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Investing in retirement can be stressful. Even with a retirement cheat sheet to help guide your decisions, it's often hard to know if you are doing what you should to preserve your nest egg. That's why it's important to create an investment strategy tailored to your goals. But, there is a lot of information out there which can make it hard to know what information you should trust. A strategy that is great for your neighbor or colleague may be terrible for you. The good news is that there are four key considerations everyone should consider when transitioning to and through retirement. Take your retirement investing up a notch. Here are four ways to help you invest better in retirement. 1. Know Your New Risk Tolerance Do you feel like your mood fluctuates with the amount of money in your account? Are you up when your account is growing and down when you see your balance fall? That’s normal, but to a large extent, those feelings can be managed with proper investment planning. Temporary Decline or Permanent Loss? Often, It’s Up To You. The first thing retirees should realize is that there is a consequential difference between a temporary decline and a permanent loss. Your behavior drives much of this distinction. Many people conflate and confuse investing and gambling. Without a plan tailored to your goals, risk, asset allocations, time horizon, and more, you may think that you’re investing, when you’re simply gambling with the stock market. As a result, your approach puts you at an increased risk for permanent loss. For example, if you concentrate too much of your savings on one investment (say a popular individual stock), you could see more significant swings in your portfolio. If those fluctuations cause you too much stress, you could end up selling in a panic— turning what could have been a temporary decline into a permanent loss. Strong investment decisions take a more balanced and strategic approach. Knowing your risk tolerance and taking prudent risks for your situation can help. Spread your investments across many different companies, economic sectors, markets, and securities (a.k.a diversification) so that you only expose yourself to the risk that’s appropriate for your needs. We can work with you to determine the right mix of allocations that suit your risk appetite. It’s our goal to help you balance getting a good night’s sleep and putting yourself in the position to generate the best potential long-term returns. What’s The Right Amount of Risk for Your Portfolio? To determine the right mix for you, it’s helpful to think about your risk comfort level in terms of hard dollars. Say you have a $1,500,000 investment portfolio. Think about a decline that would make you pretty uncomfortable. You might be alright with a temporary decline of $250,000 but not $300,000. Those numbers give us an even better idea of how to balance your investments. This number will fluctuate over time, too. As you get closer to retirement and your focus shifts from accumulating savings to withdrawing, then the risks, and your risk appetite, both change. It’s important to update your portfolio to match. Want to see if your portfolio is up to snuff? Check out our free portfolio check-up resource . This resource will help you determine the right mix of investments for your unique situation. 2. Be Cognizant of Inflation Inflation is a constant but somewhat silent risk to retirement. It’s like the kryptonite of retirement investing. Some of your retirement income may provide automatic inflation protection such as the Social Security inflation adjustment, but not all sources do. Even so, sometimes the increase in elements like Medicare premiums may overshadow the increase in Social Security. But, you can protect yourself from inflation risk with your investment plan by seeking investment options that consider inflation. It’s important to design a portfolio that protects you from inflation and rising interest rates because you rely on it for income. A few specific ways you can do that include: Your choice of bonds and other fixed-income securities. For example, the value of long-term bonds will fall significantly when rates rise. You can either hold individual bonds until maturity or invest in shorter-term bonds. Diversify asset allocations across borders as well as asset classes. If inflation is worse in the US than in other parts of the world, then the US dollar may decline in value relative to other currencies. Holding international stocks can help offset the decline in the dollar. Diversification is always critical, but it's especially important for your retirement nest egg. Create an intentional investment portfolio with a range of securities—mutual funds, exchange-traded funds (ETFs), index funds, real estate investment trusts (REITs), cash, and more. Our team can help you create an intentional portfolio designed with your needs in mind. Your portfolio should be designed to weather most market environments including rising interest rates and inflation. Building an intentional portfolio that offsets risk better insulates your retirement savings for the future. Inflation is an important risk to understand and plan for in retirement. We can help you take inflation and interest rates into account with your investment plan. 3. Create A Strong Tax Plan It's no secret that we love tax planning here at Covenant Wealth . It's one of the foremost ways to insulate your retirement nest egg, preserve the longevity of your retirement accounts, and increase the income you can take for your savings. It’s also one of the least risky. Key tax considerations include: Medicare Income-related monthly adjusted amount (IRMAA) Long-term capital gains Federal tax bracket management Lowering your taxable income to qualify for subsidies that pay for healthcare in retirement. You'll also need to get clear on where your money is held—individual retirement account, brokerage account, savings account, etc.— to make the most of every dollar. Another powerful strategy that you can use pre and post-retirement are Roth conversions . Roth conversions allow you to take advantage of lower tax years to create a tax-free bucket that you can withdraw from in higher tax years. It converts funds from your traditional IRA to a Roth IRA. This strategy is inherently a multi-year strategy, so we need to think past a single year’s tax return. 4. Set Intentional Investment Goals Investing should be about achieving a purpose rather than chasing aimless gains. Your investment plan should be grounded in your retirement goals, values, and priorities. Set intentional goals. Ask yourself, What are your retirement goals? Will you spend more on vacation in the early years and less in the later years as you age? Do you want to buy a retirement house on the beach? Is investing in your grandchild's education important? Are you funding a trust? Do you want to pass down a Roth IRA? What about charitable giving? Your goals are critical for several concrete reasons. Without a clear view of your goals, it’s impossible to set your risk tolerance and investment objectives. You’ll also never know if you are doing things right. You can’t hit a target that isn’t there! You should use your retirement money in ways that further your plan. Bonus: Work With A Financial Advisor for Your Retirement Plan It's important to work with an advisor who has specific experience with your needs. Not all advisors are the same or have the same expertise. Regardless of the type of advisor you need, we recommend working with a fee-only fiduciary that has demonstrated experience working with people just like you. Financial planning can give you confidence and security in your golden years. At Covenant Wealth Advisors, we're passionate about retirement planning. Our team has particular expertise to help clients who are 50+ and transitioning into retirement reduce their taxes and ensure that they retire without stressing about their money. If that describes you, we would be happy to talk and see if we can work together to create a tax-efficient and worry-free retirement for you. About Mark Fonville, CFP® Mark is the President of Covenant Wealth Advisors and a Certified Financial Planner ™ professional specializing in retirement income planning, tax planning, and investment management. He has been featured in the New York Times, Barron's, Kiplinger Magazine, and the Chicago Tribune. Learn more 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.

Significant advances were seen in the main stock market indices in the first six months of the year. These advances were driven by factors such as moderated inflation, a slowdown in Fed rate increases, the absence of a recession, stability in the banking sector, and a robust upswing in technology stocks. The S&P 500 saw a substantial rise of 16.9% when considering reinvested dividends this year through June 30, 2023, while the Nasdaq and Dow have reported returns of 32.3% and 4.9% respectively. The markets have effectively regained much of the losses suffered last year, with the S&P 500 now just 7% short of its historic peak. A financial advisor with investment expertise may be able to help you create a plan to navigate future economic uncertainty. Next Steps: Planning for Retirement can be overwhelming. We recommend speaking with a financial advisor at Covenant Wealth Advisors. This tool will match you with a fiduciary financial advisor with over 20 years of experience. Here's how it works: Answer these few easy questions , so we can find a match. Our tool matches you with a credentialed financial advisor who can help you on the path toward achieving your financial goals. It only takes a few minutes. Check out the advisors' profiles, have an introductory call on the phone or introduction in person, and choose who to work with in the future. Here's how markets have rebounded through July 3rd, 2023. Similarly, interest rates have remained stable after last year's dramatic increase, with the 10-year Treasury yield settling around 3.8%, which has contributed to a rebound in bond prices. What should investors keep in mind to understand this recent market progress as we transition into the second half of the year? In light of the remarkable performance so far this year, a question many investors might be grappling with is whether this signifies the onset of a new bull market or if it's merely a rally within a bear market. This contrasts with the initial apprehensions at the year's outset when investors and economists were mainly preoccupied with bear markets and recessions. Several reasons exist as to why the previous six months have only further emphasized the investment strategies that long-term investors ought to adhere to in order to realize their financial objectives Investor Sentiment Can Shift Unexpectedly Firstly, the market performance witnessed this year reinforces the idea that investor sentiment can shift unexpectedly and rapidly. Historical patterns of bear markets and brief corrections indicate that markets can bounce back at the most unforeseen