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Proactive tax planning can be instrumental in your retirement plan and, when wielded properly, can help you achieve your financial goals. However, people often confuse it with tax preparation, meaning they miss many valuable opportunities. Sound tax planning is a year-round strategy, so here are 5 important questions we think you should always ask your financial advisor about your tax plan. Tax Planning Vs. Tax Preparation Before we jump into the questions, it’s essential to highlight the difference between tax planning and tax preparation. Tax preparation concerns accounting for all financial matters within a given tax year and filing the appropriate information on a tax return. Minor planning is often involved, which usually focuses on maximizing deductions to reduce the tax bill as much as possible. Tax planning, on the other hand, is thinking about ways to reduce your total tax liability over multiple years. That strategy sometimes involves taking steps that increase your tax bill now to reduce your tax bill further at some point in the future, like with a Roth conversion or strategically realizing investment gains. The focus is on forecasting which actions you should take and when rather than recording the actions you already took. In other words, tax preparation is reactive, and tax planning is proactive. Tax planning and tax preparation are vital in different ways, and we can help you with both. We are incredibly passionate about the impact tax planning can have on your long-term financial strategy. Here is a 2023 tax number reference guide to help as you start to think about your own tax plan as well. Now, let’s dive into the top 5 tax planning questions to review with your wealth advisory team. Question 1: What’s Your Approach To Tax Planning? Asking this question will help you understand how the advisor thinks about tax planning in relation to your larger financial and investment plan… or if they do at all. Ask them specifically about their process and how they track progress. How do you go about creating a tax plan for your clients? What type of strategies do you see performing well? How do you tailor those strategies to my situation? What are the signs that the strategy “works”? When will you make adjustments? How does tax planning fit into your investment philosophy? There are many good answers to these questions, but you want to hear that they have a process in place and take it seriously. This question should also reveal what your current financial advisory team or potential advisor does to constantly add value. Beyond what they lay out during an initial plan, they should update tax plans annually. Doing so ensures you’re staying up to date with significant life changes that could impact your tax situation, like retiring, selling a business, selling significant positions in company stock, buying a house, marriage, etc. Sometimes you’ll only need minor tweaks, but in other years new opportunities present themselves. For example, when your income is lower in early retirement, you may consider a Roth conversion. Even though it could increase your taxable income, you could pay less in the long run if you aren’t collecting social security, pension income, required minimum distributions from retirement accounts, etc. You want to make sure your advisor can recognize and act on these sorts of advantageous opportunities. Question 2: Based On My Situation, How Can I Improve My Tax Standing? Once you ask this question, expect your advisor to ask you several questions in return because they’ll have to deeply understand the inner workings of your plan to give the most appropriate recommendations. To do this correctly, they’ll want to look at your most recent tax returns and develop additional questions, which may include the following, Are you taking advantage of every credit and deduction available? If not, are there small things you can do to increase eligibility for things like ACA credits, reduce your IRMAA surcharges, or lower your AGI? Are you managing your capital gains? If not, they should offer specific actions to take to get a better handle on them. Does a Roth conversion make sense? Could tax-loss harvesting help offset larger gains this year? Is your asset allocation tax-efficient? Are you investing in mutual funds, ETFs, index funds, etc., with lower ongoing tax liabilities? These are just some examples; there are so many other possibilities! The strategies you should implement depend on your unique circumstances and goals. Question 3: How Can I Strategically Include Charitable Giving Into My Tax Plan? Many people make regular charitable gifts, but only some consider how to do so in the most tax-efficient way. That’s unfortunate because there are so many tax-friendly ways to give that can reduce your tax liability even further and maximize the value of your gift. Retirees, in particular, have several great tools that your advisor should be familiar with. Qualified charitable distributions (QCDs) are one of those ways. This strategic gifting method allows you to avoid taxation on distributions from your IRA even if you don’t itemize. It also allows you to manage your tax bracket, which impacts other taxable items elsewhere in your plan. Donor-advised funds (DAFs) are another great option that allows you to deduct large gifts in a single year but control the payments to the charity. Depending on how your assets are invested, it could make sense to donate highly appreciated securities. Your advisor should look at your taxable investments to see if donating them directly to charity can help you avoid recognizing capital gains. Bunching is another strategic tax strategy that advisors often miss. Instead of making small donations each year, it’s sometimes better to make one large donation in a single year to clear the standard deduction hurdle and get a larger deduction. Question 4: Does It Matter When I Withdraw Income from Retirement Accounts? The answer to this question is a simple and resounding - Yes! This should be the foundation of a retiree's plan as it integrates investment management, investment strategy, income planning, risk, and taxes. We can help you create a custom withdrawal plan that coordinates all of these elements for your needs. Your withdrawal plan will spell out in black and white the amount you’ll take, the timing of your withdrawal, which accounts you’ll pull from, and how to structure your investments to make it all work to support your lifestyle. Don’t forget about RMDs. One of the reasons that multi-year tax planning is so important is it may reveal ways that you can reduce or avoid RMDs altogether. However, for many people, it will be a retirement reality. Question 5: What Tangible Value Does Tax Planning Bring To My Finances? Taxes are a fact of life and will impact your retirement. Proactive planning means you have more control over that impact and creativity with your financial decisions. Although it helps reduce taxes in the future, that’s not the only benefit of tax planning and may not even be the most valuable. When you plan ahead and consider what is coming down the road, you can take steps to increase flexibility in your income plan and keep your investments running smoothly. A financial plan is not complete without a comprehensive tax plan, and your plan is only fully customized if it includes a tailored tax strategy. We hope these five key questions give you a glimpse into how your current advisor considers your tax situation and can help you feel confident going into year-end. Covenant Wealth Advisors is an independent, fee-only, fiduciary wealth management firm. This means through our fee structure and legal duty, we actively avoid and reduce conflicts of interest to give you financial advice that truly is in your best interest. Our team holds certifications and education like certified financial planners (CFPs), CPAs, and other financial services designations that help us serve you best. Contact us today to get started on your tax plan. Some opportunities are only available until the end of the calendar year, and we want to ensure you don't miss out on anything that could help you improve your tax and financial situation. Scott Hurt, CFP®, CPA Scott is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors serving clients across the United States. He specializes in 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 is for educational purposes and 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.

As someone with a high-net-worth , you have a few specific considerations to consider regarding your investments. The basic principles still apply—having a plan, diversification, fee management, and taxes—but you need to think beyond standard investment advice. You can use our free spreadsheet to help you see the different limits and tax rates that may impact you. Here are a few high-net-worth investment strategies to keep on your radar. Traditional Portfolio Management The foundation of your investment plan should be a well-balanced portfolio that considers your goals, risk tolerance, and time horizon. Exchange traded funds, also known as ETFs, make it easy for you to build a scalable and manageable portfolio. This is particularly important as you near or enter retirement. In particular, as a high net worth investor, you may consider focusing on ETFs rather than mutual funds because they are generally: Tax-efficient Low cost You’ll typically also may have fewer “surprise” fees with ETFs. Broadly diversified Keep in mind that your investment portfolio will comprise a wide range of securities that fit your goals, time horizon, risk preferences, and more. As a financial firm specializing in high-net-worth clients, we can help you tailor your investment strategy to help you build wealth sustainably over the long term. Tax Planning Alongside portfolio construction and management, one of the most significant distinguishing characteristics of high net worth investment strategies is the importance of directly incorporating tax management into the investment plan rather than addressing it separately. Many high-net-worth individuals make the mistake of making investment decisions without taking into account their total tax picture. Investing without tax management can create huge tax mistakes and reduce your wealth over time. While taxes don’t have to be in the driver's seat at all times, they should be a central consideration as you select and manage your investments. Tax considerations can also help drive the selection of different types of accounts that you'll invest in throughout your life. Let’s take a look at some of the most common. Account Types Workplace Qualified Retirement Plan If you have access to an employer-sponsored retirement plan like a 401(k), that should be your first stop. Take full advantage of the annual contribution limits to your retirement accounts (Don’t forget the catch-up if you’re 50 or older). If you can choose Roth contributions, that's something worth exploring. Unlike a Roth IRA, Roth 401k contributions don’t phase out because of your income. Also, consider whether making after-tax contributions up to the annual additions makes sense for you. Doing so may allow you to move a significant amount of money into a Roth account by making mega backdoor Roth contributions. Mega backdoor Roth contributions can be a powerful strategy for high income earners who earn in excess of $214,000 for married filers and $144,000 for single filers. Taxable Brokerage Accounts Many high-net-worth individuals have a significant amount of savings outside of tax-advantaged accounts. You should have a deliberate plan for addressing taxes when investing in a brokerage account. Here are some things to consider: Leverage long-term capital gains when possible. Long-term capital gains are generally taxed at more favorable rates than regular income, but you’ll need to hang onto your investments for at least a year to be eligible. Strategically realize capital gains . You pay taxes in your brokerage account when you sell your investments. Perhaps you’ll realize some gains in an otherwise low-income year or a year where you plan to make significant charitable contributions. Employ tax-loss harvesting . Not all of your investments will earn money all the time. So if you have an asset that’s losing money, you could capitalize on it and claim it as a capital loss. You can use tax-loss harvesting to offset higher gains and use up to $3,000 in losses to reduce ordinary income. When tax-loss harvesting, be mindful of the wash-sale rule. The wash-sale rule keeps investors from selling and buying identical or similar investments within 30 days of the sale. What a lot of people don’t know is that the wash rule can be triggered if you sell a stock in one account and repurchase it within thirty days in another account. Be careful! At Covenant Wealth Advisors, we often analyze the impact of realizing long-term capital gains and implementing tax-loss harvesting strategies by reviewing your tax return as well. We suggest that you do the same. Asset Location Consider the tax differences between your various account types when choosing where to hold your investments. In general, try to hold: Your most tax-efficient investments in taxable accounts (tax-free bonds, stocks held long term) High growth