarkable retirement isn't about extravagant world cruises or buying a vineyard in Tuscany (unless that's your thing). It's about crafting a life that's true to your values, your curiosities, your untapped potential. Authenticity trumps opulence every time. 3. Don't Half-Heart It Throw yourself wholeheartedly into what makes your retirement remarkable. If it's mastering the art of woodworking, then become the Michelangelo of maple. If it's writing that novel, then pour your soul onto the pages. Half-hearted attempts lead to half-hearted results. 4. Find Your Growth Zone The edges are where the magic happens. Stretch yourself. Learn Mandarin. Take up sky diving. Volunteer in a remote village. The comfort zone is overrated. The growth zone is where remarkable lives. 5. Be Remarkable to You Remarkable doesn't mean remarkable to your neighbor or your golfing buddy. It means remarkable to you. What will make you excited to wake up each morning? If it doesn't ignite a passion within you, then it's not worth pursuing. 6. Impress Yourself Some may question your unconventional retirement choices. That's okay. It's your retirement, not theirs. The opinions that matter are those of the people who matter to you. Focus on impressing yourself. 7. Don't Follow the Herd Forget the retirement clichés. You won't find remarkable in a brochure or a 'Top 10' list. Remarkable is personal, original, unique. It's not about following the herd, it's about blazing your own trail. 8. Make It Happen The biggest risk isn't pursuing a remarkable retirement, it's settling for an unremarkable one. Regret is far more haunting than failure. Dare to attempt something worthy of your one wild and precious retirement. 9. Find Your Joy Build your remarkable retirement around what lights you up, not what the masses consider 'sensible'. Enthusiasm is contagious. When you radiate joy and purpose, you attract the people and opportunities that enrich your journey. 10. Evolve A remarkable retirement isn't a static state. It's an evolution. As you grow and change, so too will your definition of remarkable. Embrace the journey. Keep exploring, keep learning, keep challenging yourself. That's the secret to a retirement that stays remarkable year after year. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Conclusion In the end, a remarkable retirement is about living life on your own terms, pursuing passions that set your soul on fire, and leaving an indelible mark on the world. It's about stepping out of your comfort zone, defying expectations, and daring to be extraordinary. Remember, you are the architect of your retirement. You have the power to design a life that is rich in meaning, purpose, and fulfillment. Don't settle for the ordinary when you have the potential for the extraordinary. Embrace the challenge of creating a retirement that is truly remarkable. Be bold, be curious, be authentic. Surround yourself with people who inspire you, experiences that enrich you, and pursuits that ignite your spirit. Your remarkable retirement awaits. It's time to start writing the next chapter of your life story – a chapter filled with adventure, growth, and unbridled joy. The best is yet to come. So, what are you waiting for? Let's start crafting your remarkable retirement today. Take that first step, and watch as the journey unfolds before you. The world is waiting to be dazzled by the remarkable retiree you were always meant to be. Ready to get started with your remarkable retirement? Request a free retirement consultation today. We're here to help. About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors  and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free retirement assessment today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

Retirement planning can be a daunting task, but there are numerous resources available to help you navigate the process. One of the best sources of guidance and inspiration is books. From financial planning and investing to lifestyle considerations and healthcare, retirement planning books cover a wide range of topics to help you prepare for a successful retirement. To help you find the best retirement planning books, we have compiled a list of the top ten books on the subject, in our opinion. We've also consolidated a list of fifteen free retirement planning checklists that you can access now in case you don't want to read all of the books. These books have been highly regarded by experts and readers alike for their practical advice, insights, and inspiration and I've read everyone of them. Whether you're in your 40s and thinking about your future or you're nearing retirement and ready to make the leap, these books are sure to provide valuable information and guidance to help you achieve your retirement goals. In this blog, I will review each book on our list, providing a brief summary and highlighting its key strengths and insights. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... 1. "The Simple Path to Wealth" by JL Collins "The Simple Path to Wealth" by JL Collins is a straightforward and accessible guide to achieving financial independence and retiring early. Collins breaks down complex financial concepts into easily understandable language and offers practical advice for investing and saving money. One of the key strengths of the book is Collins' emphasis on simplicity. He advocates for a simple, low-cost investment strategy using index funds and encourages readers to avoid complex financial products and high fees. His approach is backed by years of research and experience, making it an excellent option for readers looking for a no-nonsense, low-risk approach to investing. Collins also places a strong emphasis on the psychological and emotional aspects of personal finance. He encourages readers to understand their own relationship with money and how their emotions can impact their financial decisions . By addressing these factors, Collins provides readers with a more holistic approach to financial planning that goes beyond the numbers and calculations. Overall, "The Simple Path to Wealth" is an excellent resource for anyone looking to take control of their financial future. Its clear writing style, practical advice, and emphasis on simplicity make it an accessible read for readers of all backgrounds and financial knowledge levels. Whether you're just starting your financial journey or you're looking for new strategies to achieve financial independence, "The Simple Path to Wealth" is a valuable resource to add to your bookshelf. 2. "The New Retirementality" by Mitch Anthony "The New Retirementality" by Mitch Anthony is a thought-provoking and insightful book that challenges traditional notions of retirement and encourages readers to embrace a new, more flexible approach to retirement planning. One of the key strengths of the book is its focus on the emotional and psychological aspects of retirement. Anthony argues that traditional retirement planning fails to take into account the social, emotional, and spiritual aspects of retirement, which can be just as important as financial considerations. He encourages readers to think beyond the financial aspects of retirement and to focus on creating a fulfilling, purposeful retirement that aligns with their values and goals. Another strength of the book is its emphasis on the importance of staying engaged and active in retirement. Anthony suggests that retirement can be an opportunity for personal growth and development, and encourages readers to pursue new interests, engage in meaningful work, and cultivate relationships with others. Throughout the book, Anthony presents a wide range of ideas and strategies for creating a fulfilling retirement, including creating a "life plan," building a portfolio of meaningful activities, and developing a "retirement portfolio" that includes not just financial assets, but also social, emotional, and intellectual assets. Overall, "The New Retirementality" is a valuable resource for anyone looking to rethink traditional notions of retirement and create a more meaningful and fulfilling post-career life. Its focus on the emotional and psychological aspects of retirement, as well as its practical advice and inspiring stories, make it a must-read for anyone looking to make the most of their retirement years. 3. "The Bogleheads' Guide to Retirement Planning" by Taylor Larimore, Mel Lindauer, and Richard Ferri "The Bogleheads' Guide to Retirement Planning" by Taylor Larimore, Mel Lindauer, and Richard Ferri is a comprehensive and practical guide to retirement planning. Drawing on the insights and philosophy of John C. Bogle, the founder of Vanguard and creator of the index fund, the authors offer a clear and accessible approach to investing and saving for retirement. One of the key strengths of the book is its emphasis on simplicity and low-cost investing. The authors advocate for a passive investment strategy using index funds (we fully agree by the way), which have lower fees and tend to outperform actively managed funds over the long term. They also provide practical advice on asset allocation, rebalancing , and tax-efficient investing , making it easy for readers to put their investment strategy into practice. Free Download: 15 Free Retirement Planning Checklists [New for 2023] to Help Make Your $1 Million Plus Portfolio Last Another strength of the book is its focus on planning and preparation. The authors provide guidance on calculating retirement expenses , estimating retirement income, and creating a retirement budget. They also address important issues such as social security, healthcare, and estate planning, helping readers to take a comprehensive approach to retirement planning. Throughout the book, the authors provide real-world examples and case studies, making it easy for readers to understand and apply the concepts they are learning. They also address common retirement planning myths and misconceptions, helping readers to avoid costly mistakes and make informed decisions. Overall, "The Bogleheads' Guide to Retirement Planning" is an excellent resource for anyone looking to achieve financial independence and retire with confidence. Its clear writing style, practical advice, and emphasis on simplicity make it an accessible read for readers of all backgrounds and financial knowledge levels. Whether you're just starting your financial journey or you're a seasoned investor, this book is a valuable resource to add to your library. 