times, particularly when investor outlook is at its gloomiest. This was indeed the case at the year's onset when a recovery seemed almost implausible to most, just as it was during times like April 2020, March 2009, and the tech crash of 2000-2002. Every market slump is triggered by a substantial event, such as an inflation surge, the pandemic, the U.S. debt downgrade, the global financial crisis, or even the infamous Black Monday in 1987. Despite that, in each scenario, the common thread was that investors anticipated the situation to keep deteriorating, oblivious to the fact that fundamentals and valuations were subtly improving. Hence, it's frequently more advantageous for regular investors to remain faithful to their meticulously planned financial strategies. By the time a consensus is reached that a recovery is underway, considerable profits are often left unrealized. Download FREE: Get the Same Checklists We Use to Help Our Clients Retire [New for 2023] This is not to undermine the distress caused by market downturns or suggest that markets only witness an upward trend. Instead, historical patterns indicate that it's generally more beneficial to maintain one's investments in a suitably structured portfolio. In the most unfortunate scenario, investors who attempt to outguess the market and overly concentrate on short-term incidents might entirely miss out on the subsequent market rebounds. Market Fundamentals Drive Stock Market Rallies Secondly, forecasting the course of the market is as challenging as determining the longevity of a specific rally while it's in progress. Therefore, it's usually more beneficial for long-term investors to concentrate on the core fundamentals propelling the rally. Despite the fact that markets can oscillate in any direction within days, weeks, or months, it's the stable economic expansion and enhancing corporate profits that usually steer markets to higher ground over quarters, years, and even decades Therefore, the necessity for maintaining a robust economy is imperative. Just a year ago, many deemed the idea of the Federal Reserve successfully orchestrating a 'soft landing,' meaning that inflation would be mitigated without a recession, as highly improbable. Although the challenge of core inflation still persists, the positive trend of overall consumer prices improving while unemployment rates stay at historically low levels bodes well for the markets. If corporate earnings start to show an upward trajectory, the attractiveness of market valuations could potentially increase over time. Economic Uncertainties Remain Lastly, it's not uncommon to view the situation pessimistically, given the numerous uncertainties that continue to cast a shadow. In the present scenario, even with improved stability in the financial system, challenges persist, most significantly those stemming from the earlier bank failures this year, particularly in the commercial real estate sector. The upcoming wave of refinancing could pose a test to the system's stability as high interest rates persist and lending activities become more stringent. Moreover, although a debt ceiling crisis was successfully dodged, the issue has only been deferred to the start of 2025. Concurrently, geopolitics remains a source of concern with U.S. ties with China and Russia still under strain. The upcoming presidential election in the following year is also poised to take center stage as markets evaluate these multifaceted risks. Download FREE: Get the Same Checklists We Use to Help Our Clients Retire [New for 2023] Nonetheless, seasoned investors, who maintain a comprehensive view of the markets, understand that there are always risks to counterbalance against long-term returns. Such risks frequently seem overwhelming when being experienced in real-time. However, once these risks are in the past, the focus of investor worries typically shifts to the sustainability of recoveries. These alternating patterns in investor sentiment are a standard and inherent feature of markets, underlining why long-term investors can enhance their chances of success by emphasizing more on the underlying trends. In keeping with this, here are seven crucial insights drawn from the first half of the year that will likely hold equal importance in the second half. 1. Unexpectedly Robust Returns Over the Last Three Quarters Have Left Many Investors Astonished The S&P 500 has now recorded three straight quarters of robust returns, commencing from the fourth quarter of 2022. This is a drastic reversal from the bear market returns observed during the initial three quarters of the preceding year, and this turnaround is taking place amidst a prevailing negative sentiment. Although there's no assurance that markets will persist with this vigorous upward trend, it emphasizes the notion that markets can shift their course unpredictably. 2. Limited Market Breadth as Giant-Cap Stocks Spearhead the Surge Although the market surge has been advantageous to many investors, the gains haven't been evenly distributed among all stocks. Predominantly, the mega-cap stocks have taken the lead. The related graph reveals that the biggest stocks within the S&P 500 have surpassed the broader index this year. Furthermore, an equal-weighted index, which assigns greater weight to smaller stocks compared to a market-weighted index, has trailed even further behind. 3. Returns of Sectors Have Varied Across the Stock Market Vs. 2022 Hence, a concern among investors is whether this year's returns have been 'skewed' by the tech sector's performance. Regrettably, it's true that the biggest stocks have steadily risen in significance over the past decade, attributed to the escalating economies of scale due to technology's impact on the economy. In recent times, the surging enthusiasm for artificial intelligence has further propelled gains in these sectors. However, the current year's gains in these areas aren't solely a result of these trends. The returns observed among these companies also signify a recovery from the previous year, a period when these stocks were most severely impacted due to escalating interest rates and an increasingly gloomy future outlook. When considered together with last year's performance, the returns, though still oversized, appear much more rational. 4. Positive Trends in Inflation Despite Persistent Core Measures One of the reasons for the pivot from last year's scenario is the discernible signs of improvement in inflation. The main Consumer Price Index has decreased from a high of 9.1% a year ago to 4% presently, primarily attributed to deflation in energy costs and other sectors such as used automobiles. However, the core inflation remains persistent, primarily driven by housing costs. The Federal Reserve and other economists are of the belief that these prices will exhibit a positive trend as rent prices achieve stability and new leases get initiated. Investors should also keep their expectations in check regarding further advancements in inflation. Optimistically, both headline and core inflation are likely to remain elevated throughout a significant part of 2024. In the interim, there's a possibility that year-over-year inflation data may show deterioration due to comparisons with the previous year's levels. 5. Pace of Federal Reserve Rate Hikes Has Slowed When inflation improves in conjunction with a robust economy, it offers the Federal Reserve an opportunity to decelerate its frequency of rate hikes. The Federal Reserve has consecutively elevated rates 10 times, moving from zero to 5%. The magnitude of each increment has gradually decreased over the past year, falling from a zenith of 75 basis points (0.75%) per meeting to a possible 25 basis points every alternate meeting. The Federal Reserve has explicitly signaled its dedication to bringing inflation back to their 2% benchmark by sustaining elevated rates over an extended period. There has been a shift in market-based expectations this year, with consensus moving away from anticipating a rate cut later in the year, to now agreeing that there could be a further rise in rates. 6. Commercial Real Estate and Other Rate Sensitive Industries Face Problems Among the various sectors affected by escalating rates and financial uncertainty, commercial real estate is perceived as the most significant risk by investors. This perception is not solely because commercial real estate has grappled with the aftereffects of the pandemic, including shifts in office usage and occupancy, but also due to the trillions of dollars in loans that will need refinancing in the near future. Increasing interest rates and stringent lending standards could potentially complicate this process, resulting in liquidity and solvency challenges for commercial real estate companies. Fortunately, the increased stability observed in the banking system over recent months, coupled with support from the Federal Reserve and the government, have alleviated some of these risks. However, market stakeholders will continue to keep a keen eye on this sector in the upcoming months. 7. Smart Investors Create a Financial Plan for Retirement Especially During Times of Uncertainty Investors, particularly those nearing retirement, might be pondering about the implications of market volatility on their portfolio. The well-established 4% rule outlines a "safe" withdrawal rate during retirement, founded on the historical performance of a hypothetical portfolio made up of 60% stocks and 40% bonds, as illustrated in the attached chart. This accounts for both prosperous and challenging market phases since 1900. The chart, however, also reveals that safe withdrawal rates can significantly vary, with the average approximating 7%. Hence, while investors must reduce the danger of depleting their resources, it is equally essential for them to optimally utilize their retirement period, especially given increasing life expectancies. Rather than merely adhering to a general guideline, investors should comprehend their individual situations to more accurately estimate their safe withdrawal rates. This strategy can aid long-term investors in achieving their financial objectives, particularly during uncertain market times such as the present. To sum it up, the markets have made a comeback in the first half of the year, catching numerous investors by surprise. Although markets don't ascend linearly, investors who concentrate on long-term fundamentals and steer clear of market timing will probably be better equipped to exploit market opportunities in the latter half of the year. As you get closer to retirement, you tend to save more and invest conservatively. So knowing how your retirement savings is properly tied to your life plan is important. A financial advisor at Covenant Wealth Advisors can help you manage your retirement savings and plan for the future. Author: Mark Fonville, CFP® Mark is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors specializing in helping individuals aged 50 plus plan, invest, and enjoy retirement without the stress of money. 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.