investments in Roth accounts over tax-deferred accounts (stocks) Investments that make regular distributions in tax-deferred accounts (bonds) For the investments in taxable accounts, take full advantage of tax-loss harvesting. Recognized losses can offset realized gains on a dollar-for-dollar basis and significantly increase the after-tax return of your portfolio. Implementing the appropriate asset location for your investment portfolio has the potential to: Improve your after-tax returns Transfer more wealth to your heirs Reduce taxation of your assets in retirement Investments You may be able to increase the tax efficiency of your taxable investments by: Investing in assets that have little turnover (won’t generate as many internal taxable gains to be distributed to you) Leaning toward capital gains rather than taxable cash flow (interest and dividend payments) Waiting to realize gains once they become long-term Holding asset classes like individual stocks or passive ETFs for the long-term may help reduce your taxes by reducing turnover. And don't make the mistake of chasing yield on investments for the sake of creating the optical illusion of greater returns. We see this all of the time and it can be a big mistake. Unless you actually need the additional income in the first place, most investors may want to pursue greater returns through a total return strategy. A total return strategy seeks to improve total returns by combining capital gains plus dividends and interest. In an ideal world, high-net-worth investors should want all growth coming from capital gains due to the improved tax efficiency and power of compounding returns. Direct Indexing Direct indexing is a more modern high net worth investment strategy you may want to consider if you want to reduce taxes or if you have highly concentrated stock positions. We are big fans of utilizing index funds for the reasons we outlined above. Direct indexing is similar to investing in index funds. However, it has the added advantage of giving you more control over your particular tax situation. Instead of using ETFs to fulfill your asset allocation, direct indexing takes the approach of buying each individual stock separately. Using this approach allows you to take advantage of potential tax-loss harvesting opportunities at the security level that would otherwise get washed out if you held the index via an ETF. Another potential advantage of direct indexing is to help diversify out of highly concentrated stock positions. For example, let’s assume that you own $100,000 of Amazon stock and your total portfolio is $3 million. In this scenario, Amazon already represents over 6% of your portfolio value. As a result, you may not want to own more Amazon in other holdings such as ETFs or mutual funds. So, what do you do? With a direct indexing approach, your advisor can build an index that excludes Amazon stock to avoid duplicating your current ownership of Amazon. This helps avoid owning more of the stock and better positions you to sell out of the stock over time to build a more diversified portfolio. While not guaranteed, proper diversification may help temper the volatility of your holdings. Municipal Bonds The interest you receive from municipal bonds may be tax-free at both the state and federal levels, making them especially attractive if your state has an income tax. Although tax-free bonds often pay lower interest rates than similar taxable bonds, you may end up with more money in your pocket with a municipal bond. Here is an example of how municipal bonds can benefit high-net-worth and high income investors: John owns a taxable corporate bond that pays 4% interest. He is in the 37% tax federal tax bracket. After taxes, he only earns 2.52%. Martha owns a tax free municipal bond that pays 3% interest. She is also in the 37% tax bracket. However, because the bond pays tax free interest, Martha's net return is still 3%. Martha's return is .48% better than John's return. What's the point? Don’t compare the interest rates of municipal bonds with corporate bonds without accounting for your personal tax situation. Invest To Protect Against Inflation Inflation is likely to play a major role in all areas of our finances, and investments are no exception. You should think about how inflation may impact your financial goals and how you can invest to protect against inflation up to and through retirement . The stocks in your portfolio can serve as a great long-term hedge against inflation. While never guaranteed, the stock market has historically provided a return that exceeds the rate of inflation (called real return). Some fixed-income investments address inflation directly. Those include: Treasury Inflation-protected securities. These bonds pay a fixed interest rate, but the bond's principal amount is adjusted every six months to reflect changes in the consumer price index. The dollar amount of interest you receive is based on the interest rate and the new principal amount. I Bonds are another treasury bond type with a built-in inflation adjustment. Instead of a principal adjustment, the interest rate on these bonds will increase when inflation rises. Bonds also offer investors liquidity, which frees them up to make major purchases, cover planned higher tax bills, and improve cash flow. In addition to bonds, real estate and value stocks have historically proven to be a strong hedge against inflation. Here’s more on how to protect your portfolio against inflation. A High Net Worth Investment Plan Tailored To You As a high-net-worth investor, we’ve walked through a number of ways to enhance your investment portfolio and position yourself to better reach your goals. Contribution limits, deductibility, and tax rates become a much more significant consideration when you reach certain asset and income levels. Many of these strategies require sophisticated financial planning. So, to build a strategy that’s right for you, it’s often beneficial to work with a financial advisor. We would be glad to help you figure out the best high-net-worth investment strategies to help you reach your financial goals. Schedule an appointment with our wealth management firm today. About Mark Fonville, CFP® Mark is a personal financial advisor and the President of Covenant Wealth Advisors. He provides retirement income planning for individuals age 50 plus who have over $1 million in investments. 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 a call. 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. Adviser believes that the content provided by third parties and/or linked content is reasonably reliable and does not contain untrue statements of material fact, or misleading information. This content may be dated.

Updating your beneficiary information may not seem like an important thing to do, so it often goes unnoticed. However, despite being a simple task, it’s actually a vital element of your estate plan and larger retirement plan . Outdated beneficiary designations can completely change what happens to your assets when you pass. And the effects are often more than just financial, leaving lasting emotional implications for your family members and loved ones. Let’s discuss the importance of updating beneficiary designations and the common major life changes that can be cause for revisions. You might be surprised just how many significant changes can occur within three to five years! Worried about other items to check off your retirement list? Grab our complimentary retirement planning checklists to cross things off as you read! What’s A Beneficiary? First, some background. A beneficiary is any individual or entity (such as a charity or trust) to whom you leave your investments or real estate property. Most retirement accounts and financial products like an IRA, 401k, or life insurance policy provide a space for naming beneficiaries directly on the account paperwork. Beneficiaries listed in these official designations are called “named beneficiaries.” When designated, new assets within an account will pass directly to the named beneficiaries when you pass away. In some financial situations, you may have accounts that don’t include named beneficiaries, like a bank or taxable brokerage account. In this instance, payable on death (POD) and transfer on death (TOD) account titling can serve the same purpose. If you aren’t sure what applies to each of your accounts, speak with your financial advisor and estate planning attorney. As an added protection, consider naming both primary and contingent beneficiaries for all your accounts. Primary beneficiaries are the first in line. You can have one or more. For example, you may have two, with each getting 50%. As long as a named primary beneficiary is alive when you pass, the percentage allotted to them is transferred. Contingent beneficiaries are second in line behind primary beneficiaries. In the unfortunate event that a primary beneficiary predeceases you, a contingent beneficiary may fill the gap. Why Are Updated Beneficiaries So Important? A significant benefit of naming beneficiaries is that official beneficiary designations allow the account to avoid probate—the public process for verifying and assigning assets from the estate to ensure it settles correctly. As with any court process, it can be lengthy and often cumbersome. Passing assets outside of that process can save your family significant time, frustration, expense, and publicity. Leaving less for an executor to manage, also makes the rest of the estate planning process more streamlined. Perhaps more importantly than their simplicity, beneficiary designations also supersede what’s written in your will . If there’s a conflict between the two documents, your beneficiary designation stands. This could create problems if you don’t keep them up to date. Let’s take a look at this common reason for updating your beneficiaries. Suppose you started working for a company years ago shortly after you were newly married. You opened a 401k through your employer and named your spouse the 100% beneficiary. Years later, you’ve since divorced your now ex-spouse and updated your last will and testament to remove them. If you don’t also update your 401k beneficiary designation, your former spouse will still get 100% of it if you pass. Even if you have a new spouse! These sorts of life changes can create traumatic situations more often than you’d like to think. Not only will it leave a surviving spouse in a rough financial position, but imagine how emotionally fraught that situation becomes. When Should You Update Your Beneficiaries? As a rule, your beneficiary designations should change with major life events that alter your family dynamic. You won’t always think about needed beneficiary changes when things happen, so taking the time to review every few years is essential to ensure you aren’t missing anything. Which major life events often lead to a need to update account documents? Think about anything that changes the composition of your family. Common examples are marriage and divorce (your own or your children’s), death, and birth—but keep in mind minors can’t inherit property. It may be better to leave assets to a revocable living trust (as an example) for the benefit of a minor rather than naming the minor directly. Job changes, moving to a new state or home, a change in your health or the value of your estate can sometimes necessitate changes as well. Remember, your estate plan should reflect your goals and values. During your periodic revisions, ensure your documents align with your vision and legacy plan, regardless of your family makeup or any changes that have occurred. Keep An Eye On Your Estate Plan Beneficiary designations are only one component of your estate plan, and your estate plan is only one element of your broad financial plan. This isn’t to say beneficiary designations or your estate plan or unimportant, but that they fit within a larger context, and it’s necessary to keep your eye on the bigger picture. Your needs may change and updating one element likely means that other areas also need attention. This is where your financial advisor and estate planning attorney can step in to help you. At Covenant Wealth Advisors we pride ourselves on developing strong client relationships. We can help you create an estate plan that suits you and your loved ones. We have worked with many families to make sure their estate planning documents accurately reflected their desired outcomes and supported their larger financial plan. We’d love to discuss how we can help you, too. Set up some time to speak with an advisor today . Your estate plan is just one aspect of your larger retirement plan. What other things should you be aware of? Check them out by downloading our free retirement planning checklists to be sure you remain on track. ___________________________________________________________________________________________ Broderick Mullins, MBA Broderick is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors serving clients across the United States. He specializes in helping individuals aged 50 plus create, implement, and protect a personalized financial plan for retirement. Schedule a Free Consultation ___________________________________________________________________________________________ Disclaimer: 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.