4. "Retirementology" by Gregory Salsbury "Retirementology" by Gregory Salsbury is a witty and insightful book that offers a fresh perspective on retirement planning. Salsbury brings his expertise as a retirement expert and consultant to the table, but also infuses the book with humor and relatable anecdotes that make it an engaging read. One of the strengths of the book is Salsbury's focus on the psychological and emotional aspects of retirement. He acknowledges that while financial planning is important, it's not the only consideration when it comes to retirement. Salsbury encourages readers to think about what gives their life meaning and purpose, and to focus on building a retirement that aligns with their values and goals. Another strength of the book is its practical advice on retirement planning. Salsbury covers a wide range of topics, from investing and saving to social security and estate planning. He breaks down complex concepts into understandable terms, making it easy for readers to apply the advice to their own lives. Throughout the book, Salsbury uses humor to make the material more accessible and engaging. He pokes fun at the retirement industry and its tendency to overcomplicate things, and shares humorous stories and anecdotes to illustrate his points. Overall, "Retirementology" is a valuable resource for anyone looking to rethink traditional notions of retirement and create a more fulfilling post-career life. Its focus on the emotional and psychological aspects of retirement, as well as its practical advice and humor, make it a must-read for anyone looking to make the most of their retirement years. 5. "Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success" by Wade Pfau The Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success by Wade Pfau is an essential guide for anyone looking to plan for a successful retirement. This book covers all the important decisions that need to be made when planning for retirement, including how much to save, when to retire, and how to invest your retirement funds. Pfau, a renowned retirement expert, provides readers with a comprehensive and easy-to-follow guide that helps readers make informed decisions about their retirement. The book is well-organized and clearly written, making it easy to understand even for those without a background in finance. One of the most valuable features of this book is its emphasis on personalized retirement planning . Pfau encourages readers to consider their own unique circumstances and goals when making decisions about retirement. He provides tools and strategies to help readers determine how much they need to save for retirement, how to create a retirement income plan, and how to minimize taxes in retirement. Another standout feature of the Retirement Planning Guidebook is the author's attention to detail. Pfau covers a wide range of retirement planning topics, including social security benefits, healthcare costs, and estate planning. He provides helpful charts and graphs throughout the book, which make it easy to visualize the concepts he discusses. Overall, the Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success is an excellent resource for anyone looking to plan for a successful retirement. It is comprehensive, easy to understand, and provides readers with the tools and strategies they need to make informed decisions about their retirement. I highly recommend this book to anyone who wants to ensure a secure and comfortable retirement in 2023 and beyond. 6. "Retire Inspired" by Chris Hogan "Retire Inspired" by Chris Hogan is a motivational and practical guide to retirement planning. Hogan, a financial expert and retirement coach, offers readers a step-by-step plan for achieving financial freedom and retiring with confidence. One of the strengths of the book is Hogan's upbeat and encouraging tone. He encourages readers to take control of their finances and to see retirement planning as an opportunity to create the life they want. He also emphasizes the importance of taking action, offering practical advice on how to get started and stay motivated. Another strength of the book is its focus on the basics of personal finance. Hogan covers everything from budgeting and saving to investing and debt management, making it a great resource for readers who are just starting their financial journey. Free Download: 15 Free Retirement Planning Checklists [New for 2024] to Help Make Your $1 Million Plus Portfolio Last Throughout the book, Hogan uses real-life examples and stories to illustrate his points. He also provides helpful tips and resources, such as retirement calculators and investment guides, to make it easy for readers to put his advice into practice. One of the most valuable parts of the book is Hogan's Retirement IQ Test , which allows readers to assess their current level of retirement readiness and identify areas for improvement. He also offers practical advice on how to maximize Social Security benefits, create a retirement income plan, and protect assets from taxes and inflation. Overall, "Retire Inspired" is a valuable resource for anyone looking to take control of their finances and create a solid plan for retirement. Its motivational tone, emphasis on the basics of personal finance, and practical advice make it a must-read for anyone looking to achieve financial freedom and retire with confidence. 7. "The Smartest Retirement Book You'll Ever Read" by Daniel R. Solin "The Smartest Retirement Book You'll Ever Read" by Daniel R. Solin is a comprehensive guide to retirement planning that offers readers a straightforward and practical approach to achieving financial security in retirement. One of the strengths of the book is Solin's focus on simplicity. He breaks down complex financial concepts into easy-to-understand terms, making it accessible to readers who may not have a background in finance. He also provides practical advice on how to create a retirement plan that is tailored to individual goals and circumstances. Another strength of the book is its emphasis on low-cost investing. Solin advocates for an approach to retirement planning that focuses on low-cost index funds and other low-cost investment options. This approach can help readers to maximize their returns and minimize their fees, ultimately resulting in a larger retirement nest egg. "The best thing that Solin brings to the party is his shrewd and skeptical approach to the art and science of investing. ...there's no question that his focus is on what's best for individuals, not institutions." - Amazon Reviewer Throughout the book, Solin uses real-life examples and case studies to illustrate his points. He also provides helpful tips and resources, such as retirement calculators and investment guides, to make it easy for readers to put his advice into practice. One of the most valuable parts of the book is Solin's discussion of the psychological barriers that can prevent people from achieving financial security in retirement. He offers practical advice on how to overcome these barriers, such as developing a positive mindset and avoiding common investment mistakes. Overall, "The Smartest Retirement Book You'll Ever Read" is an informative and engaging read that offers practical advice on how to achieve financial security in retirement. Its emphasis on simplicity and low-cost investing, along with its focus on psychological barriers, make it a valuable resource for anyone looking to take control of their finances and create a solid plan for retirement. 8. "The Five Years Before You Retire" by Emily Guy Birken "The Five Years Before You Retire" by Emily Guy Birken is a practical and informative guide that helps readers prepare for retirement in the critical five-year window leading up to their retirement date. Birken, a financial expert and retirement coach, offers readers a step-by-step plan for achieving financial security and retiring with confidence. One of the strengths of the book is Birken's focus on the unique challenges that retirees face in the five years before they retire. She offers practical advice on how to maximize retirement savings, minimize debt, and create a retirement income plan that will last throughout retirement. She also covers important topics such as Social Security benefits, healthcare, and estate planning. Another strength of the book is its emphasis on the emotional and psychological aspects of retirement. Birken recognizes that retirement is not just a financial decision, but also an emotional one. She offers practical advice on how to prepare emotionally for retirement, such as finding a new purpose and staying engaged in the community. Throughout the book, Birken uses real-life examples and stories to illustrate her points. She also provides helpful tips and resources, such as retirement calculators and investment guides, to make it easy for readers to put her advice into practice. One of the most valuable parts of the book is Birken's discussion of the importance of creating a retirement income plan. She offers practical advice on how to create a retirement income plan that will last throughout retirement, including strategies for managing taxes, creating a diversified portfolio, and using annuities. Free Download: 15 Free Retirement Planning Checklists [New for 2024] to Help Make Your $1 Million Plus Portfolio Last Overall, "The Five Years Before You Retire" is a valuable resource for anyone approaching retirement. Its practical advice, focus on the unique challenges of the five-year window, and emphasis on the emotional and psychological aspects of retirement make it a must-read for anyone looking to achieve financial security and retire with confidence. 