Retirement planning is more important than ever, but also more challenging. With high inflation rates over the past two years, most retirees worry about outliving their savings. This risk is very real and requires careful consideration to ensure a comfortable retirement. The unpredictability of markets and the economy makes it impossible to time events like daily market fluctuations or the start of retirement during a bull or bear market. Nevertheless, we can regulate our own behavior and stay focused by being disciplined. Thus, a reliable financial plan that can adapt to unforeseen circumstances, coupled with expert financial advice, has been proven to be the most effective approach in reducing retirement risks. Though there is no guaranteed success, historical data supports this approach. How can retirees continue to maintain peace of mind and their quality of life in today's environment? Download FREE: Get the Same Checklists We Use to Help Our Clients Retire [New for 2023] Retirement and investment planning can be complex, but two key concepts worth understanding are the "4% rule" and "sequence of returns risk." The 4% rule is a tool that aims to answer the question of how much money you can withdraw annually from your retirement portfolio without depleting your savings. Its creator, William Bengen, found that a 4% withdrawal rate historically served as a safe threshold for retirees to sustain their portfolios for a 30-year span, accounting for inflation. For this reason, this is also sometimes referred to as the "SAFEMAX rate." Maximum Withdrawal Rates in Retirement Are Different Throughout History You may be wondering if the 4% withdrawal rule is still viable today. Our accompanying chart above shows safe withdrawal rates based on historical 30-year periods and inflation rates for a 60/40 stock/bond portfolio, as well as estimates for recent years. The calculations reveal that the maximum withdrawal rate fell to 4% only once in the 1960s. In hindsight and on average, retirees were able to withdraw 6.9% annually without depleting funds. Keep in mind that the safe withdrawal rate can vary significantly yearly due to market returns fluctuations. Overall, these findings give retirees confidence in steady withdrawal rates. When it comes to investing and the 4% rule, it's important to keep a few things in mind. If you want to make the most of your investments over the long-term, you need to stick to your investment plan. Avoid overreacting to short-term market fluctuations, as this can negatively impact your retirement withdrawal rates later on. It's essential to consider your individual risk tolerance and portfolio construction, which can vary greatly between retirees. For many people, a 60/40 portfolio may be too aggressive, particularly in later life. Sequence of Return Risk Can Change The Value of Your Portfolio in Retirement Ultimately, investing is about more than just market events – it's also about our own behavior and approach to risk. Using simple rules of thumb for retirement savings may not fully account for the timing of bear and bull markets, which can significantly impact the value of your portfolio and withdrawals. For instance, withdrawing funds early in retirement when the market is down amounts to "selling low," leaving investors with fewer opportunities to benefit from future bull markets and compound interest. Download FREE: Get the Same Checklists We Use to Help Our Clients Retire [New for 2023] Conversely, withdrawing when the market is up ("selling high") enables your portfolio to maintain a higher value and compound faster, providing a safety net during inevitable downturns. As such, it’s important to tread carefully with any general retirement saving guidelines. Investors cannot pick their starting position in a bull or bear market. Instead, they must adapt to the cards they are dealt. Although the 4% rule is a decent starting point, it may not be enough to effectively manage spending and risks in retirement. To balance these factors, retirees should seek financial guidance and develop a plan that adapts to their changing needs and circumstances. It's essential to consider various factors when determining withdrawal rates, and having a sensitive financial plan is crucial for successful retirement planning. Withdrawal Rates and Life Expectancy Did you know that simple financial rules of thumb don't take into account increasing life expectancies? For example, a 40-year-old man today has a life expectancy of 79 years, while the 90th percentile could live beyond their 90s. For those who are 65, the average life expectancy for men and women is 83 and 86, respectively. However, the 90th percentile could live to 94 and 97. This difference of a decade or more can have a significant impact on investment portfolios and financial plans, emphasizing the need to prepare for a retirement that could last 20 to 40 years. Longevity risk is the possibility of living longer than anticipated, and it's a significant concern for most people. The risk is particularly harsh because it's worse to run out of money than to leave some behind for loved ones, charities, and others. Therefore, life expectancy is a critical factor in financial planning. Professional financial advice can help people manage their longevity risk, making it even more critical for everyone. Conclusion Although the 4% rule is a helpful tool for retirees, it does not provide a complete solution. To achieve financial security in today's volatile market, investors must adhere to a long-term investment strategy and financial plan. It is essential to stay focused and committed to your goals in order to overcome the obstacles presented by today's economic climate. Do you want a personalized plan for retirement to help make your money last? Contact us today for a free retirement assessment! 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. 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 near. So, you’re probably thinking, what are the top retirement questions to ask yourself before you take the plunge? After all, there is a lot at stake. Nearing retirement is exciting and rewarding. What kind of life do you want? What do you imagine yourself doing? SPECIAL NOTE FOR INDIVIDUALS AGED 50+ WITH OVER $1 MILLION: Tying your $1 million+ portfolio to your retirement and tax plan can be hard. If you are interested in learning how we can help fully integrate taxes, investments, and retirement income planning, click here for a free retirement assessment . Get more ideas than you thought were possible. Perhaps the idea of traveling, new hobbies, and volunteering, gets you excited. Or maybe the idea of making your own schedule and having better control over your time is a motivating factor. Free Download: 15 Free Retirement Planning Checklists [New for 2023] The future is yours. But, retirement is also one of the most critical phases of your life. Small mistakes can snowball into big problems. That’s why it’s imperative to identify opportunities and red flags in advance of taking the next step. Depending upon your retirement age, you have one chance to make your money last twenty five years or more. After helping hundreds of individuals across Virginia and the United States transition to and through retirement, we’ve learned a thing or two about financial planning for retirement. Our experience has taught us a lot about what works and...what doesn’t work. Part of the lessons we've learned include key retirement questions to ask before you take the plunge. So much so, we thought you may benefit from hearing a few insights that we've gathered over the years. Here are five retirement questions to ask yourself before you sail away into your golden years. 1. Do I have a spending and retirement income strategy that works? Probably the most glaring aspect of your retirement transition is figuring out how much you can spend each year to support your lifestyle and financial goals. Those approaching retirement can get a sense of their retirement spending by looking at their current household budget. Tracking your spending now can be a solid benchmark for future expenses. While some line items will change, many people find that their spending remains rather consistent in retirement. Once you have a better idea of how much you’ll be spending, compare that plan against the sources of income you’ll have to support it, like Social Security, part-time work, pensions, and withdrawals from your retirement accounts. Withdrawing from your retirement savings is the exact opposite of what you’ve been doing up to this point. Retirement represents a complete shift in the way you treat your savings, and an important element of this shift is deciding how to withdraw. Many retirees consider how much they should, can, or need to withdraw but the specific method is often overlooked. Building an efficient withdrawal strategy can bring immense value to your retirement income plan. If you have different accounts like a 401k, Roth IRA, and a taxable brokerage account, consider how much should come from each (including RMDs once appropriate). SPECIAL NOTE FOR INDIVIDUALS AGED 50+ WITH OVER $1 MILLION: Tying your $1 million+ portfolio to your retirement and tax plan can be hard. If you are interested in learning how we can help fully integrate taxes, investments, and retirement income planning, click here for a free retirement assessment . Get more ideas than you thought were possible. It can be prudent to take a portion of your annual withdrawal from each account rather than deplete one account at a time. But, the amount you withdrawal from your accounts depends upon your tax situation. Also, when you decide to start social security benefits can influence when and which retirement accounts you withdraw from first. Do you plan to take social security income at 62, full retirement age, or wait until age 70? The decision matters. Withdrawal planning is important for several reasons. With the right plan, you can reduce unnecessary taxes, take advantage of compounding investments, and prolong the longevity of your accounts. Don't forget, the cost of living rises over time due to inflation . So you'll want to make sure that your income increases every year. If you need help, talk to a financial planner who specializes in cash flow planning in retirement. 2. Have I accounted for my health both now and in the future? Healthcare costs are not only an important piece of a successful retirement plan but a practical reality of aging. Fidelity now estimates couples spend $295,000 on medical expenses alone in retirement excluding long-term care. Without a plan for your personal finances, you risk not being able to afford the care you need and putting the rest of your retirement savings at risk. If you are looking forward to an early retirement before age 65, you'll find that health insurance is expensive! Once you turn 65, and depending on the type of coverage you need or want, you’ll have some choices to make around Medicare. Most people qualify for Part A hospital coverage without having to pay a premium. However, you’ll have to pay a premium for Part B medical coverage. Depending on your income (specifically, your MAGI) you may also have to pay a surcharge. This alone may give you a planning opportunity. Long-term care is another often overlooked healthcare item, which is significant when you consider that the average daily cost of a private room in a nursing home is over $250. SPECIAL NOTE FOR INDIVIDUALS AGED 50+ WITH OVER $1 MILLION: Tying your $1 million+ portfolio to your retirement and tax plan can be hard. If you are interested in learning how we can help fully integrate taxes, investments, and retirement income planning, click here for a free retirement assessment . Get more ideas than you thought were possible. Medicare does not provide coverage for long-term care, so it’s essential to consider how you’ll take care of health expenses should they arise. Generally speaking, you can purchase a long-term care policy or set aside additional savings/investments to cover these expenses. Either way can work, but each requires unique planning, so it’s something you need to explore well before you need it. Free Download: 15 Free Retirement Planning Checklists [New for 2023] The important takeaway here is you can save a significant amount of money with proper planning—either directly through premiums or indirectly with additional protections from unplanned expenses. We've found that families can potentially save tens of thousands of dollars in healthcare premiums with the right planning and strategies. From health savings accounts (HSAs) to reducing taxable income, the right plan can help prepare you for inevitable healthcare expenses. And don't forget about the potential for downsizing your home in the future. The quality of your healthcare in the future has a direct relationship to where you live. 3. Am I excited about my retirement lifestyle? It’s easy to get lost in the many financial components of retirement planning, but paying heed to the personal side of retirement planning