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.

Do you have a high net worth (HNW) between $1 million to $10 million but aren’t sure how to make the most of it? If so, congratulations. You have far surpassed the average American. U.S. Federal Reserve data reveals that, between 2016 and 2019, American families saw impressive increases in both median and average net worth - a 2% jump to $748,800 for median net worth as well as an 18% climb to $121,700 for average net worth- demonstrating sustained financial prosperity over those years. Clearly, the average net worth and median net worth of most Americans doesn't come close to high net worth individuals whose liquid net worth exceeds $1 million. Even so, you may be worried about outliving your retirement savings or managing your wealth to create a lifetime of sustainable income while also keeping your taxes low. After all, a dollar doesn't go nearly as far as it once did. You can breathe a sigh of relief though because you’re in the right place. At Covenant Wealth Advisors, we specialize in high-net-worth retirement planning and wealth management. Our approach to personal finance seeks to help pre-retirees find their financial footing before diving into the next chapter of life. Whether retirement is still a few years away or you’re already enjoying your golden years, it’s important to have a plan to monitor and adapt as needed. Before we dive in, take a minute to download our free retirement planning checklists to help you get organized. They're the same checklists we use with clients to help them save money and optimize their investments. What are the key areas of focus for high net worth retirement planning? Let’s take a look. What is the purpose of retirement planning? First, many high-net-worth people find it beneficial to entrust their plan with a financial advisor. Your financial planner can provide the guidance, support, and strategies you need to reach your goals. Before we look at specific elements of a retirement plan, let's first think about the purpose of your retirement plan. The broad purpose of retirement planning is to ensure you can live the life you want without worrying about running out of money . The end result will look different from person to person, which means that how you approach certain elements of HNW financial planning might not be the same as your neighbor, best friend, or co-worker. As a high-net-worth individual, your needs are unique, and building a tailored retirement plan for your personal situation is the best way to reach your long-term goals. Maybe you want to travel worldwide and therefore need to spend more than someone who doesn’t have significant travel ambitions. Or perhaps you have an underlying health condition, so you’ll need more comprehensive medical coverage (and likely higher expenses). Everyone’s financial situation is different, and your retirement plan should reflect your personal circumstances. What should a comprehensive retirement plan look like? Regardless of how you envision living your life in retirement, these are the critical components of a high net worth retirement plan: 1. Your spending goals If the purpose of a plan is to support your lifestyle, you need to translate that lifestyle into spending goals. If you already track your budget, this part will be a little easier. If you don’t, start by thinking about what you spend in a typical month. Account for the everyday living expenses like food, utilities, housing, insurance, taxes, etc., but don’t forget to include what you might spend on “non-essentials” that are a regular part of your life like weekend trips, tickets to shows or sporting events, and gifts for family. The idea here isn’t to start by thinking about what you can do to trim your budget. That part can come next if it’s necessary. 2. Cash flow projections with appropriate inflation adjustments Once you establish a benchmark for your annual funding needs, you need to project that into the future using reasonable assumptions for inflation. Historically, inflation has averaged around 2.5% per year, but as you know, the scales are a bit off balance presently. You can use that as a starting point and may want to adjust depending on the main categories you spend on. 3. Tax reduction strategies in retirement So here’s the thing: we really like tax planning at Covenant Wealth Advisors because so many of our clients are high-net-worth. Proactive tax planning is critical for high-net-worth individuals and families in retirement because it helps keep more of your hard-earned money working for you. Many families aren’t quite sure how to manage their new tax situation in retirement, but we offer unique strategies that can help bring confidence and control back into this vital area of your financial life. With proper tax management, you can stretch your retirement savings even further by actively considering ways to reduce taxes in retirement. The following few points will illustrate a few of these tax-savers! 4. Account drawdown strategy A withdrawal strategy goes beyond considering how much you will withdraw from your retirement accounts. Conventional wisdom has pointed people toward taking roughly 4% from their accounts in the first year, and then increasing withdrawals at the rate of inflation — but your retirement plan shouldn’t be cookie-cutter conventional. How you drawn down your accounts in retirement can have a major impact (good or bad) on your ability to maintain your preferred lifestyle. A deliberate withdrawal strategy considers the amount of money to remove from each account and establishes a plan for how to do so effectively. Will you take simple inflation-adjusted distributions each year? Will you use a guardrail strategy? What about the timing of withdrawals? From which accounts will you withdraw first? This decision is personal to you, and it depends on your income needs, tax bracket, income sources, and more. For example, taking money out of a Roth IRA is different than taking money out of a traditional IRA because one is taxed (traditional) and the other isn’t (Roth). We can help you craft a dynamic withdrawal strategy that maximizes the longevity of your investments. 5. Roth conversions As we alluded to above, qualified distributions on Roth accounts are tax-free in retirement. Building up this tax-free bucket gives high-net-worth retirees so much more flexibility, control, and options in their golden years. But Roth accounts aren’t typically the norm for savings vehicles. Most people save in tax-deferred accounts, and when they remove the money (planned spending, RMDs, heirs), the IRS taxes it at their ordinary income tax rates. If you retire in a high tax bracket, that could mean paying more to Uncle Sam than you’d like. By saving in both tax-deferred and after-tax accounts, you give yourself more options when it comes time to take the funds out in retirement. But here’s the thing: high-net-worth individuals often can’t directly contribute to Roth IRAs due to IRS-established income thresholds. One way to get around this rule (legally) is to do a Roth conversion , where you “convert” funds from a traditional account into a Roth. Roth conversions can be huge tax-savers, especially for high-net-worth individuals in retirement. 6. Social security benefits planning A fixed-income source critical to your retirement income plan is your Social Security benefits. And while they may not make up the majority of your retirement cash flow, they are a significant benefit to take advantage of. Social Security creates a solid base of income that is inflation-adjusted, not dependent on the market, and guaranteed to pay for the rest of your life. In general, many people start collecting benefits at three pivotal times: Early at 62 (by collecting early, you permanently reduce your benefit by about 30%) On-time at full retirement age (here, you’re eligible for 100% of your benefits) Late at 70 (you accrue delayed retirement credits and can boost your monthly check by 25%) High-net-worth retirement planning can help you review the pros and cons of each option and consider other elements like spousal and survivor benefits. It’s also important to consider other fixed income securities like an annuity, pension, cash, and more. 7. Tax-managed investing Tax-advantaged retirement accounts (401k, traditional IRA, etc.) are frequently maxed out by high-net-worth investors due to contribution limits. This mean you probably have significant savings in taxable accounts (brokerage) as well. It’s essential to be mindful of how taxable brokerage accounts are taxed. For brokerage accounts, you’ll have to pay capital gains tax (long or short, depending on how long you held the asset) when you sell. In that case, you can consider investing in tax-advantaged securities like tax-free municipal bonds or managing the investment plan to minimize short-term gains and interest. We can also help you think about the taxable nature of real estate investing. Many high-net-worth individuals and families have real estate as part of their investment portfolios, making it important to properly manage the capital gains. Often times we find that new clients have too much money concentrated in just a handful of individual stocks. Clients often know this is a problem, but they don’t know how to sell out of the positions without taking a big tax hit. A proper tax plan, equipped with tax-efficient practices, can help you unwind these positions and get the proceeds invested into more diversified investment holdings. Ultimately, your investment approach should incorporate tax-managed investing. But, it shouldn't stop there. For a more in depth review of key considerations for your investments, here are 11 questions to ask a financial advisor about your portfolio . 