9. "How to Make Your Money Last" by Jane Bryant Quinn "How to Make Your Money Last" by Jane Bryant Quinn is a comprehensive guide to managing your finances in retirement. Quinn, a financial expert and journalist, offers readers practical advice on how to make their retirement savings last as long as possible, regardless of how long they live. One of the strengths of the book is Quinn's focus on creating a sustainable retirement income stream. She offers practical advice on how to manage expenses, minimize taxes, and create a diversified portfolio that will generate income throughout retirement. She also covers important topics such as Social Security benefits, annuities, and long-term care. Another strength of the book is its emphasis on the emotional and psychological aspects of retirement. Quinn recognizes that retirement is not just a financial decision, but also an emotional one. She offers practical advice on how to prepare emotionally for retirement, such as finding a new purpose and staying engaged in the community. Throughout the book, Quinn uses real-life examples and stories to illustrate her points. She also provides helpful tips and resources, such as retirement calculators and investment guides, to make it easy for readers to put her advice into practice. One of the most valuable parts of the book is Quinn's discussion of the importance of planning for unexpected expenses and life events. She offers practical advice on how to create a financial plan that can weather unexpected expenses, such as healthcare costs or a sudden market downturn. Overall, "How to Make Your Money Last" is a valuable resource for anyone approaching or already in retirement. Its practical advice, focus on creating a sustainable retirement income stream, and emphasis on the emotional and psychological aspects of retirement make it a must-read for anyone looking to achieve financial security and peace of mind in retirement. 10. "Get What's Yours for Medicare" by Philip Moeller "Get What's Yours for Medicare" by Philip Moeller is an essential guide to navigating the complex and often confusing world of Medicare. Moeller, a journalist and expert on retirement, offers readers a comprehensive and easy-to-understand guide to the different parts of Medicare and how to get the most out of their coverage. One of the strengths of the book is Moeller's focus on empowering readers to make informed decisions about their healthcare. He offers practical advice on how to choose the right Medicare plan for their individual needs, how to navigate the enrollment process, and how to understand the different benefits and costs associated with each plan. Another strength of the book is its emphasis on the importance of understanding the fine print. Moeller provides clear explanations of the different parts of Medicare, including Parts A, B, C, and D, and offers helpful tips on how to avoid common pitfalls and misunderstandings. Throughout the book, Moeller uses real-life examples and stories to illustrate his points. He also provides helpful resources, such as checklists and tables, to make it easy for readers to understand the different options and make informed decisions. One of the most valuable parts of the book is Moeller's discussion of how to save money on healthcare costs. He offers practical advice on how to compare prices for different procedures and treatments, how to take advantage of preventative care services, and how to navigate the complex world of prescription drug coverage. Overall, "Get What's Yours for Medicare" is an essential resource for anyone approaching or already in Medicare. Its practical advice, focus on empowering readers to make informed decisions, and emphasis on understanding the fine print make it a must-read for anyone looking to get the most out of their Medicare coverage. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Conclusion In conclusion, there is no one-size-fits-all approach to retirement planning, but reading and learning from the experiences of others can be invaluable. The ten books reviewed above offer a wealth of knowledge, practical advice, and inspirational stories to help readers navigate the complex world of retirement planning. Whether you're just starting to plan for retirement or are already enjoying your golden years, these books offer a range of perspectives and insights to help you make informed decisions and achieve your retirement goals. From financial planning to emotional and psychological preparation, each book offers something unique and valuable to readers. Remember, retirement planning is a lifelong process, and it's never too early or too late to start. By reading and learning from these top ten retirement planning books, you'll be well-equipped to create a retirement plan that's tailored to your individual needs, goals, and aspirations. The biggest problem with books though is that they are providing information and not personalized advice. Often times you may feel that there is so much information that you simply don't know what to do next. If you find yourself facing needing more personalized advice regarding your retirement planning, click here to schedule your free consultation with one of our CERTIFIED FINANCIAL PLANNER ™ professionals to see how we can help. We specialize in designing personalized retirement income plans for individuals who have over $1 million in investment assets. About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors  and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free retirement assessment today   Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place.

For many Americans, Social Security is a vital part of retirement planning, and understanding how to maximize your benefits can make a huge difference in your financial well-being during your golden years. To help you make the most of this retirement security net, we’ve created a Social Security cheat sheet that highlights 12 ways to maximize your benefits. These 12 strategies are perfect for those who are nearing retirement and are looking to boost their hard-earned monthly payments. If you want more detailed advice and guidance around your social security decisions, you can request a free retirement assessment through our firm, Covenant Wealth Advisors. Before you read further, don't forget to download our free social security benefits cheat sheet for spouses . Here are the strategies that you can expect to learn more about in this Social Security cheat sheet: Delay Your Claim Work a Bit Longer Coordinate Spousal Benefits Claim and Suspend Maximize Earnings Be Mindful of the Earnings Test Optimize Survivor Benefits Receive Dependent Benefits Coordinate with Other Retirement Income Sources Pay Attention to Your Tax Bracket Leverage the Restricted Application Fact-Check the SSA See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... 1. Delay Your Claim One of the simplest ways to increase your Social Security payments is by delaying your claim beyond your full retirement age (FRA). For each year you delay, your benefit increases until you reach age 70. For near-retirees who already have a bountiful nest egg, delaying your claim can be a simple, low-stress way to increase your Social Security benefit. Social Security benefits are intended to be neutral. This means that if you live an average lifespan, you'll receive roughly the same benefits regardless of when you start claiming. However, delaying your claim can be better if your family has a history of living longer than average. But, delaying social security until age 70 has another potential benefit few people consider; higher survivor benefits. If the spouse outlives the beneficiary, the surviving spouse is entitled to receive the higher amount the deceased was receiving or was eligible to receive. By waiting until age 70, the beneficiary maximizes the monthly benefit, which can significantly increase the survivor’s benefits. Social Security benefits are also adjusted annually for inflation. Delaying your claim means starting with a higher amount. This starting point can provide better protection against the impact of inflation over the course of your retirement. Delaying your claim opens up a host of opportunities including being able to implement Roth conversions. This can get complex and we recommend talking to a financial advisor. Just complete the quiz below to request a free assessment. While delaying your claim gives up benefits in the short term, the long-term benefits can make it a smart financial move. This can include higher monthly payments, a larger lifetime benefit, and protection against inflation. It's a bit like planting a seed and waiting years to enjoy a more bountiful harvest in the future. However, one downside to delaying your claim is that you will not be able to spend or invest your monthly check until you decide to claim it. Depending on your budget and personal retirement savings, this might mean living on a reduced income. Even if you have enough savings to bridge the gap, there can be a bit of anxiety associated with making substantial withdrawals from your investment portfolio. This is especially true from the day you retire to the time you begin taking social security. 2. Work a Bit Longer Social Security benefits are based on the number of credits you've earned over your working career. You can earn up to four credits per year, and you generally need 40 credits to qualify for retirement benefits. By working a bit longer, you have the opportunity to earn more credits, ensuring that you meet or exceed the 40-credit requirement. Continuing to work beyond your FRA can increase your benefits. The Social Security Administration (SSA) calculates your benefit based on your highest 35 years of earnings. So, swapping a lower-earning year for a higher-earning one can make a meaningful difference in the size of your check. Also, the SSA adjusts your earnings to account for average wage changes over the years. 