is just as critical. Considering your lifestyle wants, needs, and expectations helps you walk into retirement with purpose and confidence. What's on your bucket list? Planning for your ideal lifestyle is just as important as a well-structured investment plan. Ask yourself, How will I spend my time? How can I maintain and form new social connections? Where/how will I find meaning and fulfillment? How can I challenge myself, both mentally and physically, to maintain good health? The reality for most retirees that don’t have concrete answers to these questions is that retirement becomes dull and unfulfilling. Instead, make a conscious effort to build the retirement life you want one step at a time. For many, that involves something rather contradictory to the traditional idea of retirement—working. Over the last few years, many retirees have embraced second careers that bring them joy, fulfillment, purpose, and resources for their life. Maybe you volunteer to teach a hobby of yours or start a small business. These are compelling ways to stay engaged and motivated in your golden years. Whether it’s meaningful work or fulfilling hobbies, consider how you’ll spend your time before you make the leap. 4. Is my estate plan updated? Your estate plan should be updated periodically, especially in significant life transitions, making retirement the perfect opportunity to check-in on your documents. Even if you don’t think your estate is large enough to worry about because it is well below the estate tax exemption, there are plenty of reasons to give estate planning some time. Perhaps you have acquired new assets (house, boat, business, etc.) and need a plan for passing those along. If you haven’t clearly laid out how you want your assets to pass to heirs, then they may have to deal with the courts and go through the probate process. Avoiding probate alone is often reason enough to make sure you have a proper estate plan in place. You also want to check-in on your primary and contingent beneficiaries, update your power of attorney and medical directive, and ensure your trusts are funded properly. We often find that individuals prepare the right estate planning documents, but fail to properly establish their traditional IRA or life insurance beneficiaries. The result is a failed estate plan that you spent thousands of dollars creating. An experienced Certified Financial Planner ™ or CFP® should be able to help analyze your estate plan. Free Download: 15 Free Retirement Planning Checklists [New for 2023] 5. Do I have an income tax strategy in place? The way you pay taxes changes in retirement. Knowing how your income channels are taxed and making a plan for tax-efficient withdrawals in retirement will extend the life of your nest egg and give you more flexibility and freedom in your spending plan. Your 60s and 70 can be filled with fluctuations in taxable income. Your income from employment, savings withdrawals, annuities, pension payouts, and Social Security will likely all change during this time. Employer retirement benefits can also create tax opportunities and problems. Managing your taxable income is paramount to reduce taxes now and in the future, and with all of this variation, there are many planning opportunities. Should I do Roth conversions? When should I take Social Security? How can I maximize my giving while reducing taxes? Is my investment portfolio managed with taxes in mind? The answers to these and other retirement tax questions are often integrated because they affect each other. SPECIAL NOTE FOR INDIVIDUALS AGED 50+ WITH OVER $1 MILLION: Tying your $1 million+ portfolio to your retirement and tax plan can be hard. If you are interested in learning how we can help fully integrate taxes, investments, and retirement income planning, click here for a free retirement assessment . Get more ideas than you thought were possible. For example, consider your withdrawal plan. As we mentioned before, the way you withdraw can have a significant impact on your taxes. For example, it may be possible to reduce the taxes you pay on your Social Security benefits or Medicare Part B premiums because those factors are based on your other income sources. We’ve created a handy checklist to help you go through these considerations and others when you’re thinking through retirement. Feel free to grab a copy here: What Issues Should I Consider Before I retire? Conclusion Retirement can and should be a wonderful chapter in your life. But, it's important to know the right retirement questions to ask yourself before you transition to the next chapter in your life. There are just too many things that can go wrong if you don't plan ahead. That's why having a personalized financial plan can be so helpful. A plan can help address all the questions above and many more that we didn't discuss. As a start, the five key questions you may consider include: Do you have a spending and retirement income strategy that works? Have you accounted for your health both now and in the future? Are you excited about your retirement lifestyle? Is your estate plan updated? Are you prepared for your taxes? If you're able to confidently answer these questions, then I think that's a great start to maintaining financial security and peace of mind going forward. But, there's a lot more to think about and the devil is in the details. If you’re looking for a tailored retirement plan that addresses all of your retirement questions, schedule a call with our team today. Our financial advisors specialize in helping individuals and couples age 50 plus have enough money for retirement so you can enjoy life without the stress. Whether you're located in Virginia, California, Florida, or anywhere across the country, we offer comprehensive advisory services that can help. Contact us for a free consultation. Mark Fonville, CFP® Mark is a fee-only, CERTIFIED FINANCIAL PLANNER ™ helping individuals age 50 make better decisions with their money so they can enjoy retirement without the stress of money. He is also the President of Covenant Wealth Advisors and has been featured in the New York Times, Kiplinger, the Chicago Tribune, and more. Schedule a free consultation 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.

Retirement can be a blissful time of life, but it can also be a period of financial uncertainty. After all, with no steady paycheck, how do you know if you're on track to cover your expenses? That's where a retirement budget comes in. By setting a budget, you can make sure your nest egg lasts as long as you do. So, let's dive in and explore how to create a retirement budget that works for you. Assess Your Expenses First things first, you need to understand how much money you're spending. It might seem like a no-brainer, but many people don't have a clear idea of where their money is going. To get a handle on your expenses, start by reviewing your current spending habits. If you're like most people, you'll probably find that you're spending more than you realized on things like eating out or buying new clothes. But how do your expenses change in retirement? Well, it depends on your lifestyle. For example, if you're used to traveling frequently, you might find that your travel expenses decrease in retirement. Conversely, if you're planning on picking up a new hobby or two, you might need to budget for those expenses. In short, take some time to think through how your expenses might change in retirement. And don't forget to factor in inflation! While you might be used to paying a certain amount for groceries or utilities, those costs are likely to increase over time. So, make sure your budget accounts for rising prices. Determine Your Sources of Income Next, you need to know where your money is coming from. For most people, retirement income comes from a combination of sources. Social Security is one of the most common sources of income for retirees. Depending on your earnings history, you could receive a monthly benefit ranging from a few hundred dollars to several thousand. Retirement accounts are another source of income for many retirees. If you've been contributing to a 401(k) or IRA throughout your career, you'll likely have a substantial nest egg to draw from in retirement. Pension plans are also a common source of income, although they're becoming less common these days. If you own rental property, that can be a source of retirement income as well. However, rental income can be unpredictable and may require a lot of work. Plus, you'll need to budget for property maintenance and repairs. Calculate Your Retirement Income Shortfall/Surplus Now that you know your expenses and income sources, it's time to do some math. Subtract your expenses from your income sources to determine your retirement income shortfall or surplus. Ideally, you want to have more income than expenses. If you have a shortfall, you'll need to either reduce your expenses or find additional sources of income. For example, let's say you're estimating that you'll need $4,000 per month to cover your expenses in retirement. You expect to receive $2,500 per month from Social Security and $2,000 per month from your retirement accounts. That adds up to $4,500 per month in income, which means you have a surplus of $500 per month. Of course, not everyone will have a surplus. Let's say your expenses are the same, but you expect to receive only $2,000 per month from Social Security and $1,500 per month from your retirement accounts. That adds up to $3,500 per month in income, which means you have a shortfall of $500 per month. In this case, you might need to consider downsizing your home, finding a part-time job, or delaying retirement. Prioritize Your Expenses Once you've calculated your retirement income shortfall or surplus, it's time to prioritize your expenses. In other words, which expenses are most important to you? This can be a tough decision, as it often involves lifestyle choices and trade-offs. For example, let's say you're a foodie and love eating out at fancy restaurants. However, you also enjoy traveling and want to take a big trip every year. If you're on a tight budget, you might have to choose between the two. In this case, you might decide that travel is more important to you than dining out, and adjust your budget accordingly. The same goes for other expenses, like entertainment, hobbies, and healthcare. Think about what's most important to you and prioritize accordingly. That way, you can make sure you're spending your money on the things that bring you the most joy. Create a Retirement Budget Now it's time to put everything together and create a retirement budget. You can use a budgeting tool or spreadsheet to help you allocate your income sources to your expenses. Be sure to adjust your expenses as needed to make sure everything balances out. For example, let's say you've determined that you need $4,000 per month to cover your expenses in retirement. You'll receive $2,500 per month from Social Security and $2,000 per month from your retirement accounts. That adds up to $4,500 per month in income, which means you have a surplus of $500 per month. You might allocate your income sources as follows: Essential expenses (housing, food, utilities, healthcare): $3,000 per month Discretionary expenses (entertainment, hobbies, travel): $1,000 per month Savings: $500 per month Of course, your budget will look different depending on your personal situation. The key is to make sure you have enough money to cover your essential expenses, with some wiggle room for discretionary spending and savings. Monitor and Adjust Your Retirement Budget Creating a retirement budget is just the first step. You'll also need to regularly monitor and adjust your budget as needed. Life is unpredictable, and unexpected expenses can throw a wrench in your plans. That's why it's important to review your expenses and income regularly, and make adjustments as needed. For example, let's say you've been retired for a few years and your healthcare costs have increased. You might need to adjust your budget to allocate more money to healthcare expenses. Or, let's say your investments are performing better than expected and you have a surplus of income. You might decide to splurge on a big vacation or donate to a charity. In short, be flexible and willing to adjust your budget as needed. That way, you can make sure your retirement savings last as long as you do. Conclusion Creating a retirement budget can be daunting, but it's an essential step in ensuring your financial security in retirement. By assessing your expenses, determining your sources of income, calculating your retirement income shortfall/surplus, prioritizing your expenses, and creating a retirement budget, you can make sure you're on track to cover your expenses in retirement. And remember, be flexible and willing to adjust your budget as needed. Retirement should be a time of enjoyment, not stress! 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. Hypothetical examples are fictitious and are only used to illustrate a specific point of view.