8. Healthcare in retirement Health care is a significant component of any retirement plan. Fidelity estimates that healthcare will take up about 15% of someone’s retirement budget. You’ll have to consider Medicare premiums, out-of-pocket costs, long-term care, and more. No matter how you look at it, health care expenses will be a major part of your retirement budget. But it doesn’t have to be scary! The core of your healthcare plan will likely be Medicare. As with Social Security, you need to make sure you choose the right Medicare coverage. Don’t rely on rules of thumb or go with a particular plan just because your friend did. Analyze the coverage options and consider your own needs, resources, and lifestyle. It’s also important to actively save for your future healthcare costs. One way to do this is by investing in a health savings account (HSA). You can save in these valuable, tax-friendly accounts if you’re enrolled in a high-deductible health plan. 9. Stress test your plan with Monte Carlo analysis. Now you have all the pieces of your retirement plan, it’s time to put them together! Ask yourself, how well does your plan hold up when tested against future probabilities? To help answer this question, we can run a Monte Carlo simulation . Since we can’t know for sure what investment returns/stock market performance will be going forward, we need to test our plans against a range of possible outcomes. Doing so gives confidence and financial security in the plan and identifies areas of weakness to address now before they become a significant problem and possibly derail retirement. For example, Monte Carlo analysis can help you determine if $2 million, $5 million, or $10 million is enough to retire with a high degree of confidence. We wrote a comprehensive case study on the topic here . In addition to ensuring your nest egg will be in strong supply throughout retirement, there are some additional risk management elements to consider like Insurance policy needs (life insurance, long-term care insurance, etc.) Risk tolerance heading into retirement. If this changes, it may impact your investment strategy. Investment fees (now could be a good time to consider a rollover). and additional liabilities. Bonus: Estate Planning A high-net-worth retirement plan wouldn’t be complete without a thoughtful and thorough estate plan. Your advisor can play a big role in helping you craft an estate plan that maximizes your assets and honors your legacy. They can help you analyze, The wealth transfer process (like using a trust to protect your wealth) The pros and cons of using individual retirement accounts (IRAs) as an inheritance plan. Your beneficiaries Properly titling your assets and accounts Tax considerations Cultivating a robust, lasting legacy And more! High-net-worth financial planning and retirement planning at Covenant Each high-net-worth investor's retirement is different, so each plan needs to be different. Regardless of the detail, any retirement plan needs to account for these components to be as effective as possible. Otherwise, you risk throwing hundreds of thousands of dollars away in taxes and poor returns. Even worse, retirement could end up being full of anxiety and concern. Our expertise is providing financial planning for high net worth individuals including pre-retirees and retirees to ensure they don’t miss a step, and we would be happy to speak with you. Secure your spot on our calendar today! Don't forget to download your free retirement checklists and start preparing for your retirement plan. About Mark Fonville, CFP® Mark is a personal financial advisor and the President of Covenant Wealth Advisors. He provides retirement income planning for individuals age 50 plus who have over $1 million in investments. 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 a call. 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. Adviser believes that the content provided by third parties and/or linked content is reasonably reliable and does not contain untrue statements of material fact, or misleading information. This content may be dated.

Entrusting your hard-earned money to a financial advisor is a significant decision. When searching for the right professional, you want to find someone with the knowledge, experience, and drive to help you navigate your unique life and financial considerations. If you earn a considerable amount of money, whether through your salary, equity compensation, your own business, real estate, and other investments, you’ll need a firm specializing in high-net-worth retirement planning and investment management. What does it mean for a firm to specialize in high-net-worth wealth management? What should you look for in a financial partner? How can you ensure you make the right decision regarding an advisor? Today, we’ll answer these questions and more! You can also use our checklist of 25 questions to ask an advisor before you hire them. What is high net worth? There isn’t a legal definition of what it means to be “high net worth,” but most classify it as a range between $1 million and $5 million in liquid assets, including stocks, bonds, cash, or mutual funds. High-net-worth investors may also be interested in alternative investments like private equity, venture capital, and more. Conversely, ultra-high net worth investors tend to have $5 million to $30 million, according to Forbes. Why does it matter how much someone has saved? It’s essential to consider this factor because different levels of wealth tend to be associated with different financial needs and concerns, so the strategies and investment advice an advisor uses and recommends will (and should!) differ. Plus, the investment decisions you’ll make will also be distinct! What does the wealth management firm specialize in? First, identify if the firm you are considering even specializes in high-net-worth wealth management. If they do, they should be able to explain what they do and how it is relevant to you. What the advisor says should also match what you find online about them and what they describe on their website. So what are the magic indicators? Here are a few. High-net-worth investment strategies - What do they invest clients' money in? High net worth individuals often have significant investments outside of tax-advantaged retirement accounts, which comes with unique considerations, notably tax-managed investing. Certain high-net-worth strategies can help maximize after-tax returns while also better managing risk to help preserve the wealth that you’ve worked so hard to build. There will also be different portfolio management strategies to consider to minimize taxes and maximize efficiency. High-net-worth retirement planning - Your advisor should be able to develop a sophisticated distribution plan that takes all of your assets into account. They should also be able to advise you on the most opportune ways to get income in retirement, be mindful of taxes, and charitable giving strategies. High-net-worth tax planning - High-net-worth individuals need to be very mindful of taxes, and your advisor should have a deliberate plan for how to address them in your situation. Charitable giving strategies and tax-efficient investments are likely tools. High-net-worth estate planning - If you have considerable assets, you may also have significant goals concerning your estate. As such, you need financial services that also include your estate, like seamless wealth transfer, tax considerations, charitable giving, and legacy. Are they required to put your best interests first? Once you identify that your advisor has the necessary skills, you must ensure they also operate with your best interest in mind. How will you know the answer to this question? Ask the advisor if they are a fiduciary. If they are, they will be willing to put it in writing, so don’t be afraid to ask them to. A fiduciary is legally required to provide you with recommendations that are better for you than for their firm's bottom line. How are they compensated? Make sure you understand precisely how the advisor gets paid and if they receive any commissions or revenue shares from products they recommend to you. Ideally, you want a "fee-only advisor,” meaning your advisor cannot receive any form of compensation from the financial advice they give you other than what you pay them. This payment structure significantly reduces their incentive to make recommendations that are better for them than for you. Your advisor may receive a percentage of the investments they manage for you, typically around 1% to .40% for high net worth individuals. The fee often depends on how much money your advisor manages for you. Other fee-only arrangements include fixed, hourly, or even monthly subscription fees depending on the types of clients the advisor works with. Are they trying to sell you or advise you? This question goes hand-in-hand with making sure they are a fee-only fiduciary. If your advisor seems more interested in selling you a product, steer clear! Wealth management, in all forms, should be led by action and advice rather than products. Products should help you implement a strategy—not BE the strategy. What technology do they use? What you are looking for concerning technology is that the advisor has the appropriate technology in place to manage and track your financial plan and communicate with you. Most wealth management firms use some form of commercially available financial planning software. This software often allows you to link all of your accounts (even accounts not held with the advisor, such as your checking account) to make all of your information available in one place. Ask to see a demo of your potential advisor’s tech. If you work with them, you may be using this software regularly, so it’s important that you feel comfortable using it and like how it looks and feels. How do they communicate? Ask them how, and how often, they communicate with you. You should pay attention to how your potential advisor answers this question because they should be willing to adapt to your preference within reason. Will they call you once a quarter? Email once a month? There’s no right or wrong answer, but you want to know that they are communicating with you often enough and in a preferred method. What are their credentials and experience? Professional certifications are a way of verifying your advisor's field knowledge. The Certified Financial Planner (CFP ® ) is a wonderful designation to look for. To earn the CFP ® credential, an advisor must complete a comprehensive study program covering all the key topics in personal financial planning, pass a rigorous exam, and satisfy experience requirements. Beyond that, other helpful credentials may include the Enrolled Agent or CPA since taxes are such an integral part of high net worth wealth management. At my firm, Covenant Wealth Advisors, we have a team of CFP ® professionals, a CPA, and an MBA. Our financial advisors average over 15 years of experience helping high-net-worth individuals. The Right Firm Is Out There! Finding the best high-net-worth wealth management firm for you can be intimidating because it’s so important to find an advisor you can trust . You also want to work with a firm that’s wealth management services are designed to help you reach your financial goals. Selecting the right advisory firm is a big decision and should be taken seriously. You have a lot of options in your search for the right advisor firm, from private banking to large financial corporations on wall street to independent registered investment advisor firms like ours. As you explore your options, use our list of 25 questions to ask an advisor to help guide you. We would love a chance to speak with you and show you how we can help. Author: Katherine Fonville Katherine Fonville is a personal financial advisor and fee-only financial planner and founder of Covenant Wealth Advisors. She manages investment portfolios for individuals age 50 plus with over $1 million in investments. Schedule a call. 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. Adviser believes that the content provided by third parties and/or linked content is reasonably reliable and does not contain untrue statements of material fact, or misleading information. This content may be dated.