3. Coordinate Spousal Benefits If you're married, planning with your spouse to optimize your benefits can be useful. By coordinating spousal benefits, you can create a scenario that maximizes overall household benefits. Download Now: Do I Qualify for Social Security Benefits as a Spouse? [New for 2024] For example, one spouse might agree to continue working and delay their benefits while the other spouse receives theirs. This way, the household can expect to receive a higher benefit a few years down the road. This can result in a higher total household benefit compared to each spouse claiming the moment they reach their full retirement age. 4. Claim and Suspend “Deemed filing” was a strategy where some spouses received spousal benefits at full retirement age while letting their own Social Security benefits grow by delaying their benefits. In this sense, they were able to receive one type of benefit while getting rewarded for delaying another benefit. The Bipartisan Budget Act of 2015 put an end to this practice. Example 1: Helen will be 62 after January 1, 2016. Her husband, Frank, is 65. Both of them have put in enough years at work to qualify for retirement benefits. Come March of 2020, Helen hits her full retirement age and decides to apply for these benefits. There's a perk she can get based on Frank's work record—it's called a spousal benefit. But here's the thing: Helen has to sign up for her own retirement benefit at the same time. Gone are the days when she could just go for the spousal benefit and hold off on claiming her own retirement cash. What happens now is she'll get a mix of both benefits that adds up to the higher amount of the two. However, this strategy is still legal for those claiming survivor benefits. If you are a widow or widower, you may start your survivor benefit independently of your retirement benefit. Example 2: Alexis is 62 and has been widowed. She's earned enough through her career to get retirement benefits and is also entitled to survivor benefits from her late husband's work. This year, she kicks off her survivor benefits by applying just for the widower's benefit. Alexis decides not to tap into her own retirement funds yet, letting that potential money grow over time. When she hits 70, she begins to collect her own retirement benefits, which have now increased thanks to the delay, and she'll get these enhanced payments for life. The recent changes in the law don't change her plan, because the rules that often require a person to apply for all available benefits at once, known as deemed filing, don't apply to widows and widowers. Alexis will receive whichever amount is greater between her own retirement benefits and the survivor benefits. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your social security timing. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... 5. Maximize Earnings Social Security benefits are calculated based on your Average Indexed Monthly Earnings (AIME). Maximizing your earnings means that you're contributing more to your AIME. This helps determine your primary insurance amount (PIA). A higher PIA leads to higher monthly Social Security benefits. As your benefit is based on your highest 35 years of earnings, maximizing your income during your working years can be a huge benefit to you. Each year, the Social Security Administration reviews all beneficiaries who have wages reported for the previous year. If your latest year of earnings is one of your highest years, they will recalculate your benefit and pay you any increase you are due. So, if you are presented with a high-paying job opportunity then you might want to consider it even if you are nearing retirement – boosting your AIME can help lead to a higher Social Security benefit. 6. Be Mindful of the Earnings Test You are legally allowed to work and earn income once you’re retired, even if you’ve already started receiving Social Security benefits. However, there is a limit to how much you can earn while still receiving your full benefit. If you are under the full retirement age then the SSA will deduct $1 from your benefit payment for every $2 you earn over the annual limit . In 2023, the annual earnings limit for those under full retirement age is $21,240. If you reach full retirement age in 2023 then the SSA will deduct $1 from your benefit payment for every $3 that you earn over the annual limit. In 2023 , the annual earnings limit for those who have reached full retirement age is $56,520. This earnings test applies to both retirement and survivor benefits, but not to benefits received by spouses or divorced spouses. If you're working and claiming benefits before your FRA, be aware of the earnings test. Excess earnings could result in a reduction of your benefits. Learn more about how the SSA deducts earnings from your benefits here. 7. Be Aware of Survivor Benefits Survivor benefits can be essential for maximizing Social Security benefits, particularly if planning for the potential loss of a spouse. If a family member passes away then other members of their family may be eligible to receive their benefits – as long as the deceased person worked long enough to qualify for benefits. In most cases, the funeral home will report the death to the SSA. So, be sure that you provide the deceased’s social security number to the funeral home. Although it’s a morbid topic, survivor benefits can be leveraged in certain situations – such as when there is a large age gap between spouses. Get a free checklist to find out if you qualify for surviving spouse social security benefits here. 8. Receive Dependent Benefits There are five parties that can be eligible for dependent benefits: Spouses : If you're married, your spouse may be eligible for spousal benefits based on your earnings record. The spousal benefit is generally equal to 50% of your FRA benefit. Widowers/Widows : Survivors who have reached their normal retirement age can receive 100% of their deceased spouse’s benefit. But, you may also be able to receive a partial amount of your spouse’s benefit depending on your age and circumstances. Ex-spouses : Divorcees are eligible to receive up to 50% of their former spouse’s PIA if they were married for more than ten years. Dependent children or grandchildren : Children can qualify for a benefit as the survivor of a deceased worker or as the dependent of a living parent who receives Social Security retirement or disability benefits Dependent parents : The dependent parents of a deceased worker who is 62 or older can receive 82.5% of the worker’s benefit for one parent or 75% each for two parents Being aware of these contingencies can help you take advantage of benefits that might have otherwise gone unclaimed – a key strategy for your Social Security cheat sheet. 9. Coordinate With Other Retirement Income Sources Coordinating Social Security benefits with other income allows for tax-efficient planning. For example, timing withdrawals from tax-deferred retirement accounts (e.g., traditional IRAs or 401(k)s can minimize your overall tax liability. Additionally, prioritizing other sources of income, such as pensions, can allow you to delay claiming your Social Security benefits. Thus, increasing your eventual benefit. Analyze the timing and taxes of these income streams to improve your overall financial picture. For personalized advice, please request a free retirement assessment to learn more about your options. 10. Pay Attention to Your Tax Bracket Social Security benefits are subject to income tax if your income exceeds certain thresholds. Monitoring your income and being aware of your position within tax brackets can help you make better decisions. For example, in some cases, it is not beneficial to increase your income if it means that you will be taxed at a higher rate. After paying the higher tax rate, you might end up with less net income. Here’s more on how your tax bracket is impacted in retirement . It can also help with knowing when and how much to withdraw from retirement accounts and when to start claiming Social Security. In the years leading up to claiming Social Security benefits, you might have the opportunity to control your taxable income. This allows you to plan your withdrawals from retirement accounts accordingly to avoid tax bracket bumps. 11. Leverage the Restricted Application The restricted application is a Social Security claiming strategy that allows divorced individuals born before January 2, 1954, to file a restricted application for only spousal benefits while delaying their own retirement benefits. By delaying the receipt of their own benefits, retirees can earn delayed retirement credits at a rate of 8% per year for each year beyond their FRA (up to age 70). This may help retirees maximize their Social Security benefits while still receiving income. Unfortunately, the restricted application strategy disappears at the end of 2023. 12. Fact-Check the SSA For the most part, the Social Security Administration will handle calculating your total benefit. But, this doesn’t mean that they will do an accurate job of doing so. Always remember to check the SSA’s calculations to ensure that you are receiving your full benefit. There’s a chance that they might make a mistake when it comes to calculating your income, working years, or another factor. Or, they might not realize that you’re eligible for a specific benefit. If this is the case, you’ll be able to correct them and start receiving your full benefit. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Social Security Cheat Sheet: Maximizing Benefits Remember, the key is to align these strategies with your financial position and goals. Just because there are 12 ways to maximize your Social Security benefits, doesn’t mean that you need to leverage all of them. In fact, there might only be one or two that are relevant to your needs. Consulting with a financial advisor can help you tailor these strategies to your situation. This can ensure that you make the most of your working years to increase Social Security benefits. We hope that you’ve found this article valuable when it comes to learning a Social Security cheat sheet to boosting your benefits. If you are ready to take control of your retirement planning, get a jumpstart with this free retirement assessment from Covenant Wealth Advisors. Don't miss out on this opportunity to make better decisions about your financial well-being. Start planning today! About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors  and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free retirement assessment today   Disclosure: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice. Registration of an investment advisor does not imply a certain level of skill or training.