Retirement planning is a crucial aspect of financial planning, and one of the most effective ways to save for retirement is through retirement accounts. There are several types of retirement accounts available, each with its own set of rules and benefits. However, you may be wondering, how many retirement accounts can I have? But first, be sure to download our free checklist: What accounts should I consider if I want to save more? In this article, we will explore the answer to that question and provide tips for managing multiple retirement accounts. The Basics of Retirement Accounts Before we dive into the specifics of how many retirement accounts you can have, let's first review the different types of retirement accounts available: 401(k): A retirement account offered by an employer, typically with contributions made through payroll deductions. Earnings grow tax-deferred until withdrawn in retirement. Traditional IRA: An individual retirement account that allows you to contribute pre-tax dollars, reducing your taxable income. Roth IRA: An individual retirement account that allows you to contribute after-tax dollars, but provides tax-free growth and withdrawals in retirement. SEP IRA: A retirement account for self-employed individuals or small business owners. Simple IRA: A retirement account for small businesses that allows both the employer and employee to make contributions. Comparison of Retirement Account Types Each type of retirement account has its own set of rules and benefits. Here is a comparison of some key features: Retirement Account Type Contribution Limit (2023) Employer Contributions Tax Benefits 401(k) $22,500 + $7,500 Catchup age 50+ Yes Pre-tax and tax-deferred growth Traditional IRA $6,500 No Pre-tax and tax-deferred growth Roth IRA $6,500 No After-tax and tax-free growth SEP IRA $66,000 or 25% of income Yes Pre-tax and tax-deferred growth Simple IRA $15,500 Yes Pre-tax and tax-deferred growth As you can see, the contribution limits and tax benefits of each retirement account type vary. Additionally, some accounts, like the 401(k), require employer contributions, while others, like the traditional IRA, do not. How Many Retirement Accounts Can You Have? Now, let's get to the question at hand - how many retirement accounts can you have? The short answer is that there is no limit to the number of retirement accounts you can have. However, the IRS does have rules that govern how much you can contribute to these accounts each year. Free Download: What Accounts Should I Consider If I Want to Save More? For example, in 2023, the contribution limit for a 401(k) is $22,500 while the contribution limit for a traditional IRA is $6,500. If you have multiple retirement accounts, you cannot exceed these contribution limits in total. However, you can spread your contributions across multiple accounts. It's important to note that contribution limits apply to each type of retirement account individually. For example, if you have two 401(k) accounts, you cannot contribute $22,500 to each account. Instead, you must stay within the $22,500 limit for all of your 401(k) contributions combined. Pros and Cons of Multiple Retirement Accounts Now that we've established that there is no limit to the number of retirement accounts you can have, let's discuss the pros and cons of managing multiple retirement accounts. Pros: Flexibility: Different retirement accounts have different rules and benefits, allowing you to tailor your retirement savings to your specific needs. Tax benefits: Depending on your income and tax situation, having multiple retirement accounts can provide additional tax benefits. Cons: Complexity: Managing multiple retirement accounts can be complex and time-consuming, especially if you have several different types of accounts. Overlapping investments: If you have multiple retirement accounts, it's possible that you may end up with overlapping investments, which can reduce the diversification benefits. Fees: Each retirement account may come with its own set of fees, which can add up over time. Tips for Managing Multiple Retirement Accounts If you do decide to have multiple retirement accounts, it's important to have a plan for managing them effectively. Here are some tips: Consolidate where possible: Consider consolidating similar retirement accounts to simplify your portfolio and reduce fees. Use a financial advisor: A financial advisor can help you develop a retirement savings plan that incorporates multiple accounts and meets your specific needs. Keep track of contribution and income limits: Be aware of the contribution and income limits for each type of retirement account and make sure you don't exceed them. Rebalance your portfolio: Regularly review and rebalance your retirement accounts to ensure you maintain an appropriate asset allocation. Free Download: What Accounts Should I Consider If I Want to Save More? Conclusion In conclusion, there is no limit to the number of retirement accounts you can have, but there are contribution limits that apply to each type of account individually. While having multiple retirement accounts can provide diversification and flexibility, it can also be complex and potentially costly. If you do decide to have multiple retirement accounts, consider consolidating where possible and working with a financial advisor to develop a retirement savings plan that meets your needs. By managing your retirement accounts effectively, you can set yourself up for a comfortable and secure retirement. Click here to get a free retirement assessment from Covenant Wealth Advisors 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. Hypothetical examples are fictitious and are only used to illustrate a specific point of view.

Financial planning is essential for everyone, but it is especially important for physicians who face unique financial challenges. Despite earning high incomes, many doctors struggle with managing their finances effectively. In this blog, we will discuss five common financial mistakes that physicians make and provide advice on how to avoid these pitfalls, enabling you to build a stable financial future. Before you get started, here are a couple of free resources to help with your journey: Important Numbers Every Tax Savvy Investor Should Know [New for 2023] 15 Free Retirement Planning Checklists Mistake 1: Not Creating a Budget One of the most common financial mistakes made by physicians is neglecting to create a budget. A budget is a crucial tool that helps you understand your income and expenses, allowing you to make informed decisions about your spending and saving habits. Without a budget, you may find yourself overspending on non-essential items and failing to save enough for future financial goals. Example 1: The Consequences of Poor Budgeting with Dr. Emily Thompson Dr. Emily Thompson, a successful pediatrician in her mid 40s, had always been confident in her ability to manage her finances. With a six-figure income, she never worried about living paycheck to paycheck. However, despite her high income, she never saw the need to create a budget, believing that she had more than enough money to cover her expenses and save for the future. Over the years, Dr. Thompson developed a taste for the finer things in life. She frequently dined at upscale restaurants, took lavish vacations, and splurged on designer clothes and accessories. Additionally, she purchased a luxury car and a sprawling home in an exclusive neighborhood, both of which came with hefty monthly payments. Since she didn't track her spending or set limits on her expenses, her lifestyle quickly began to exceed her income. One day, Dr. Thompson received an unexpected medical bill for a procedure that her insurance didn't fully cover. As she went through her bank statements to assess her financial situation, she was shocked to discover that her savings were nearly depleted. To make matters worse, she realized that her credit card balances had skyrocketed, and she had amassed a significant amount of high-interest debt. Dr. Thompson's situation quickly became dire when she was faced with an emergency home repair that she couldn't afford. She found herself borrowing from her retirement accounts to cover the costs, jeopardizing her financial future. With no budget in place, she had unknowingly spent herself into a financial crisis. Had Dr. Thompson created a budget early in her career, she would have had a clear understanding of her income and expenses, allowing her to make informed decisions about her spending and saving habits. A budget would have helped her identify areas where she could cut back, allocate funds to emergency savings, and prioritize her financial goals. By neglecting this crucial financial tool, she jeopardized her financial stability and put her future at risk. To create an effective budget: List your monthly income sources, including salary, bonuses, and investments. Identify all your fixed and variable expenses, such as mortgage, utilities, food, and entertainment. Allocate funds to savings and investment goals, such as emergency funds, retirement accounts, and college savings plans. Track your spending regularly to ensure you stay within your budget. To maintain your budget, consider using budgeting apps or software, and review your budget periodically to make necessary adjustments. Mistake 2: Ignoring Student Loan Management The average medical school graduate carries a significant amount of student loan debt. Ignoring this financial burden can lead to higher interest costs and a longer repayment period. To effectively manage your student loans: Understand your loan terms, including interest rates, repayment options, and potential forgiveness programs. Consider refinancing or consolidating your loans to secure a lower interest rate or more manageable monthly payments. Research loan forgiveness and repayment assistance programs, such as Public Service Loan Forgiveness (PSLF) or income-driven repayment plans. Example 1: The benefits of managing student loan debt with Dr. Andrew Martinez Dr. Andrew Martinez, a dedicated family practitioner in his mid-30s, was well aware of the heavy burden of student loan debt he carried after completing medical school. With over $200,000 in loans, he knew that managing this debt would be crucial to his long-term financial success. Determined to tackle his student loans head-on, Dr. Martinez devised a comprehensive strategy to reduce his debt as efficiently as possible. First, Dr. Martinez took the time to understand the terms of each of his loans, including interest rates and repayment options. He discovered that some of his loans had significantly higher interest rates than others, making them prime candidates for prioritizing in his repayment plan. Next, he researched refinancing and consolidation options, ultimately choosing to refinance his high-interest loans to secure a lower interest rate and more manageable monthly payments. This decision saved him thousands of dollars in interest over the life of the loan. Dr. Martinez also explored various loan forgiveness and repayment assistance programs. He learned that he qualified for the Public Service Loan Forgiveness (PSLF) program due to his work at a nonprofit hospital. By enrolling in an income-driven repayment plan and making consistent monthly payments, he would be eligible for loan forgiveness after ten years of service. To further accelerate his loan repayment, Dr. Martinez committed to living frugally and directing any extra income, such as bonuses or tax refunds, towards his student loan debt. He also set up automatic payments to ensure that he never missed a payment and potentially jeopardized his eligibility for forgiveness. Thanks to his diligent management of his student loan debt, Dr. Martinez was able to pay off a significant portion of his loans and secure forgiveness for the remaining balance. By