Bonds play a significant role in the wealth-building process and your retirement income strategy. As you grow your wealth, you might want to concentrate on stocks, but bonds offer high-net-worth investors unique opportunities to potentially preserve and provide improved stability within an investment portfolio. It's no surprise then that bonds should be a major component of high net worth retirement planning . Let's take a look at how bonds could potentially help your portfolio and the types of bonds you might want to consider investing in. If you think you may need to review your holdings feel free to request a portfolio checkup , and we will help. Bonds Are Still Important As a quick review on bonds, remember that, unlike stocks, they are debt securities. A bond is an IOU from the bond issuer/borrower to you, the lender, in which they will pay you interest for borrowing that money over a set period of time. They are legally binding contracts that require the issuer to pay you the stated interest payments (also known as the bond coupon) and return your principal at the end of the bond term, or maturity date. The binding agreement is a central difference between stocks and bonds and why they are generally considered safer. Bond prices and interest rates are also inversely related. For example, when interest rates rise, bonds typically fall, and vice-versa. But, with high inflation and historically low-interest rates, many investors are questioning the bond market’s relevance. After all, investors continue to face challenging headwinds when it comes to keeping pace or outpacing inflation with bonds alone. However, the fixed income asset class can play a vital role toward your comprehensive investment objectives. Financial and economic factors impact bonds differently than stocks, so bonds often react differently than stocks. For example, in the chart below, we show the returns of the Bloomberg U.S. Aggregate bond market vs. the 20 worst quarters for the S&P 500 since 1990. As you can see, the bond market increased in value during 16 of the 20 worst quarters for the stock market, illustrating the potential diversification benefits to holding bonds during volatile times. Many bonds, such as short-term and high credit quality bonds, tend to be more stable than stocks and provide consistent interest payments. Bonds also may provide a source of liquidity outside of your stock portfolio for specific needs such as income in retirement or major purchase like a car or vacation. While not guaranteed, including bonds in your portfolio may also provide a source of funds to help rebalance your portfolio when stocks are down. For example, the S&P 500 had negative returns in 2008, 2018, and so far in 2022 as depicted in the chart below. In all four periods, the fixed income market outperformed the stock market, thus providing a source of funds to rebalance your portfolio. This means that investors who had exposure to fixed income may have been able to sell some of their fixed income investments (while prices were higher) and purchase stocks (when prices were lower). But, like most types of investments, there are some downsides to bonds. For example, some bonds may not keep pace with inflation. Also, unlike U.S. Government bonds, some bonds aren’t guaranteed to pay back the principal (junk bonds). Finally, some individual bonds may be costly to buy or sell on their own, which is why many investors get exposure to bonds through diversified bond index funds, like mutual funds or exchange-traded funds. With these tradeoffs in mind, here are some bonds to consider. Treasury Inflation-Protected Securities (TIPS) Treasury inflation-protected securities, or TIPS, are exactly what they sound like. They are US Treasury securities whose interest payments adjust with inflation. You receive a fixed interest rate set by a competitive auction when each issue is offered. But that rate is based on the principal amount, which is adjusted for inflation every six months. You can buy TIPS from the Treasury at treasurydirect.com or through a registered broker. Since the US Treasury market is large and active, many Treasury bonds, including TIPS, are available in the secondary market. You can also purchase them at issue by placing a bid in one of the regular auctions. Most individual investors will place non-competitive bids, meaning they will take the rate determined by the auction. You are limited to $5 million of non-competitive bidding. An easier way to purchase TIPS may be to purchase a diversified mutual fund or exchange-traded fund (ETF) that is specifically designed to invest in TIPS on your behalf. In addition to inflation protection, TIPS also provide tax benefits if you are taxed by your state or municipality because the interest and principal growth (if you bought them at a discount) are exempt. They are still subject to federal income taxation. I-Bonds You’ve probably heard about I-bonds recently—they are having a moment. They're all over the news, and for good reason. The current I-bond rate is an annualized 9.62% as of this writing! Like TIPS, they are a tool to protect you from inflation . They function differently from TIPS, however. They have a fluctuating interest rate that is composed of two parts: A fixed component that remains the same for the life of the bond. A variable component that adjusts every six months for inflation. Like TIPS, they are exempt from state and local taxation. Each individual is limited to a total of $15,000 worth ($10,000 online and $5,000 in paper bonds using your tax refund) of purchases each year. You must wait at least one year after buying before you can sell an I-bond, and if you sell within five years, you’ll forfeit 3 months' worth of interest. Since I Bonds are inflation-protected, you’ll likely see them boasting a higher interest rate than other types of bond investments. Municipal Bonds Municipal Bonds, or “Munis,” issued by state and local government entities (such as school districts) are a classic staple for high-net-worth investors. They have earned their place in most portfolios because they are usually tax-free at the Federal level and often at the state and local levels. To get the state and local tax exemption, you need to purchase bonds from an issuer in the same state you live in. But just because you have a high income doesn’t mean that municipal bonds are right for you. For example, we often find that some high-income investors may be better off purchasing corporate or government bonds within their tax-deferred accounts rather than purchasing municipal bonds within their taxable brokerage accounts. Like anything, the right municipal bond strategy depends on your unique situation. Corporate Bonds Corporate bonds are issued by for-profit companies. Because a governmental taxing authority doesn’t back them, they are often riskier, and their yields tend to be higher than comparable Treasury and municipal bonds. Issuers of corporate bonds have credit ratings similar to your credit score that can help you sort through them by risk profile. Building A Bond Strategy Now that you understand a little more about the different types of bonds and how they can help you, it’s time to think about how to incorporate them into your strategy. Fixed income and bond returns can differ depending upon the types of bonds that you include in your investment portfolio and the timing of your investment. That's a great reason to think about diversifying your bond portfolio across different segments of the bond market. While diversification does not guarantee against loss, history has shown that spreading out your investments may provide a benefit over the long-term. A great, low-cost way to buy bonds for your portfolio is via bond funds, either mutual funds or ETFs. They make it easier for you to diversify your bond portfolio and reduce the complexities of buying and selling bonds on your own. Plus, they tend to pay more frequent dividends than individual bonds alone. You can find a bond fund for just about any type of bond exposure you want. Some examples of different types of diversified bond funds that we utilize at Covenant Wealth Advisors are: Fidelity Short-Term Bond Index (FNSOX) DFA Five-Year Global Fixed-Income Portfolio (DFGBX) iShares S&P Short-Term National Muni Bond ETF (SUB) But, bond funds aren’t the only investment option for high-net-worth investors. You may also consider building out bond ladders. A bond ladder is a strategy whereby you purchase individual bonds with different maturities, volatility, and credit quality, like a high-yield bond. Keep in mind that higher-yield bonds tend to be riskier investments. As a bond matures, you can reinvest the proceeds in a new bond with a different interest rate. The downside of bond ladders may include a reduction in diversification (vs owning bond funds), potentially higher costs of acquiring the bonds, the work involved in maintaining the bond ladder in the first place, and a lack of liquidity for certain bonds. Bonds May Provide Benefits to Your Retirement Portfolio To re-cap, owning bonds isn’t just about their level of return which sometimes seems small. They are a tool and can bring additional benefits that are paramount to your retirement portfolio. Depending on the types of bonds you hold and the percentage they make up of your total asset allocation, they may provide stability to counter the fluctuations in your stocks, serve as an income source in retirement , are sometimes tax-free, and may provide liquidity for big purchases in retirement. So, are bonds a good investment? Ultimately, stock markets don’t always go up, and high-net-worth investors like yourself should consider the potential benefits of including bonds in your retirement portfolio. If you’d like to review your bonds to make sure they are serving as they should in your larger investment strategy or would like to talk about how bonds could help you, we will review your portfolio with you . Find some time on our calendar today ! About Mark Fonville, CFP® Mark is a fee-only financial advisor at Covenant Wealth Advisors. He specializes in retirement income planning, investing, and tax planning for people aged 50 plus who want to 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 a call. 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.