Everyone knows you shouldn’t keep all your eggs in one basket. Right? This is especially true when it comes to investing. But, its important to understand the difference between bonds vs. stocks vs. mutual funds if you want to preserve and grow wealth. When you’re investing for retirement and other life goals, it’s important to have different types of investments to achieve the returns you need to reach your goals. Bonds, stocks, and mutual funds are powerful components of a well diversified portfolio. That’s why it’s important to understand what these investments are and how they differ. Let's start by understanding the difference between stocks and bonds. Then you'll learn how mutual funds come into play. What are bonds? Bonds are investments designed to help governments or corporations raise money to finance projects. They can be viewed as a loan to investors. The investor does not receive stock ownership in the company, but they do receive an interest payment. Example: Apple needs to raise $10 million to build more computers. They decide to offer a 5 year bond to investors to raise the money. You purchase the bond at the issue price and Apple pays you interest on the money paid for the bond. After the bond matures, Apple pays you back the value upon maturity, known as the face value. Bonds are “fixed income” assets, which means they pay interest at regular intervals until they reach maturity. They’re called fixed income because the amount of the interest payments are fixed in advance. When you buy a bond, you’re basically making a loan to the issuer. When you think of bonds vs stocks (we’ll explain mutual funds a bit later), bonds are usually considered the safest of the two assets. Bonds are safer because corporations are required by law to pay back bond investors before stock investors in the event of bankruptcy. But that doesn’t make bonds risk free. Bonds are rated for credit quality by a credit rating agency such as Moody’s or Standard and Poor’s to help investors gauge their risk. Investment-grade bonds typically have a rating of A, AA, or AAA. Eight bond terms to know Types of bonds Bond issuers can be cities and states (municipal bonds), the US Treasury (government bonds), or government-affiliated organizations such as the FHA or SBA (agency bonds). When governments and government agencies need to raise money to finance debt, they can only issue bonds, which is a unique characteristic of bonds vs stocks vs mutual funds. Businesses also issue bonds (corporate bonds) instead of seeking a loan from a bank. Doing so is usually cheaper because the bond market has lower interest rates and better terms in many cases. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... How much do you actually pay for bonds? Most investors who buy stocks and mutual funds have a good idea of what they pay in commissions or expenses. What you may not realize is that bond dealers also charge commissions (known as markups), but these costs are rolled into the quoted price for the bond. Companies such as Merrill Lynch, Wells Fargo, and Davenport & Company in Richmond, VA all charge markups to their clients. The problem is that most clients don’t know, and aren’t told, the true cost of their bond purchase in advance. This can make buying bonds as an individual much more costly than meets the eye. Although new regulations require brokers to publish their bond markups, they don’t have to do so until after the sale. That makes it hard to know what you’re actually paying for bonds. Stocks and mutual funds are far more transparent. Markups vary a lot, but Standard and Poor’s puts the average markup at about 1.2% for municipal bonds and 0.85% for corporate bonds. Some markups are as high as 5%! Given the relatively low yield of most investment-grade bonds in 2020, markups can have a huge impact on your overall returns. For individual investors seeking bond exposure, we almost always recommend that clients purchase bond mutual funds or ETFs instead as a way to reduce cost and improve diversification. More on this later. Where do bonds fit in your portfolio? A great approach to investing for retirement is to aim for growth and income. The idea is to achieve growth with your stocks and income and stability with your bonds. Bonds offer the potential to stabilize a diversified investment portfolio. The reason is that certain types of bonds can be very stable when stock markets decline. Your personal financial goals and preference for risk will dictate how much you may want to allocate toward bonds in your portfolio. What are stocks? Unlike bonds, when you buy stock, you buy ownership in a company and in effect tie your financial future to theirs. If the business does well by selling more of their products and services, you may benefit by seeing the value of your stock increase; if it does poorly, you risk losing some or all of your investment. Stocks tend to be riskier than bonds because you are not guaranteed that the stock will do well. But, you also have the opportunity to enjoy greater growth on your money. Companies sell stock for a lot of reasons. They may want to expand into a new market, develop new products, or even pay off debt. The first time a company sells stock, it’s called an initial public offering or IPO. Determining a “good” price for an individual stock is far from a precise science. That’s why you see wildly different analyst forecasts for the same stock. Picking individual stocks can be a risky business. If you choose a winner, however, the results can be amazing: A $10,000 investment in Google’s 2004 IPO would be worth over $300,000 today . Unfortunately, the vast majority of investors fail to be “good stock pickers”. Substantial research has shown that even the brightest professional investors are unable to consistently identify winning stocks in advance. That’s why we often recommend that our clients purchase diversified mutual funds or index funds instead. What does it mean to diversify your stock portfolio? People often confuse asset allocation and diversification, but they are two different things. Asset allocation can be defined as the right mix of stocks and bonds in your investment portfolio across different asset classes. Asset classes can be described as more narrowly defined segments of stocks and bonds. For example stocks may be broken down further into U.S stocks, non U.S. stocks, small stocks, and large stocks. Bonds may be broken down into short-term maturity bonds, high credit quality bonds, non-U.S. bonds, and U.S. bonds. The right mix of asset classes is your asset allocation. Diversification is choosing different investments within each asset class to spread the risk and boost returns. Here’s why it’s important to diversify your portfolio : Example: Charles is following the asset allocation strategy recommended by his financial advisor of 60% stocks and 40% bonds. From the outside, it looks like Charles is doing a good job balancing his risk. On closer inspection, however, Charles only owns 20 technology stocks. His biggest stock holdings include Google, Amazon, and Apple. His bond investments are from the same corporate issuers - Google, Amazon, and Apple! All of his investments are tied to the technology industry and he has too few holdings —his portfolio is not diversified. It may be much better from a risk and return perspective for Charles to further diversify his investments so that many different industries are represented in his portfolio. Moreover, he should own considerably more stock and bond holdings. While there is no guarantee, proper diversification may protect you against downturns in a particular sector or stock, and helps boost your returns with exposure to industries and markets with high growth potential. What are mutual funds? In the bonds vs stocks vs mutual funds comparison, mutual funds sound the most complicated, but the concept is simple. In a mutual fund, investors pool their money to buy a collection or portfolio of assets. The money in the pool is managed by a fund manager who decides what assets to buy and sell based on the fund’s objectives. Mutual funds may own stocks, but they’re not the same as stocks. When you buy shares in a mutual fund, you don’t actually own shares of the stock it invests in, you own a piece of the fund itself. A mutual fund share price is called the net asset value (NAV), and it’s calculated by dividing the total value of the assets in the fund’s portfolio by the number of outstanding shares. Mutual funds aren’t traded on the stock exchange. When you place an order to buy or sell mutual fund shares, the order is filled after the market closes and the NAV is determined. Different types of mutual funds Mutual funds can invest in any asset class, so you can find bond funds, stock funds, money market funds, funds that invest in commodities such as precious metals or oil and gas, foreign exchange (forex) funds, real estate funds, and even cryptocurrency mutual funds. If you’re interested in exploring growth opportunities in markets with high barriers to entry, a mutual fund is a great way to get your feet wet. Stock funds are one of the most common fund types. They are grouped according to what the investments are based on, such as: Company size, i.e. large-cap or small-cap funds Sector or industry such as health care or technology Location—a single country (Japan, for example), a region (Europe) or global Investing style such as growth funds, value funds, and blended funds It’s possible to find a mutual fund for just about every investing style and objective. What about index funds and ETFs? An index fund is a type of mutual fund that tries to replicate the performance of an underlying stock index such as the Dow, the S&P 500, or London’s FTSE 100. Instead of hiring analysts to pick stocks for the fund, the fund manager simply buys the stocks on the index in roughly the same proportion as the underlying index. Exchange traded funds or ETFs are a type of investment that is similar to a mutual fund, however there are some key differences. For example, an ETF can also be indexed or it can be actively managed. Some invest in commodities; you can even buy ETFs backed by physical gold or silver bullion. ETFs trade on the exchange just like stocks, which means you can buy and sell them during the trading day. ETFs can be either passively or actively managed. What is active vs passive management? Mutual funds are either actively or passively managed. Index funds are passively managed; the fund manager’s job is to make sure the equities in the fund closely match the benchmark index. Passively