actively addressing his debt, he freed up funds for other financial priorities, such as saving for a down payment on a house, investing for retirement, and creating an emergency fund. His proactive approach to student loan management set the stage for a stable and secure financial future. By actively managing your student loans, you can reduce your debt burden and free up funds for other financial priorities. Mistake 3: Inadequate or Improper Insurance Coverage Insurance is an essential part of any financial plan, providing protection against unforeseen events that can negatively impact your finances. Physicians, in particular, should prioritize acquiring adequate malpractice, disability, and life insurance coverage. Common insurance pitfalls include: Underestimating the amount of coverage needed or opting for the cheapest policy without considering the quality of coverage. Relying solely on employer-provided coverage, which may not be sufficient or portable if you change jobs. Neglecting to review and update policies regularly, leading to gaps in coverage as your financial situation evolves. Example 1: The consequences of being underinsured with Dr. Sarah Mitchell Dr. Sarah Mitchell, a skilled anesthesiologist in her late 40s, had always been diligent about her career and patient care. However, she paid little attention to her insurance needs, assuming that her employer-provided coverage was sufficient. Unfortunately, her lack of attention to her insurance coverage would eventually lead to serious financial consequences. One day, while on her way to work, Dr. Mitchell was involved in a severe car accident that left her with multiple injuries. Her recovery would require months of physical therapy and time away from her practice. As the primary breadwinner for her family, Dr. Mitchell was concerned about maintaining her financial stability during her prolonged absence from work. Confident that her employer-provided disability insurance would cover her income during her recovery, she was shocked to discover that the policy only provided 60% of her base salary, and her additional income from overtime and bonuses was not covered. This significant reduction in income made it difficult for her family to keep up with their mortgage payments, medical bills, and other living expenses. In addition to her inadequate disability insurance, Dr. Mitchell had opted for a minimal life insurance policy, believing that her high income and savings would be sufficient to support her family in the event of her passing. However, her recent accident and the resulting medical bills had depleted much of her savings, leaving her family financially vulnerable. Had Dr. Mitchell taken the time to evaluate her insurance needs and supplement her employer-provided coverage with appropriate individual policies, she could have avoided the financial strain her family faced during her recovery. A comprehensive disability insurance policy with coverage for her full income, including overtime and bonuses, would have provided her with the financial security she needed. Additionally, a more robust life insurance policy would have ensured her family's financial stability in the event of her passing. Dr. Mitchell's experience serves as a cautionary tale about the importance of thoroughly evaluating one's insurance needs and obtaining adequate coverage to protect against unforeseen events that can impact one's financial well-being. To ensure you have the appropriate coverage, consult with a trusted fee-only financial advisor who can help you evaluate your needs and recommend suitable policies. Periodically review your insurance coverage to ensure it remains adequate as your circumstances change. Mistake 4: Neglecting Retirement Planning Starting retirement planning early is crucial for physicians, as a late start can lead to inadequate savings and reduced financial security in later years. To effectively plan for retirement: Understand the various retirement savings options available to you, such as 401(k) plans, IRAs, and Roth IRAs. Maximize employer-sponsored retirement benefits, including contribution matching programs. Develop a long-term investment strategy that balances risk and return, taking into account your age, risk tolerance, and retirement goals. Regularly review and adjust your retirement plan as needed, considering factors such as changes in income, inflation, and market conditions. Example 1: Dr. Robert Anderson neglects planning for retirement Dr. Robert Anderson, a respected cardiologist in his early 50s, had spent the majority of his career focused on providing exceptional care to his patients. Although he had earned a substantial income over the years, he had never given much thought to retirement planning. Instead, he believed that his high earnings would naturally provide him with a comfortable retirement. As Dr. Anderson approached his 50s, he began to realize that he had not saved enough to maintain his desired lifestyle during retirement. His only retirement savings were in his employer-sponsored 401(k) plan, to which he had contributed the minimum amount required to receive the employer match. He had not explored other retirement savings options such as IRAs or back-door Roth IRAs or taxable brokerage accounts for better tax management in retirement, nor had he developed a comprehensive investment strategy to grow his nest egg. Concerned about his financial future, Dr. Anderson sought the advice of a financial planner, who informed him that he would need to significantly increase his retirement savings to avoid a drastic reduction in his standard of living during retirement. Unfortunately, given his age and proximity to retirement, Dr. Anderson had limited time to make up for the lost years of savings and compound interest. To address the shortfall in his retirement savings, Dr. Anderson was forced to make some difficult decisions. He began aggressively contributing to his 401(k) plan and evaluated the potential for a back-door Roth IRA and Mega Backdoor Roth IRA to take advantage of the tax-free growth. He also had to reevaluate his investment strategy, striking a delicate balance between growth and risk as he approached retirement age. In addition to ramping up his retirement savings, Dr. Anderson had to make significant lifestyle adjustments. He downsized his home, postponed his plans for luxury vacations, and delayed his retirement by several years to give him more time to save and grow his investments. Dr. Anderson's story illustrates the importance of early and consistent retirement planning. By neglecting this crucial aspect of financial planning, he jeopardized his financial security during his retirement years and was forced to make considerable sacrifices to compensate for his lack of foresight. Pro Tip: You rely on checklists when helping patients. Be sure to download our free retirement planning checklists to help you avoid major retirement planning mistakes. By prioritizing retirement planning, you can build a comfortable nest egg that ensures your financial security throughout your golden years. Mistake 5: Lack of Investment Diversification A well-diversified investment portfolio is essential for managing risk and optimizing returns. However, many physicians make the mistake of concentrating their investments in a single asset class or sector. This lack of diversification increases the risk of significant losses during market downturns. To create a diversified portfolio: Spread your investments across various asset classes, such as stocks, bonds, real estate, and cash. Diversify within asset classes by investing in different sectors, industries, and geographical regions. Consider using low-cost index funds, exchange-traded funds (ETFs), or professionally managed mutual funds to achieve diversification without the need for constant monitoring. Periodically rebalance your portfolio to maintain your desired risk level and asset allocation. Example 1: Dr. Samuel Green learns the importance of proper diversification, the hard way Dr. Samuel Green, a renowned neurosurgeon in his early 50s, had managed to accumulate a substantial net worth of over $2 million through his diligent retirement savings and disciplined investment in taxable accounts. Confident in his financial success, Dr. Green had invested the majority of his wealth in the healthcare sector, particularly in biotechnology and pharmaceutical companies, as he believed his industry knowledge would give him an edge in generating significant returns. Unfortunately, Dr. Green's overconfidence in his investment strategy led to a lack of diversification in his portfolio. When an unexpected global event caused a major disruption in the healthcare industry, the stocks of biotechnology and pharmaceutical companies plummeted. Dr. Green's heavily concentrated investments in these sectors experienced significant losses, resulting in a drastic reduction in the value of his retirement and taxable investment accounts. Realizing the gravity of his situation, Dr. Green sought the advice of Covenant Wealth Advisors who emphasized the importance of diversification to protect his portfolio from future market downturns. To create a more diversified portfolio, Dr. Green was advised to: Reallocate his investments across various asset classes, such as stocks, bonds, and real estate, to reduce his overall risk exposure. Diversify within asset classes by investing in different sectors, industries, and geographical regions to avoid over-concentration in any single area. Consider using low-cost index funds, exchange-traded funds (ETFs), or professionally managed mutual funds to achieve diversification without the need for constant monitoring. Periodically review and rebalance his portfolio to maintain his desired risk level and asset allocation. Overlay proper tax management across his portfolio to help improve after-tax returns. By following Covenant's recommendations, Dr. Green began the process of diversifying his investment portfolio to reduce risk and better protect his assets from future market fluctuations. Though it would take time to recover his losses, Dr. Green learned a valuable lesson about the importance of diversification in ensuring long-term financial stability. Pro Tip: You rely on checklists when helping patients. Be sure to download our free retirement planning checklists to help you avoid major retirement planning mistakes. By maintaining a diversified investment portfolio, you can reduce risk and potentially enhance long-term returns, helping you achieve your financial goals. Conclusion In summary, the five common financial mistakes physicians make are neglecting to create a budget, ignoring student loan management, having inadequate or improper insurance coverage, neglecting retirement planning, and lacking investment diversification. By addressing these issues and implementing the suggested solutions, you can build a strong financial foundation and secure your financial future. It's important to educate yourself about personal finance and maintain discipline in managing your finances. However, don't hesitate to seek professional financial advice tailored to your specific needs and circumstances. Remember, the sooner you start planning and avoiding these mistakes, the better prepared you will be for a prosperous and secure financial future. We help. Contact us for a free consultation to see how we can better manager your financial health. Author: Mark Fonville, CFP® Mark is the CEO of Covenant Wealth Advisors, a fee-only financial planning and investment management firm helping physicians build, preserve, and enjoy their wealth through improved financial health. 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. Request a free consultation 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. Hypothetical examples are fictitious and are only used to illustrate a specific point of view.