If you're a retiree in Richmond, VA looking for activities to keep you busy, you're in luck. Richmond has a thriving arts and culture scene, as well as plenty of parks and outdoor activities. Here are some of the best activities for retirees in Richmond, VA! 1. Virginia Museum of Fine Arts The Virginia Museum of Fine Arts (VMFA) is a top destination for retirees in Richmond, VA. Located in the heart of the city, the museum offers activities and events to suit every retiree's interests. The VMFA features permanent collections from around the world, as well as rotating exhibitions and special programming. From lectures and educational activities to musical performances, there's something for everyone. Retirees can take advantage of free general admission and a $20 discount per couple for an annual general membership and a 10% discount in the VMFA Shop, Amuse Restaurant, and Best Café. The museum also hosts activities specifically tailored to seniors such as yoga classes, drawing classes, and lectures on various topics. These activities provide educational opportunities while allowing seniors to stay active and socialize with others in their age group. The museum also offers docent-led tours which give attendees an up close look at some of the most beautiful pieces in their collection. Retirees can also take part in special events at the VMFA such as art classes or film screenings featuring classic movies from years gone by. There are also activities that celebrate local culture like festivals showcasing music and activities from around Richmond or programs centered around Richmond’s history and role in American culture. No matter what interests you have, there is something for everyone at the VMFA - making it a great destination for retirees looking for activities to enjoy in Richmond. 2. Take a Class at the Visual Arts Center The Visual Arts Center in Richmond, VA is a great option for retirees looking for activities to enjoy. Located in the heart of the city, the Visual Arts Center offers a wide variety of activities and classes to suit every retiree's art interests. From painting and drawing classes to photography workshops and classes on mixed media, there are plenty of activities for retirees to explore. Not only does the Visual Arts Center offer activities specifically tailored to seniors, but there are also social activities that allow retirees to make new friends and meet other people with similar interests. The center also has activities designed for those who want to improve their skills in a particular area such as sculpting or pottery. With regular seminars and special events like art shows or film screenings, there's something for everyone at the Visual Arts Center. The benefits of attending activities at the Visual Arts Center go beyond just learning an artistic skill. Retirees can also benefit from activities that increase physical activity levels as well as gain knowledge on topics such as history or culture that they may not have had access to previously. The center offers educational opportunities while allowing seniors to stay active, socialize with others in their age group and express themselves creatively. Whether you're interested in learning a new skill or improving on an old one, there are activities at the Visual Arts Center for everyone - making it an ideal destination for retirees looking for activities in Richmond VA. 3. Virginia State Capitol The Virginia State Capitol is a beautiful historical building located in Richmond, VA. The Capitol is the seat of the government of Virginia and home to the General Assembly, the oldest continuously functioning legislature in the Western Hemisphere. The Capitol was designed by Thomas Jefferson and features a neoclassical design with Corinthian columns and a domed roof. The Capitol is open for guided tours Monday through Saturday from 9am to 5pm, and on Sundays from noon to 5pm. The guided tours offer visitors an up close look at some of the most beautiful rooms in the building, including the House of Delegates Chamber, Senate Chamber and Governor's Suite. In addition to touring the inside of the building, visitors can also explore the grounds which feature gardens and monuments. The history of the Virginia State Capitol is fascinating and its beauty makes it a popular tourist destination for those visiting Richmond. If you're looking for activities to enjoy in Richmond VA, be sure to include a visit to the Virginia State Capitol on your list! 4. Richmond Symphony The Richmond Symphony is a professional orchestra that has been providing classical music to the Richmond, VA community for over 100 years. The symphony was founded in 1912 by local musicians and has been entertaining Richmonders ever since. The symphony is made up of over 85 professional musicians and offers a variety of concerts each season. The Richmond Symphony also offers educational programs for students of all ages. One of the highlights of the year for the Richmond Symphony is their annual gala. This black tie event features dinner, dancing and a performance by the symphony. The gala is a popular event and often sells out. The Richmond Symphony is an important part of the community and provides classical music to residents of all ages. Membership and attendance are high, making the Richmond Symphony one of the most popular activities for retirees in Richmond VA 5. Richmond Riverfront Canal Walk The Riverfront Canal Walk in Richmond VA is a great activities option for retirees looking to stay active while exploring the city's rich history and culture. The walking path runs from the Capitol Building along the James River, with stunning views of the river and city skyline. It's also lined with trees, shrubbery, and flowers, providing seniors with plenty of opportunities to enjoy nature. The Canal Walk can be explored at a leisurely pace or used as a way to stay active. For those that wish to stay healthy and fit during their retirement years, activities such as jogging or biking on the canal provide an excellent way to do so. There are even activities like yoga classes or drawing classes that are offered along the canal walk which allow retirees to participate in activities that are tailored specifically for their needs and abilities. The Riverfront Canal Walk is also great for those who want to explore Richmond's rich culture and history at their own pace. There are plenty of interactive activities available along the walk such as educational lectures about local history or guided tours that can help seniors learn more about their surroundings as they explore. In addition, retirees can take advantage of discounted admission fees for special events like art shows or film screenings hosted along the walk which make staying connected with their community much easier and more affordable. With activities designed specifically for retirees, stunning views of nature, and plenty of opportunities for exploration and learning, there's no better way to spend your retirement than by taking advantage of all that the Riverfront Canal Walk has to offer! 6. Bell Isle State Park Belle Isle State Park in Richmond VA is a great activities option for retirees looking to stay active while exploring the city's beautiful scenery. Located in the James River, Belle Isle an easy outdoor destination for seniors interested in fishing, kayaking, and swimming. For those who want to stay fit and healthy during their retirement years, activities like biking, jogging, and even yoga classes are offered along the extensive nature trails. In addition to providing activities for seniors, there are also some fantastic educational activities available at Belle Isle State Park such as ranger-led tours which offer insights into local history and culture or educational talks about conservation and sustainability efforts. For those who prefer to take things slow and enjoy nature at its finest, Belle Isle offers stunning views of the James River with plenty of opportunities for bird watching or observing wildlife. The park also features gardens with native plants that attract a variety of butterflies and birds providing seniors with a tranquil escape from the hustle and bustle of everyday life. Retirees can benefit from discounted admission fees for special events like art shows or film screenings hosted along the walk which makes staying connected with their community much easier and more affordable. Not only does Belle Isle provide a great escape for seniors but it also serves as a great way for retirees to make new friends by connecting them with other people who share similar interests. Whether you're interested in fishing or just want to take part in an easy but beautiful hike, there's something available at Belle Isle that can help you meet new people while exploring all that Richmond has to offer! There's no better destination than Belle Isle when it comes to finding activities perfect suited for retired individuals looking for an active experience! Don't forget to bring the grandkids! 7. Science Museum of Virginia The Science Museum of Virginia in Richmond, VA is a world-renowned museum that offers interactive exhibits and activities for visitors of all ages. The museum traces its history back to 1846 when the first exhibit opened in the city's Capitol building. In 1969, the museum moved to its current location on Broad Street and has since become a popular tourist destination for those interested in science, technology, and history. The Science Museum of Virginia offers both permanent and temporary exhibits which change regularly to keep things fresh for returning visitors. In addition to its exhibits, the Science Museum of Virginia also offers membership packages that provide discounted admission fees as well as other benefits such as free parking and advance notice of special events. Annual attendance at the museum has exceeded half a million people each year since 2007 making it one of Richmond's most popular attractions! 8. Tide's Inn Resort If you're looking for a wonderful day or weekend road trip that offers plenty of activities and opportunities to socialize, look no further than Tide's Inn Resort in Irvington, VA. It may be one of Virginia's greatest hidden gems! The resort is located on the banks of the Rappahannock River and features stunning views of the waterway as well as the surrounding countryside. The resort also offers a variety of activities specifically tailored for seniors such as golfing, fishing, biking, and kayaking which provide retirees with a way to stay active and engaged while enjoying all that nature has to offer. In addition to outdoor activities, Tide's Inn Resort also offers a variety of events and activities designed to help seniors socialize and connect with each other. From wine tastings and cocktail parties to arts and crafts classes, there's something available at Tide's Inn Resort for everyone. While it's not cheap, if you're looking for a high end and exciting place to spend some time outside of Richmond in your retirement years, look no further than Tide's Inn Resort! Don't forget to try the oysters! 9. Historic Landmark Trolley Tour The Historic Landmark Trolley Tour is a great way for retirees to see all of Richmond's most important landmarks and learn about the city's rich history. The tour lasts for two hours and covers over 60 points of interest, including the State Capitol, Monument Avenue, and Hollywood Cemetery. The trolley tour is a great way to see all of Richmond's most important landmarks in a short period of time, and the knowledgeable guides provide interesting insights into the city's history. Retirees can also benefit from discounted admission fees for special events like art shows or film screenings making it easier than ever to stay connected with their community. In addition, the tour offers a number of opportunities to socialize with other retirees who share similar interests. If you're looking for a fun and informative way to spend your retirement in Richmond, look no further than the Historic Landmark Trolley Tour! 10. Enhance Your Retirement by Talking to a Retirement Advisor at Covenant Wealth Advisors If you're looking for a way to make the most of your retirement years without the stress of money, talking to a retirement advisor at Covenant Wealth Advisors is a great way to start. Voted one of the Best-in-State Wealth Advisors by Forbes and ranked the #1 fasted growing company in Richmond, VA by Richmond BizSense , Covenant Wealth Advisors is a trusted boutique investment firm focused on helping you get the most out of life. Specializing specifically on helping individuals aged 50 plus who have over $1,000,000 in savings and investments, Covenant Wealth Advisors is a fee-only (we don't charge commissions or accept third party payments from product companies) financial planning firm that excels in helping retirees make the most of their golden years. We understand the unique challenges and opportunities that come with retirement, and we are dedicated to helping our clients navigate this new stage of life. Whether you're looking for help maximizing your income in retirement, conservatively preserving and growing your money wisely, or simply want someone to talk to about your options, Covenant Wealth Advisors can help. We offer free consultations so you can learn more about what we have to offer, and we are committed to providing each client with individualized service that meets your specific needs. If you're looking for some guidance during your retirement years, talking to a retirement advisor at Covenant Wealth Advisors is a great place to start! Contact us for a free consultation.