managed funds aren’t out to “beat the market,” they simply want to generate the same returns as the underlying index. If the index declines, the fund manager doesn’t adjust the stock mix in an attempt to improve returns. Passive Management Actively managed funds aim to beat the market. These funds are usually pegged to an underlying index to measure performance. For example, a fund’s objective might be to outperform the Russell 1000. Its management team relies on in-depth market research, analysis, and forecasting to pick stocks. Fund managers have to take more risk to generate higher returns, and there is more trading activity in these funds compared to index funds. Active Management When you’re looking at bonds vs stocks vs mutual funds for your retirement investment strategy , passively managed funds have historically outperformed their active counterparts a majority of the time. Standard and Poor’s produces a scorecard each year that shows how actively managed funds performed compared to their benchmark index. In 2019, 89% of all actively managed domestic mutual funds underperformed their benchmark over a 15-year period . In other words, if you put your money in a low-cost index fund, 9 times out of 10, you’d have better results than someone investing in a high-priced actively managed fund. Which is best: Bonds, stocks, or mutual funds? There’s no single asset class that’s best for every investor. You should base your investments on four criteria: Your age . Younger people have more time to recover if one of their investments doesn’t perform as expected. They can afford to be more aggressive in their stock and mutual fund choices. Length of time until you need the money. If you are saving for college and your child graduates high school in three years, you need safer investments—think bond funds, CDs, and cash—than someone saving for college in 20 years. Income generation. If you’re building a retirement portfolio , you want assets that generate income and preserve your nest egg. Bonds and dividend stocks are good options. Risk tolerance/willingness to tolerate decline. This goes to the heart of who you are as an investor. If you’re the sort of person who panics over a 10% swing in the market, even knowing recovery is likely in a well-diversified portfolio, you won’t be comfortable with an investment plan heavily weighted toward stocks. When it comes to risk in your portfolio, here’s my rule of thumb: Take your maximum tolerable 12-month decline and double it. That’s the percent of your portfolio you may consider investing in stocks and equity funds. The rest should be in safe assets such as bonds, bond funds, and money market funds. Example: Bill and Catherine are approaching retirement. They both agree that they would be very uncomfortable if their nest egg lost 25% in a year. Bill and Catherine may want to limit their stock exposure to no more than 50% of their retirement portfolio . See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Building your portfolio It takes time and effort to build a well-diversified portfolio; there are over 10,000 stocks availble worldwide and 8,000 different mutual funds. It’s a huge task to compare them all and find the ones that align with your values, goals, and investment objectives. Keeping expenses low is an essential part of building a portfolio that lets you retire with confidence. Management fees, transaction costs, tax liabilities all drag on performance. Even a 0.5% difference in returns has huge consequences over the long term. Once you build your portfolio, it needs regular attention to make sure your investments are performing as expected and to replace those that no longer match your objectives. It needs to be rebalanced periodically to make sure your portfolio is in alignment with your asset allocation strategy. At Covenant Wealth Advisors, we help you build a portfolio to help you achieve your investment goals. We take the time to get to know you as a person—find out what’s important to you—so your investments not only meet your financial needs, they align with your values. We also offer expert advisory and management services to make sure your investments continue to work for you. At Covenant Wealth Advisors, we take the time to get to know you and understand your priorities and values. We’ll help you create a financial plan that accomplishes your retirement goals and helps make your money the rest of your life. We are independent Certified Financial Planners who operate on a fee-only basis; meaning we never receive commissions for product sales. Additionally, we serve as a fiduciary which means we are required by law to always put your best interests and objectives at the forefront. We can help you find the right retirement strategies to help you retire without the stress of money. Schedule a free retirement assessment today! About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors  and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free retirement assessment today   Disclosures: Covenant Wealth Advisors is a registered investment advisor . Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like accounting, tax or legal advice, you should consult with your own accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Registration of an investment advisor does not imply a certain level of skill or training.

Retirement requires careful consideration of your finances, and one key question is whether you might be pushed into a higher tax bracket with withdrawals from retirement accounts. The answer depends on factors like the type of account and how much income you'll need to live comfortably in retirement - experts estimate this could range between 70-80% compared to pre-retirement earnings. Retirees know that the Roth IRA or 401(k) is a smart way to maximize retirement savings. Put in after-tax dollars, and you can withdraw your full profits tax-free once retired - helping ensure those post-career years are financially secure! Traditional IRAs and 401(k)s offer varying benefits for retirement savings. Contributions to these accounts may provide a tax break now, but withdrawals will be taxed as ordinary income during your golden years - potentially shifting you into the higher end of the tax bracket then. Before you read further, you may find it helpful to download our tax cheat sheet . It's the same resource we use to help clients reduce their taxes. Investing in a traditional IRA or 401(k) helps you save for the future while taking advantage of current tax savings. Each year, contributions to these pre-tax accounts can be deducted from your taxable income, giving savvy savers an added boost towards meeting their retirement objectives. Investing in traditional accounts for the 2022 tax year comes with certain financial limits. Those under age 50 can add up to $6,000 and those more than 50 can benefit from an additional $1,000 catch-up contribution - totaling a possible investment of $7,000 (all increasing to respective amounts of $6,500 and 7$500 in 2023). In 2022, retirement savings enthusiasts can contribute up to $20,500 toward their 401(k). The contribution limit will then increase the following year to an impressive amount of $22,500. Plus - workers 50 or older are eligible for additional catch-up contributions that they won't want to miss out on! Taking advantage of a traditional 401(k) is one way to reduce your taxable income during the year and save money at tax time. Your contributions are deducted from each paycheck in pre-tax dollars, allowing them to grow on a tax deferred basis until retirement when you can withdraw it all without penalty! An IRA or 401(k) could be an excellent choice for those looking ahead towards their future financial stability. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Required Minimum Distributions Upon reaching the ripe old age of 72, your retirement savings are ready to roll! But don't forget about those tax-mandated required minimum distributions - if you fail to take them as stipulated, prepare for a hefty penalty. When you begin taking regular retirement distributions, they are considered taxable income and can have a significant impact on your financial situation. By factoring in the amount of money taken out of your account each year when calculating taxes, it is possible to be pushed into higher marginal tax brackets depending on how much additional earnings were made elsewhere. If you're looking to delay taking required minimum distributions (RMDs) from your retirement accounts, a qualified longevity annuity contract (QLAC) may be something worth considering. While it may come with some high fees depending upon the annuity provider and the cash value of the annuity cannot easily be accessed in one lump sum, up to $135,000 can be invested into an RMD-deferring deferred annuity account taken right out of traditional IRA or 401(k). QLAC funds will remain separate from what's considered for those withdrawals. Important Fact: With the passage of 2019's SECURE ACT, Americans can enjoy an extra year-and-a-half before having to start taking their required minimum distributions (RMDs). The rule change means that individuals will now be able to wait until age 72 instead of 70½ - a welcome gift for those who want more time with their retirement savings. Roth IRA and Roth 401(k) Accounts Funding a Roth IRA and/or a Roth 401(k) account with after-tax dollars may not grant you the same upfront tax break as traditional accounts, however these investments offer something even better--the assurance that your income in retirement will remain untaxed. Provided certain conditions are met when making withdrawals from both initial contributions and investment earnings, it's possible to experience long-term financial freedom! Withdrawing contributions from a Roth-type account is both penalty and tax free; however, the five year rule requires that if you're under 59½ years old and have been contributing to any type of Roth IRA or 401(k) for less than 5 years your investment earnings remain taxable. To reap the full benefits of this retirement plan it's important to be aware these requirements exist. Starting a Roth IRA could be an advantageous choice if you predict your tax rate may increase in retirement. However, those making more than $144,000 (or married couples filing jointly earning over $214,00) are ineligible for a Roth account in 2022 – this amount increases to $153 and 228k respectively the following year. Although there is no limit on how much money can exist within these accounts, individuals cannot contribute more than the