You've worked hard for your money. That's why it can be so disappointing to see much of your earnings paid out to Uncle Sam. Paying too much in taxes can make you feel like your running on a treadmill, never actually moving forward as hard as you try. The problem is that many investors and even financial advisors don’t take retirement tax planning seriously. After all, it takes time and specialized skills to fully integrate your retirement tax plan with your life plan. These two requirements are often big enough barriers to avoid taking the necessary steps. Depending upon your situation, the little known secret is that retirement tax planning has the potential to save you hundreds of thousands of dollars over time. That's why retirement tax planning is integral to your total financial plan and something you should keep current. A proactive retirement tax plan can set you up for success today and tomorrow. I can speak from experience. After having advised hundreds of families over the past seventeen years on retirement tax strategies and investing in retirement, I’ve learned that retirement tax planning may strengthen your financial security, help you maintain your lifestyle in retirement, and help you keep more money in your pocket. Ultimately, there are many reasons that you or your financial advisor should do tax planning. It’s worth it for those who are willing to invest a little extra time getting started. You’ve worked hard for your retirement savings, and you deserve to pay no more in taxes than you are legally required. To help you on your journey through your next chapter in life, here are seven critical benefits of retirement tax planning based on real-world experience. Oh, and don't forget your free cheat sheet to help you quickly put it all in context. 1. Retirement Tax Planning May Keep More Money In Your Pocket Of course, no one likes paying taxes, but it is inevitable as long as we have public roads, education, and national defense. We all do our part to pay for it, but just because you value things that taxes provide doesn’t mean you have to be careless about what you pay. What if you're overpaying? The truth is that you may not know until you get help. Vanguard estimates that investors may add an additional 0.60% per year in after-tax returns by implementing a single tax strategy called asset location. That’s $6,000 more per year in returns on a $1 million portfolio for one strategy. As another example, the state of Virginia has a program whereby taxpayers can purchase tax credits at a discounted rate of between 8-12%. The result is the potential for saving $800 to $1,200 in taxes on every $10,000 in credits purchased per year. That’s money that could be spent on date night with your spouse or an extra round of golf. I remember working with a new client several years ago. They were charitably inclined and had given $15,000 a year to different charities over the past ten years or more. They were confident that they had been giving in the most tax-efficient manner. After a quick review of their tax return, we discovered that their tax preparer had not properly implemented the strategy they thought they were following. As a result, I estimate that this mistake cost them between $3,000 to $4,000 per year in additional taxes over a ten-year period. That’s potentially $30,000 to $40,000 in tax overpayments to the IRS that could have gone right back into the client’s wallet, paid for a great vacation, or provided additional funds to give more to charity. The good news is that you don’t need to be an expert in retirement tax planning. A Certified Financial Planner who focuses on tax planning should be able to help you create a tax plan that ensures you retain as much of your hard-earned money as you legally can. There are many strategies available to help you, including: Tax-loss harvesting—strategically selling assets at a loss to offset more significant gains. Tax-gain harvesting—strategically realizing gains at lower tax rates to create smaller gains in the future. Asset location—housing securities in the most tax-efficient accounts. This can help determine the proper asset allocation for your risk tolerance, time horizon, and goals. Balancing tax buckets, like taxable, tax-deferred, and after-tax accounts. Charitable giving—optimizing your giving efforts to maximize your donation and save money on your tax bill. State tax credits - Virginia and other states provide land preservation tax credits that may be purchased, thus reducing your overall tax liability. Reducing your taxes spills over into other areas of your finances. When you proactively manage your adjusted gross income (AGI), you may have more control over taxes in other areas such as Social Security benefits, Medicare premiums, net investment income tax, and more. There are a lot of pieces, and you can gain the most value by thinking about them comprehensively. Don’t employ individual tactics without considering how they fit into the big picture! 2. Retirement Tax Planning Could Make Your Money Last Longer A retiree's most palpable fear is running out of money. That’s understandable, considering the effect that could have on your lifestyle. Tax planning may help your nest egg last longer by allowing you to keep more of it. One of the best ways to accomplish this goal is with a custom withdrawal strategy. If you are deliberate about when you will withdraw, from which accounts you will withdraw, and how much, you can navigate your taxes most efficiently. That sometimes means intentionally taking a taxable distribution or doing a Roth conversion even if it causes your taxes to go up one year. Michael Kitces reports that implementing partial tax conversions has the potential to increase your net after-tax wealth. Why? Because a strategy like a Roth conversion can potentially lower your average taxable income long-term and maximize the number of assets you transition to your heirs. The traditional rule of thumb is to take money from your taxable accounts first, then tax-deferred, then tax-free accounts like a Roth IRA. Here’s the dirty little secret when it comes to the order of account withdrawals in retirement. Traditional rules of thumb don’t always work best. Tax planning can help provide the personalized insights necessary, so you don’t pay more in taxes when creating the cash flow you need. Retirement Reminder: Don’t neglect your planning window during your pre-RMD (required minimum distributions) years from age 60 to age 72! This is often a time when your income is lower, so you may consider building up your after-tax bucket with Roth conversions while you are subject to a lower tax rate. Prioritizing Roth accounts will also give you more planning flexibility later by reducing your RMDs from your tax-advantaged retirement accounts. But, Roth conversions aren’t right for everyone, and your personal tax situation will help dictate if they are right for you. 3. Retirement Tax Planning May Help You Reduce Capital Gains Taxes Building a portfolio of low-cost investments can help save you money over the long term and may allow your investments to compound at a faster rate. That’s good, but if you hold your investments in taxable accounts, those gains are taxable when you sell. But if you consider your investments as part of a comprehensive tax plan, and coordinate it with your charitable giving to be tax-efficient, it may save you money. Instead of realizing a massive gain and paying the tax bill, what if instead you donated investments to charity? If you donate appreciated assets directly, rather than selling them first, you may avoid the taxable gain entirely. What if you don’t want to give to charity? When markets or individual investment positions are down, tax-loss harvesting can help preserve current losses on paper, allowing you to offset future gains. You have to do it correctly, and this will likely involve a multi-year strategic giving plan to ensure you take full advantage of the available itemized deduction—and we can help! 4. Retirement Tax Planning Can Better Position You for Future Tax Law Changes Benjamin Franklin once said there is nothing certain in life except death and taxes. I would like to add another to that list, which is changes to the tax code. Politicians make a name for themselves through legislation. Legislation often includes changes to our tax code and tax rates. As you can see in the chart below, individual income rates have changed numerous times since the early 1900s. If you aren’t prepared, those tax law changes can cost you money and weaken your financial position. In my experience, most people wait to plan until it’s too late. Procrastination isn't planning, it’s reacting. Reacting puts you on the defensive and in a weak position when it comes to reducing taxes. The truth is that nobody knows what tax rates will be in the future. But, tax planning in retirement can help you develop a long-term road map in an effort to diversify your taxable income. When tax laws change, you may be in a better position to react. 5. A Proactive Retirement Tax Plan Enables You To Pass More Money To Your Heirs Retirement tax planning can also spill over into your estate plan. By growing your accounts with taxes in mind, you may have more to pass on to beneficiaries and contribute to family generational wealth. For example, would your heirs rather inherit $1 million in a Roth IRA or $1 million in a Traditional IRA? A Roth IRA, of course! That’s because every dollar withdrawn from a Roth IRA is tax-free, whereas every dollar withdrawn from a Traditional IRA (under normal circumstances) is fully taxable at the federal and state level. That may mean transferring assets strategically and not simply building up a large estate may help maximize generational wealth. Lastly, it could also make sense to give some money away while you're alive, so you don't exceed the federal estate exemption of $12.06 million (double for married couples) in 2022. 6. You Can Increase The Value of Charitable Donations You don’t donate for the tax benefit, but for the good it does. However, when you think about charitable giving from a tax perspective, you'll actually be able to boost the overall value of your gift. As noted before, donating an appreciated asset would be more valuable than donating cash you already paid taxes on. Other excellent strategies to consider include qualified charitable distributions or QCDs, donor-advised funds, tax deduction bunching, and more. Which methods you employ depend on your tax bracket, savings, values, and goals. 7. Retirement Tax Planning Helps You Gain Peace of Mind Life is full of stress. From worrying about your health to family members to your career, there is enough to worry about without also having to worry about the taxes you pay. Proactive tax planning isn’t a one-time thing or something you put into a silo to think about on its own. Retirement tax planning is a long-term, comprehensive, multi-year process. Creating that plan is worth every bit of the effort it requires, especially if you have professional help to take the brunt of the load off of you. It can help you feel confident and prepared for the future while also providing the peace of mind you need to enjoy life. The less you pay in taxes, the more you have at your disposal. Saving all this money on taxes presents an excellent opportunity to reinvest those savings toward your long-term goals. Paying fewer taxes could allow you to put more away for retirement, maximize Roth accounts, convert tax-deferred balances, or save for your health in an HSA. The point is that it’s your money, and you have options. Paying unnecessary taxes should be the last thing on your priority list! Find A Financial Advisor To Help At Covenant Wealth Advisors, we specialize in retirement tax planning, investing in retirement, and retirement income planning and have the experience, resources, and capacity to help you. We also encourage you to collaborate with your tax professional to ensure you implement the proper strategies on your annual tax return. If you’d like to learn more about how you could benefit from a well-thought-out retirement and tax plan, watch our video on how we help and give us a call. Scott Hurt, CFP®, CPA Scott is a fee-only financial advisor and fiduciary at Covenant Wealth Advisors serving clients across the United States. He specializes in retirement tax planning and helping individuals aged 50 plus create, implement, and protect a personalized financial plan for retirement. Schedule a Free Consultation 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.