Cash contributions are an excellent way to ensure that charitable organizations or nonprofits you value have the financial support they need to operate. The world around us has been and is continuing to be greatly affected by the COVID-19 pandemic. Public charities and nonprofits need your help more than ever to fulfill their missions. For many high-net-worth families, charitable giving is a collective activity and a central component of their financial plan. Whether you make decisions on your own, or with the involvement of other family members, you must consider the mechanism by which your gift is completed. Why? Because each giving vehicle carries its own implications for your tax bill. Rather than direct cash charitable contributions, it may be helpful to establish a private foundation or donor-advised fund. Both charitable giving vehicles have advantages and disadvantages, so which should you choose? Let’s explore some details you should review before deciding on the most effective and appropriate giving instrument. Understand Your Charitable Goals As A Family Before you decide on your giving strategy, it’s important to establish context for your decision. Knowing your goals and values as a family is the first step. Discuss this together with the family members that will be involved in the process. Specific thoughts to address include the following. What’s most important to each family member about giving? Individual perspectives will likely vary. If that is the case, have a deeper conversation to find out why each family member feels the way they do. There may be common themes that underlie each person’s motivations, which can help you all get on the same page and make a coordinated plan. What causes, missions or values do you want to support? Start with broad concepts rather than specific nonprofits or organizations. Once you address what the family values most, you can start to narrow down and identify the relevant organizations that may make suitable recipients of your family’s support. As you discuss these issues together, consider whether you see charitable donations as an important part of your financial and personal life and if it’s something you’d like to see live on for multiple generations. If so, work with your financial advisor to tailor your giving plan to best serve both your family and the charitable cause for the long-term. Once you have a clearer picture of what you want, you can evaluate your options with more context and clarity. The Pros and Cons of Establishing a Private Foundation Family foundations provide a means for families to set up and operate their own charitable giving entities. They are funded and operated solely by the family, who retains complete control over all decisions, including how the assets are invested and any grants the foundations make. Pros of Private Family Foundations Private foundations cement a legacy of giving because they can exist as a perpetual entity. The difference they can make extends beyond your lifetime and can involve not just your current family members but also future generations. You can fund it with nearly any asset that you would otherwise donate to a charity, like appreciated assets, private stock, real estate, or other family-owned assets. If you itemize, you’ll also receive an immediate tax deduction. However, each donors deduction is limited to the following: Up to 30% of AGI for cash Up to 20% of AGI for securities (Pro tip, donating securities can help you avoid capital gains tax) Cons of Private Family Foundations While private family foundations allow you to retain significant control over the assets and gifting decisions, there are some constraints. One such limitation is that you must give at least 5% of the foundation's assets per year. Despite the label of “private,” the details about your family foundation are quite public. This includes tax information, donors' names, board members, compensation paid to staff, and investment fees. Don’t underestimate the amount of work that might be involved in contending with family politics, either. The Pros and Cons Of Using A Donor-Advised Fund Donor-advised funds (DAF) are like charitable investment accounts. Similar to a private foundation, you establish a DAF by donating assets that are then set aside to make future gifts. Based on IRS regulations, you receive an immediate charitable tax deduction and can also invest the donations, which will grow tax-free. Pros of Donor-Advised Funds Like a family foundation, DAFs provide an excellent means to establish a regular schedule of giving. You can also use a DAF as a strategic giving tool to maximize the deductibility of your gifts through itemized deductions. For example, assume you want to donate $10,000 per year to a certain organization. That alone won’t allow you to clear the standard deduction, so you don’t really get any tax breaks for it. You could instead donate $30,000 to a DAF, itemize your deduction, and then have the DAF pay $10,000 for each of the next three years. You can also claim a higher deduction for DAF donations than you can for private family foundations: Up to 60% of adjusted gross income (AGI) for cash donations Up to 30% of adjusted gross income (AGI) for securities Donor Advised Funds don’t have the same public reporting requirements as private foundations, so names and donations can remain confidential. Cons of Donor-Advised Funds When you donate to a DAF, you legally give up control, and the charitable gifts are managed by a third party. DAFs often require a minimum initial contribution to establish, giving you a little less flexibility than you might have with a private foundation. Although, there is no requirement to pay out 5% each year. In addition, account fees like administrative, management, and investment expenses may be high due to a DAF functioning through a third-party organization. Charitable contributions to a DAF are irrevocable, so you can’t take it back out once you’ve donated. Which Is Right For You? The right charitable giving path for you depends on your needs, goals, assets, and legacy plans (like estate planning). Don’t skip the first step outlined above—carefully evaluate your goals before making a decision! Both your current giving patterns and your expected future giving patterns affect your decision. Work with your financial advisor and tax professional to evaluate how each option could impact your privacy, tax-exempt status, tax returns, taxable income, etc. If you need help evaluating your options, we would be happy to discuss them with you. Call us to find out how a private foundation or DAF can help you and your family give to nonprofit organizations more effectively. We also have a comprehensive list of all the most important tax updates and numbers for the 2022 tax year . If you’re wondering where your giving fits in, grab your free copy today. ___________________________________________________________________________________________ Katherine Fonville Katherine is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors serving clients across the United States. She specializes in helping women aged 50 plus create, implement, and protect a personalized financial plan for retirement. Katherine is the founder of Covenant Wealth Advisors and resides in Richmond, VA with her family. 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.

The global economy has faced many setbacks this year due to inflation, the war in Ukraine, China's zero-Covid policy, and many other factors. Unlike the U.S. which largely rebounded from the pandemic, many countries have faced a tougher road to recovery. The effects of high energy prices and supply chain problems have only added to these difficulties. Still, there are reasons to maintain a broad perspective on the global landscape, especially as these factors stabilize. How might this evolve in the coming year and what impact does it have on long-term portfolios? While one of the core principles of investing is to be diversified, this is often easier said than done. Within the U.S., investors already have many factors to consider such as sectors (e.g. energy vs tech), styles (e.g. value vs growth), and sizes (e.g. small vs large caps). However, investors shouldn't neglect to look beyond U.S. borders at international opportunities. Staying on top of developments across global economies, including trends in trade and geopolitics, can make investing exponentially more complex. Fortunately, diversification can benefit investors even without following events and data in every country. What helps is simply to focus on the right global trends. For instance, simply understanding global growth expectations can be valuable. Twice a year, the OECD, an international organization consisting of mostly developed countries, releases new economic projections across regions and countries. Its most recent report highlights the challenges that still face the global economy. Overall, worldwide economic output is forecasted to decelerate from 3.1% in 2022 to 2.2% in 2023. These numbers represent significant declines from 2021 when many economies were roaring back from the pandemic and before inflation began surging. There are a few important points to note from these forecasts. First, while growth is expected to slow, few major regions and countries are anticipating recessions (i.e. negative growth). Even where recessions are expected in major countries, the declines are small and not on the scale of 2008 or 2020. This is true even in Europe which is on the front lines of the war in Ukraine and has been heavily exposed to rising energy prices. So, although growth in the region will be meager, dragged down by countries like Germany, it could also be supported by growth in countries such as France, Spain and Italy. In contrast, China might experience re-accelerating growth if it begins to ease its Covid policies, allowing its economy and manufacturing activities to fully reopen. This is also true in Japan which has experienced only modest inflation, unlike most other parts of the world. Other major countries in the region, including Korea and India, are expected to see relatively steady growth. Unsurprisingly, Russia is the outlier and is expected to shrink by 3.9% in 2022 and 5.6% in 2023 due to the heavy toll from its military campaign. Second, these forecasts also suggest that growth could rebound again in 2024 once the economic shocks of the past year begin to fade. Based on this, nearly all economies are expected to experience positive growth in 2024. While multi-year forecasts should be taken with a grain of salt, they suggest that many economies can eventually bounce back from today's challenges. Finally, what matters to investors is that, despite ongoing economic challenges, it's likely that markets have already priced-in much of this information. After all, the inflationary and geopolitical pressures that have driven these trends have been on investors' radars since the start of the year. In fact, any easing of these pressures could help to improve investment and valuation prospects. For example, the U.S. dollar had been appreciating in value for much of the year until recently when the Fed confirmed that may begin to slow the pace of rate hikes. Many countries that experienced weaker currencies during this period may have had difficulty buying foreign goods including food and energy, exacerbating their inflationary problems. The fact that the dollar has weakened recently may provide some relief. For U.S.-based companies, a weaker dollar can be a welcome sign if it helps to boost foreign sales. Unfortunately, some investors may have grown discouraged with international investing over the last decade due to a series of challenges faced by developed and emerging markets alike. Even during the many years when international stocks performed well, the U.S. typically experienced outsized gains. For this reason, the U.S. has had significantly more expensive valuation levels over this period, as shown in the chart above. However, the events of the last few years only underscore the need to stay diversified and to take advantage of more attractively valued investments. Predicting which region or country might outperform in any given year is not only difficult, but might be impossible. While the U.S. has done well over the past decade, the decade prior to this experienced significant growth and returns across international markets. Ultimately, this is not an either-or choice. Instead, what matters is maintaining a proper asset allocation that benefits from global trends across all regions, ideally with the guidance of a trusted advisor. In this environment, it may take time for trends such as high energy prices and geopolitical tensions to be fully resolved. Investors should also not be surprised by unforeseen events such as those of the past few years. However, other factors such as Fed tightening, interest rates and financial conditions have begun to ease. As this occurs, poor economic performance and investor sentiment could shift in many countries. This won't be an overnight process, just as the OECD's forecasts suggest, but this is also why it takes patience to be positioned for long-term gains. The bottom line? Investors ought to stay globally diversified to benefit from international investment opportunities.