annual maximum plus any additional catch-up amounts from age 50 or older each year. Can You Avoid Required Minimum Distributions Altogether? Withdrawing your investment earnings too soon can have serious consequences. Not only will any early withdraw be added to your yearly income and taxed, but it could also lead to an additional 10% fine unless you are exempt from the penalty. If you're looking for a way to leave a legacy, Roth IRAs and Roth 401(k)s may be the perfect option. Unlike other retirement accounts, with these plans there are no forced withdrawals while you’re alive - meaning that any money not withdrawn could grow tax-free until passed down as an inheritance! How to avoid Penalty Free IRA Withdrawals Taking an early withdrawal from a traditional or Roth IRA usually comes with heavy financial penalties, but there are times when you can get off the hook! Make sure to check and see if one of these exceptions apply so that you don't have any surprises. IRA Withdrawal for Medical Expenses. Did you know that when it comes to IRA early withdrawals, there is an exception for major health care costs? If your medical expenses exceed 10% of your adjusted gross income in the same year as the distribution and are not reimbursed by insurance, you may be eligible to take money from your retirement account without being subject to a penalty. To figure out how much can be safely withdrawn from an IRA under this clause – add up all unreimbursed medical expenses and subtract 10% of one's AGI (non-itemizers included). You Made an IRA Withdrawal to Pay for Health Insurance Premiums. If you find yourself out of work and collecting unemployment benefits, taking money from your IRA to cover health insurance premiums doesn't have to come with a penalty. You can withdraw funds without the usual accompanying consequences as long as it falls within 12 consecutive weeks of receiving unemployment compensation - even if those two periods do not match up perfectly in terms of timing! Just make sure that any withdrawals are made before 60 days pass since finding your new job or else this exception will no longer apply. You Paid for College. Instead of shelling out big bucks for college tuition, it's possible to take advantage of penalty-free distributions from your IRA. From textbooks and supplies to room and board expenses – if you're the account owner, married or have kids -money can be withdrawn tax-free towards qualifying educational institutions like colleges and universities participating in federal student aid programs. Just keep in mind that withdrawing money could reduce a student’s chances at receiving financial assistance down the line! IRA Withdrawal for First Time Home Purchase. Have you ever considered using funds from your IRA to help purchase a first home? You may qualify for an early withdrawal of up to $10,000 ($20,000 as a couple) without incurring the penalty. For this exception to apply, however, you will need to prove that neither yourself nor any close family members have owned a residence in the past two years prior and if construction or purchasing is canceled within 120 days then the money must be put back into your IRA account. Investing some retirement savings towards helping loved ones own their very first place could truly make all the difference! Adoption or Birth of a Child. New parents are now entitled to a special gift - up to $5,000 in penalty-free IRA distributions! If you've welcomed a little one into your family this year, you can access these funds within the first twelve months. Of course it's primarily for financial reasons and not treats and toys; but don't worry if circumstances improve down the road as money that is withdrawn from an IRA can always be put back at any time! Pay for a Disability. For those with life-altering physical or mental disabilities, there is some relief available. If you can provide appropriate documentation of your condition, the IRS allows for penalty free withdrawals from individual retirement accounts. A doctor's evaluation will be needed to determine if it meets the threshold for a long-term disability that qualifies; unfortunately this includes cases where death may eventually occur as a result of said disability. Military Service. Members of the military reserves ordered or called to active duty after September 11, 2001 for more than 179 days may be eligible to take an IRA distribution without penalty. Qualified reservist distributions are available across many branches including Air Force Reserve, Army National Guard and Naval Reserve – as long as they take their distribution during the period of active service. Substantially Equal Periodic Payments. For those looking to make withdrawals from their IRA, annuity payments could be the way to go. The great news is that these IRAs are not subject to early withdrawal penalties - as long as you use an IRS-approved distribution method and withdraw at least once a year! Calculating your payment total requires special assistance though, so it's important take into effect all aspects of life expectancy when planning out how much money needs withdrawing each year; otherwise unplanned fees may apply. Withdrawal From Your Roth IRA. When it comes to accessing funds in your retirement plan before age 59 1/2, a Roth IRA often offers an easier route than with traditional IRAs. Your contributions can be withdrawn without penalty from one that is at least 5 years old but investment earnings may come with a 10% early withdrawal tax. An additional bonus of having money in the Roth? A lack of income tax on distributions and no requirements for mandated withdrawals after 72! Withdrawal From an Inherited IRA. Inheriting an IRA can be a complicated process, with different rules for different beneficiaries. Generally speaking, if you are younger than 59 1/2 and not the spouse of the original account holder nor in one of five special categories (minor child; disabled or chronically ill; etc.), any distributions from your inherited traditional IRA will incur income tax but no early withdrawal penalty. Conversely, spouses inheriting IRAs have more flexibility to treat them as their own — though they must still pay taxes on pre-59 1/2 withdrawals while also subjecting themselves to potential penalties. Leave Your 401 (k) Where It Is. Workers who have reached the age of 55 or greater can withdraw from their 401(k) without incurring a 10% penalty. This becomes even more lenient for public safety employees, allowing them to begin taking withdrawals as early as 50 years old! However if you roll over your money into an Individual Retirement Account (IRA), you need to wait until 59 1/2 before withdrawing funds in order to avoid this fee unless other exceptions apply. As such, it's best not to transfer assets between plans while awaiting retirement eligibility so that those extra protections remain intact. 401 (K) Hardship Withdrawals Retirement plans like 401(k)s offer a way to save for the future, but you may be able take out funds in an emergency. Known as hardship distributions, these penalty-free withdrawals are reserved for those facing immediate and heavy financial needs. Struggling to make ends meet? You may be able to take advantage of an IRS-regulated hardship distribution program, allowing you access to funds for essential expenses such as medical bills or housing costs. Per the IRS website, these include: Medical care expenses for the employee, the employee’s spouse, dependents or beneficiary. Costs directly related to the purchase of an employee’s principal residence (excluding mortgage payments). Tuition, related educational fees and room and board expenses for the next 12 months of postsecondary education for the employee or the employee’s spouse, children, dependents or beneficiary. Payments necessary to prevent the eviction of the employee from the employee’s principal residence or foreclosure on the mortgage on that residence. Funeral expenses for the employee, the employee’s spouse, children, dependents, or beneficiary. Certain expenses to repair damage to the employee’s principal residence. Understanding Tax Brackets Withdrawing from traditional retirement accounts doesn't mean the IRS automatically bumps you up to a higher marginal tax rate. It all depends on which bracket you're in and how much extra income those withdrawals create. Here's a look at the tax brackets for 2022: For example, If you're married and your income totals $177,000 or less, then 22% is the top marginal rate. However if those earnings push past a threshold of $178,150 dollars per year than any additional income may be subject to 24%, instead! It's important to remember that only the extra money in excess over this cut-off will experience an increase in taxation. For 2023, the tax rates remain the same as 2022, but the income ranges are slightly higher: Is It Possible to Sneak Into the Zero Percent Tax Bracket? For many retirees, avoiding taxation can be a challenge; however, it is not impossible! If you are able to live on an annual income of $25,000 (single) or $32,000 (joint filers), your Social Security benefits will likely remain untaxed. Otherwise there are strategies available for minimizing taxes in retirement such as converting traditional IRA funds into Roths or investing in tax-free municipal bonds. Additionally selling off the family home and living off those proceeds would help keep capital gains liability at bay. Will I Be in a Higher Tax Bracket in Retirement? Tax brackets can be a tricky thing during retirement, and the conventional wisdom that you'll find yourself in a lower one is not quite as straightforward. Although income would decrease with no job to depend on, retirees may end up paying more taxes if they lose deductions like mortgage interest or those associated with children - factors that are difficult to predict accurately years down the road. How Will My Tax Bracket in Retirement Be Determined? Retirement can come with some tax surprises, depending on your income stream. When you leave the workforce, it's possible that both Social Security payments and pension or retirement account distributions could push you into a higher or lower bracket than before! That's why it's so important to incorporate tax planning into your retirement game plan. Financial advisors who specialize in tax planning in retirement should be able to help you navigate tax brackets in retirement so you don't pay more in taxes than necessary. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Conclusion Retirement tax-free? It really can be a reality for some people. Crossing into the zero percent bracket requires careful planning and budgeting. Individuals making more than $12,959 annually $25,900 if married filing jointly must pay income taxes; add to that earnings over 25K from Social Security benefits alone - you may face even higher taxation! Achieving this goal needs thoughtful strategies but it's an attainable dream with enough smarts and hard work. Planning for your retirement doesn't have to be taxing. Investing in a Roth 401(k) or IRA can help lessen the amount of money you'll owe come tax season, so consider switching from traditional accounts before it's too late! While transferring funds will require payment upfront, that could provide financial relief down the road - making sure future generations get to enjoy their golden years without worry. If you’re looking to keep more of your hard-earned money come 2023, consider taking advantage of the 0% long-term capital gains rate – it could be available for those with single filer taxable income up to $44,625 and married couples filing jointly making a combined $89,250 or less! So, how do you better manage your tax situation in retirement? Work with a financial advisor who specializes in retirement tax planning. If you are aged 50 plus with over $1 million in retirement savings and investments, contact us for a free consultation. We can help. About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors  and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free retirement assessment today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