Are you getting ready for your golden years? Being a physician offers you a challenging and rewarding career, but you likely don’t plan to do it forever. Moving toward successful retirement requires planning and preparation if you want to live comfortably—especially if you’re hoping to retire early. What steps do you need to take in the years leading up to retirement? Get a quick breakdown of everything to keep in mind with our retiring physician checklist to make sure that you are in good shape for your financial future. Meet with a Financial Advisor It likely goes without saying that you’ll benefit from expert help behind you as you move away from that steady paycheck in your practice. A financial advisor can help you start planning as soon as possible—and the earlier you can meet with them, the better off you will be in retirement. Set a Budget Income often takes a substantial hit when you transition into retirement . This is why it is crucial to set a new budget to ensure that you have enough money to live off when your career no longer supports you. Set Goals Understand what you want to do in retirement: travel, charitable giving, paying for a grandchild’s college tuition, or something else entirely. Knowing your goals helps you budget accordingly. Maximize Employer Benefits Many employers offer assistance to those who are focused on the future, matching employee contributions to retirement savings accounts. Take full advantage of these matches and start to contribute the maximum allowed to your retirement. Even if your employer doesn’t offer a match, it will still benefit you to contribute as much as you can toward whatever doctor retirement benefits are offered through your employer – whether that is a 401(k), 403(b), 457(b), 401(a), HSA , or a combination of these. If you are old enough to qualify, don’t forget about catch-up contributions. Map Out a Succession Plan If you own your own practice, then you need to think about what will happen to the reputation you built after you retire. Plan out who will take it over, whether that means passing on the business to family or selling it, and what role you will play in the business in your golden years. Use Vacation Days Take advantage of the perks offered by your employer including those vacation days you have saved up over the years. This is a great way to continue receiving your steady paycheck, maximize the benefits your employer offers, and take some much-needed time away from your work instead of allowing those vacation days to go unspent. Rebalance or Reallocate Your Portfolio As you look toward retirement, you want to make sure you have enough after-tax liquidity in order to cover your expenses. For many physicians, this means rebalancing their portfolio so that they can withdraw some of their money if and when the need arises instead of waiting around for something to sell. Immediately before retirement, you will likely need to rebalance again to optimize your portfolio for income and preservation. Have a Withdrawal Plan When you have multiple retirement savings accounts, understanding which one to pull from first often poses a problem. Partner with a financial advisor to help you understand the implications of pulling from each account and to make a game plan for which accounts you will tap into first. Build a Tax Plan Just because you no longer have a steady stream of income from an employer doesn’t mean that you will be exempt from taxes. A financial advisor can help you come up with core strategies that will help minimize the taxes you will pay in your retirement on the money that you worked hard to earn. Tax planning in retirement is one of the most important items to address to help make your money last. Explore Health Insurance Options One of the perks of working is that you have access to benefits like health insurance, but these go away when you retire. You won’t be eligible for Medicare until age 65. For physicians who are retiring before age 65, you will need something else to cover you until it kicks in. Do some research now on where to get coverage and how much it will set you back so that you can budget accordingly. With proper advice from a financial advisor and tax planning, it’s possible to substantially reduce the premiums you pay out of pocket for private health insurance. Refinance Your Mortgage Do you still hold a mortgage on any of your properties? Maybe you have a high interest rate on your mortgage or you want to lower monthly payments to help out your budget. Refinancing your mortgage, if applicable, is a great step prior to your official retirement because you may not get approved once you are no longer employed. Pay Off Debt Paying off debt may not be for everyone, but it is something you will want to consider as you make a budget and meet with a financial advisor. Some physicians will be better off putting their money toward investments that have a higher rate of return. However, paying down debt could be necessary to reduce monthly expenses. Prepare for Retirement with Confidence In case you haven’t already gathered from this retiring physician checklist, one of the most important things you can do to prepare for your golden years is to meet with a financial advisor. A qualified financial advisor like the ones you will find at Covenant Wealth Advisors can walk you through each step of this checklist to make a comprehensive retirement plan that works for you. This is not necessarily a one-and-done type of appointment. Rather, you should meet with them multiple times leading up to retirement to ensure that you are on the right track and can make small adjustments as needed. Are you on track to retire early? Download the Financial Planning Kit for Doctors Considering Early Retirement today! Author: Mark Fonville, CFP® Mark is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors specializing in helping individuals aged 50 plus plan, invest, and enjoy retirement without the stress of money. 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. Request a free consultation 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.

Retirement planning is tricky for everyone, but it holds a particular struggle for those with a high income such as physicians. You may be used to a higher quality of life that may be difficult to maintain after retirement. It opens the door to thinking about the details – how you will live your life without the constant worry that your money will run out. Everyone needs a clear plan for retirement, but you may find that there are some physician retirement investment strategies that work better than others to achieve your financial goals. Here are our top five tips to help you achieve financial freedom and peace of mind when it comes to your retirement savings account. 1. Set Goals for After Retirement The ability to live your life comfortably while in retirement is only the first step toward making sure that you have the money you need. While budgeting for current expenses is important, you also need to think about additional goals like travel or paying college expenses for grandchildren. You should have a quick snapshot of how much money you need to retire comfortably . Physicians still need to stick closely to their budget, even if they are high earners. Everyone needs a budget to help them define their expenses and accurately forecast their financial future. The key here is to align your budget with your goals so that you ensure that you have enough money for everything that matters to you. 2. Prioritize Your Health Your finances are not the only thing that you should be planning for when it comes to retirement. In the present, you need to invest in yourself through things like exercising and eating healthy. This is especially true for physicians who often work long hours and are more prone to burnout. The question is: what does this have to do with your retirement investment strategy? Health costs are a top expense for people in retirement. Unexpected medical bills can seriously derail your retirement plans, so minimize your risk by prioritizing yourself in the here and now. You may even want to consider maxing out your HSA contributions that can be used to cover any unexpected medical bills in retirement. 3. Max Out Employer-Offered Retirement Accounts It might seem like common sense or obvious advice, but many people put off contributing to their retirement accounts. No matter what type of retirement savings plan your employer offers, consider maxing out your contributions. This is even more important when your employer offers to match contributions up to a certain percentage. Whether you have a 403(b), a 401(k), a 457(b), or a 401(a), you should take advantage of these types of accounts. A health savings account (HSA) is also a great tool to contribute pre-tax dollars that will grow tax-free, and can be withdrawn to cover healthcare expenses without taxes. Many physicians incorrectly use their HSA which can be a big mistake. Here’s how to use an HSA for retirement . If you can, be sure to take advantage of catch-up contributions that increase your savings once you reach a certain age. You can make catch-up contributions at age 50 for 401(k)s and IRAs or at age 55 for HSAs. 4. Diversify Your Investment Accounts You’ve heard about proper investment diversification. But, have you heard about diversifying your investment accounts as well? Taxes in retirement will sneak up on you if you haven’t prepared in advance. That’s why it’s important to think about the types of accounts that you invest in over time. There are three major categories of investment accounts from a tax perspective: Tax deferred accounts - 401(k), 403(b), IRA Taxable accounts - Brokerage account, savings account, or revocable trust account Tax-free accounts - Roth IRA, Roth 401(k), or Health Savings Account Diversifying your investment savings across these three buckets is crucial for helping you access money whenever you need it most. To this end, you should look for investment options beyond those that are offered by your employer, such as taxable accounts and tax-free accounts. Doing so will help you better manage your taxes in retirement because taxation of withdrawals differs depending upon the type of account you own. Be sure to take your tax bracket into account when maxing out some of these accounts to ensure that you will not be placing yourself in a position to pay more taxes upon withdrawal. Why does this matter? Consider this scenario: you are experiencing high rates of burnout and want to retire early. If all of your funds are in a 401(k), you will have to pay early withdrawal penalties that you could avoid if you had some of your retirement savings located in taxable brokerage accounts or trusts. You should also consider maintaining adequate liquidity within these accounts by having some money invested in cash or CDs. Consider what would happen if you had a surprise emergency expense and all of your money was tied up in the stock market. You might be forced to sell shares during an unfavorable market just to cover your expenses. Keeping money in different types of accounts can help you better manage your risk and make your savings last longer. 5. Work with a Financial Advisor Are you having a hard time figuring out what physician retirement investment strategies are the right fit for you? This can be a complex topic for anyone to navigate, especially if they are trying to do it on their own. Instead, work with a financial advisor to analyze your current portfolio and help you estimate if you are on the right track to retire on your own terms. A solid financial adviser can use tools like the Monte Carlo simulation to help you determine your odds of meeting your retirement spending goals. While a one-time strategy session might be a great way to start, you need more than a “one and done” financial planning session. For the best results, you need to meet with an advisor multiple times leading up to retirement so that you can stay flexible and make adjustments to your savings plan as needed. Are You Considering Early Retirement? The chance to retire early is an exciting prospect for anyone, but especially for physicians who work long, demanding hours and dream of a well-deserved break. Are you dreaming about early retirement but aren’t sure how feasible it is with your current assets? Are you looking for financial resources to put you on track when planning early retirement? Download our free guide, The Financial Planning Kit for Doctors Considering Early Retirement . Our all-in-one retirement planning kit includes a printable worksheet and checklist to identify considerations for retirement planning and actionable strategies to help you plan for an early retirement. Grab your free copy now! Author: Mark Fonville, CFP® Mark is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors specializing in helping individuals aged 50 plus plan, invest, and enjoy retirement without the stress of money. 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. Request a free consultation 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.