Perhaps no sector of the economy has been impacted by rising interest rates as much as housing. The declines in both housing activity and prices have wide-ranging effects on households and the economy, as well as across financial markets. Like many other sectors, the housing market surged during the pandemic and is now experiencing a hangover. Some investors may even worry about echoes of the 2008 housing bubble and the resulting global financial crisis. How might the current slowdown in housing impact investment portfolios in the months and years to come? The housing market affects the economy and financial markets in important ways. As individuals, primary residences are usually the most important assets on household balance sheets, and monthly mortgage payments are the largest expenses. As diversified investors, the housing market can represent an income-generating asset class as well as a macro-economic indicator. Rising home prices can bolster financial confidence and spur consumer spending, and vice versa, a fact often referred to as a "wealth effect." The housing market has made strong gains since 2012 but is slowing Housing prices accelerated during and after the pandemic as many sought to purchase new homes because they left cities, needed more space, or were working from home. In addition, robust consumer balance sheets and limited spending on other goods and services meant that consumers had the excess savings to consider major purchases. The chart above shows an index of housing prices across 20 major U.S. metropolitan areas and highlights the steep rise since 2020. This added to the gains since the housing market bottomed in 2012. Over this full period, the average home price in these areas rose 127%. One measure of the economic impact of housing is what's referred to as  "residential fixed investment" in the quarterly GDP report. According to the Bureau of Economic Analysis, residential fixed investment increased by 7.2% and 10.7% on an annual basis in 2020 and 2021, respectively, contributing 0.28 and 0.47 percentage points to annual growth in those years. This has also added to inflationary pressures. In October, the shelter component of the Consumer Price Index, which has a weight of 42% within core CPI, rose 6.9% compared to the previous year. A red hot housing market added to economic growth but also to the price pressures felt by many households. Mortgage rates are at their highest since the mid-2000s housing bubble More recently, the Case-Shiller index experienced its largest deceleration in its history. This is due to rapidly rising mortgage rates, the slowing economy, and the general reversal of pandemic trends that has impacted many economic and stock market sectors. The average rate on a 30-year fixed mortgage currently sits at 6.6% after briefly rising above 7% for the first time since 2002. This exceeds the 30-year average of 6% and is well above the average of 4.1% since 2008. Homebuyers and investors alike are experiencing sticker shock as rising rates make housing less affordable by pushing up mortgage payments, even as home prices decline. Many measures of housing activity have slowed as a result, from building permits and housing starts to existing home sales and mortgage refinancing. Similarly, the S&P 500 real estate sector has fallen 25% this year, worse than the overall index decline of 16%. While privately held real estate may be holding up in value on paper, this is likely due to delayed mark-to-market adjustments. For those holding private real estate, this may not matter if there is steady rental income, especially if it can offset rising costs in this inflationary environment. Existing home sales have slowed Where does the dramatic rise and now decline in the housing market leave us? While the future is uncertain, market expectations are for rates to remain elevated alongside inflation. Even if the Fed does slow its pace of rate hikes, fed funds futures suggest that policy rates will hit 5% by mid-2023. Of course, it's also unlikely that rates will surge as much as they have already. So, unless there is another surge in housing demand, the short-term path of home prices is likely to be sideways at best. Regardless, these factors could continue to affect the entire housing sector and detract from residential real estate activity. The good news for investors is that a repeat of 2008 is also unlikely. Household balance sheets strengthened during the pandemic and many focused on paying off debts and shoring up savings. Additionally, the housing bubble was not just due to sky-high home prices - it was due to historic levels of financial leverage that led to systemic risks within and across banks. Fortunately, there are few signs that this is the case today. Collapses in areas such as cryptocurrencies, and declines in tech stocks, appear to be having few spillover effects into the real economy so far. The bottom line? While the housing market may face headwinds, many other parts of the economy are steady. Investors ought to remain diversified across sectors and construct their portfolios and financial plans with a broad view of their assets, including their real estate holdings. Would you like a free consultation to see how we can better align your investment portfolio with your retirement? Call us. 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.

Medical care is a popular tax write-off for most retirees. Why? Health care costs are a significant component of most household spending in retirement, roughly 15% of a retiree’s budget . So why not get a tax break on them? Let’s ensure you understand which medical expenses you can write off and discuss key issues to plan for if you intend to write off medical expenses in the 2022 tax year. And, don't miss out on download our cheat sheet with relevant tax planning figures as we set the scene. It's the same tool we use with clients to help them reduce taxes. Plan To Itemize Many people overlook the fact that you can only claim most tax deductions for healthcare expenses if you itemize deductions. If you fail to plan accordingly, you may miss out on a tax reduction opportunity. When you file your taxes, you have two options for deductions. Itemize your deductions - that is, name them one by one or Take the standard deduction. Schedule A of your tax return details what you can itemize, but common items include: Mortgage interest Medical expenses Charitable gifts State and local taxes If your itemized deductions don’t add up to a larger amount than the standard deduction, it typically makes sense to claim the standard deduction instead. So what is the standard deduction? For 2022, the standard deduction is $25,900 for a married couple that files a joint return and $12,950 for single filers. If you aren’t quite there, you may be able to get over the hump by shifting some deductible items from one year to the next. For example, if you regularly give to charity, you could consider making several years' worth of contributions at once so you can itemize and claim more of your medical expenses. This strategy could make sense if you regularly have expenses that get you close to the limit or if you have one year with exceptionally high expenses that don’t push you over the standard deduction. Know Your AGI To plan for itemizing expenses effectively, you must know your taxable income, namely your adjusted gross income (AGI). Your AGI is the “master key” to understanding your eligibility for deductions. To calculate your AGI, start with your gross income and subtract certain deductions like 401k and HSA contributions. You can find the complete list of deductions on Schedule 1 . Line 11 of your 1040 tax return also shows your AGI for prior tax years, which you can use as a reference point to estimate your AGI for the current year. For medical expenses, taxpayers can deduct their total medical expenses over 7.5% of your AGI . Note that you can only take the medical expense deduction on the portion of your expenses that exceed 7.5%—not the entire amount. This rule applies whether you’re a W-2 employee or are self-employed. For example, suppose you have an AGI of $80,000 and medical expenses of $10,000. 7.5% of $80,000 is $6,000, so you can deduct qualified costs above $6,000. You have $10,000 in expenses, so $4,000 is the qualifying amount you can deduct. Understand The IRS Definition of “Allowable” Expenses While you don’t need to memorize any lists, you do need to be aware that the IRS doesn’t count everything as an allowable expense. Just because you have a medical and dental expense doesn’t mean you can deduct it from your taxes. While that may not be great news, the list is more comprehensive than you might think. Some common examples of deductible expenses include: Health insurance premiums, as long as you pay them with after-tax dollars. In other words, you can’t deduct expenses that you also use to justify a tax-free health savings account HSA distribution. Long-term care insurance premiums and expenses Home care expenses Medical equipment like wheelchairs, walkers, eyeglasses, and hearing aids Medical expenses you paid for dependents (should you meet the IRS Publication 502 requirements) These things can add up. If you’re in a health insurance plan with higher premiums and you incur significant out-of-pocket costs, you could be close to or over the deduction limit. What’s not allowable? Common examples include: Late fees for otherwise deductible premium payments Non-prescription drugs Personal hygiene items Cosmetic surgery Funeral or burial expenses Remember, you can’t deduct costs unless they are qualified medical expenses. Medical bills can strain your cash flow, so be sure you have a sufficient plan. What Records Do You Need To Give To Your CPA? When you itemize, you have the opportunity to save money, but it also tends to come with more paperwork. If you have deductible expenses that you plan to claim, make sure you keep receipts. The more detail you can provide your CPA for tax preparation, the better off you are likely to be. If you aren’t sure if you need to keep a document, err on the side of caution. Your CPA will tell you if it turns out they don’t need it. Create A Larger Strategy for Itemizing You wouldn’t retire without a distribution plan, and you shouldn't end the tax year without a deliberate strategy, either. You might not itemize every year, but when you do, it should be intentional. Think ahead about ways you can be the most tax-efficient before the year is over, so you don’t miss any planning opportunities, like charitable contributions, home office deductions, interest deductions, and other elements that directly impact your income tax return. Here's a powerful checklist of key issues to consider before year end just so you avoid missing anything. Reach out to us for help! We can help you create a proactive tax plan that takes a holistic view of your money and help you plan for the “best” years to take advantage of itemizing. If you are aged 50 plus with over $1 million in investments (excluding real estate), contact us for a free, no-obligation consultation . Scott Hurt, CFP®, CPA Scott is a fiduciary, fee-only financial advisor at Covenant Wealth Advisors serving clients across the United States. He specializes in 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.