As we move closer to the presidential election on November 5, the race is heating up, promising a daily dose of headlines.  It looks like we might see Joe Biden and Donald Trump go head-to-head once again. Presently, Trump is leading in many polls among registered voters, while Biden is not far behind, actively raising and spending campaign funds.  With so much time still left until November, it's understandable if some investors, especially those aged 50 and above with significant savings, start to worry about how the election's outcome could affect the stock market and the economy.  The current political scene is more divided than ever, not just because of the upcoming elections, but also due to ongoing disagreements in Washington over key issues like the budget, immigration, foreign policy, and more.  So, how do 4-year presidential election cycles impact the stock market? History shows us that regardless of who's in charge, predicting market doom or economic downfall because of a single leader is often misplaced.  Since 1933, the U.S. has seen 15 presidents, from both parties, and through all these years, there have been many warnings that the next president could be disastrous for the economy.  Yet, here we are, still one of the most prosperous nations in the world with more opportunity than our ancestor's imagined possible. Elections matter a lot, whether you're thinking about the country's future direction or who you want leading it. Everyone's vote counts in shaping what values our nation will stand by. But, when we talk about where to put our money, it's best to leave political preferences out of our investment decisions.  The chart above tells a compelling story: the economy and stock market have thrived under both Democratic and Republican leadership.  If an investor had decided their investments based on the political party in the White House, they might have missed out on significant growth opportunities.  To put this into perspective, consider the period from 2008 to 2020, which included the terms of Presidents Obama and Trump.  During these years, the S&P 500 saw an impressive total return of 236%. This growth happened amidst a backdrop of what many perceived as stark differences between the two administrations and a time of heightened political division. Moreover, this period was not without its challenges, including numerous budget disagreements, fiscal cliffs, debt ceiling standoffs, the downgrade of the U.S. credit rating, as well as the global financial crisis and the pandemic. However, it's important to acknowledge that policy decisions do play a role in economic outcomes. The ways in which governments approach taxes, trade, industrial regulation, antitrust laws, and other areas can indeed influence specific sectors, potentially leading to broader economic effects.  Yet, it's critical to recognize that policy changes are often gradual, and the market's ability to quickly price in new policies means companies and entire industries are usually able to adapt over time. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... This adaptability, coupled with the difficulty in accurately predicting the long-term impact of any given policy, suggests that making investment decisions based solely on political preferences or predictions about policy impacts can be misguided. While it's understandable to have concerns about how political decisions might influence financial markets, history has shown us that the market is resilient, capable of adjusting to a wide range of political and economic conditions.  This resilience underscores the importance of maintaining a long-term investment strategy that looks beyond the immediate effects of politics and focuses on broader market fundamentals. The state of the business cycle plays a more significant role than the identity of the President in the White House. For the savvy long-term investor, tuning into the rhythm of the business cycle beats getting caught up in the daily drama of election news. Sure, the ups and downs of political campaigns can send stocks on a short-term rollercoaster ride, but it's the broader market and business cycles that really shape the investment landscape. These cycles, driven by forces like tech revolutions and the winds of globalization, play a much larger role in your portfolio's performance than the latest tweet from the Oval Office. If we're talking returns, the impressive climb to current market highs since 2008 owes more to these deep economic currents than to any particular tenant of the White House. Take, for example, the tech-driven '90s and the early 2000s. Bill Clinton's presidency coincided with the dawn of the internet age, not because he was particularly tech-savvy (we doubt he ever considered coding his own website), but because of timing. Similarly, the dot-com bubble burst and the 2008 financial meltdown bookended George W. Bush's time in office, highlighting that a president's term can just as easily coincide with economic downturns as upturns. To pin the booms and busts solely on presidential policies would be like saying the rooster's crow causes the sun to rise. While governmental decisions certainly have their impacts, the true movers and shakers are often technological and financial innovations. History shows us that presidents might get more credit—or blame—than they deserve when it comes to the economy. The good news: Regardless of the party in office, stock market returns are positive on average For the skeptics still glued to their screens, hanging on every political tweet and headline as if it were gospel for their investment strategy, here's a nugget of wisdom to chew on: stock market returns have smiled upon us under both red and blue administrations. Yes, you heard it right—the market doesn't throw a tantrum and tank every time the White House switches party lines. The chart above is pretty clear. It's like the market has its own bipartisan agreement, showcasing double-digit gains on average and over the long-term whether a Democrat or Republican calls the Oval Office home. And it doesn't stop there. Whether we're in the heat of election fever or enjoying a political off-season, the S&P 500 seems to hum along, racking up positive returns on average. Now, while we can't predict the future with a crystal ball (or an algorithm), and sure, the market has its ups and downs, history has shown that bailing out of the market due to election results or just because the political circus is in town might not be the most historically savvy move. So, before you let the latest political pundit's predictions send you into a sell-all frenzy, remember: the stock market has been through wars, recessions, booms, and busts, and still, it's managed to keep on climbing. It seems to have a knack for shrugging off political drama with ease, much like a teenager ignores their parents' advice. See How Our Financial Advisors Can Help You Plan for Retirement Retirement Planning  - unlock retirement strategies and optimize your cash flows. Investment Management  - our team designs, builds, and manages custom portfolios tied to your life. Tax Planning  - Creative tax strategies, Roth conversions, RMDs, charitable giving and more... Conclusion As the presidential election on November 5 draws near, with Joe Biden and Donald Trump possibly facing off again, it's easy for investors, especially those over 50, to get caught up in the whirlwind of political headlines. Amidst the polarized atmosphere and debates over key issues, the question arises: how should investors navigate this election year? The answer lies in not letting the political spectacle sway your investment decisions. History has shown that the stock market has the resilience to thrive under both Democratic and Republican administrations, delivering substantial returns through various economic challenges and policy shifts. From the tech booms to financial crises, the market's performance has been influenced more by broader economic trends than by who occupies the White House. Investors are reminded that market dynamics, driven by the business cycle, play a more significant role than political leadership in determining long-term investment success. Despite the uncertainty that elections can bring, the stock market's history of positive returns under both parties suggests that staying the course is often the wisest strategy. In short, as we approach the election, it's crucial to maintain a long-term investment perspective, focusing on what you can control rather than getting sidetracked by political drama. Remember, the market has weathered many storms and is likely to continue its upward trajectory, regardless of the election's outcome. Our best advice: create a retirement or investment plan that focuses on the things you can control. Contact us today for a free retirement assessment . About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors  and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free retirement assessment today   Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.