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For those who spend between $100,000 to $300,000 per year on expenses in retirement, healthcare costs can consume between 4.4% to 13.2% of your retirement budget. The average couple who retires at age 65, according to Fidelity, needs $330,000 for medical expenses throughout retirement.  And, this excludes the potential cost of memory care or dependent living. Here's how much healthcare costs may represent as a percentage of your total expenses in retirement. Table calculation: Fidelity Investments – 2024 Retiree Health Care Cost Estimate. A 65-year-old couple retiring in 2024 can expect to spend approximately $330,000 on healthcare in retirement. Based on a projected lifespan of roughly 25 years. Annualized Estimate: $330,000 ÷ 25 years = $12,600 per year. That's why creating a comprehensive healthcare funding strategy that includes Medicare planning, supplemental insurance, and dedicated healthcare savings accounts is essential for protecting your retirement nest egg. Introduction to Healthcare Costs in Retirement After 30 years of working different jobs - Sarah at the bank and Tom in sales - they could finally sync their schedules. They had big plans for retirement - that Alaska cruise they'd been talking about since their kids were little, and maybe finally learning to play pickleball together at the rec center. Sarah was especially excited about having more time with their twin granddaughters, who lived just two towns over. Tom kept joking that he'd trade his frequent flier miles for hiking boots, but Sarah knew he was just as thrilled as she was to start this new adventure together. Then reality hits – Sarah and Tom are hit with a medical emergency in retirement that costs $25,000 out of pocket, despite having Medicare coverage. This scenario plays out for many retirees each year who underestimate healthcare costs in retirement. This scenario plays out for many retirees each year  who underestimate healthcare costs in retirement. According to Fidelity's 2024 Retiree Health Care Cost Estimate, a 65-year-old individual retiring today will need approximately $165,000  to cover healthcare expenses throughout retirement – and that figure doesn't include long-term care costs. The challenge isn't just the total amount; it's the unpredictability and rapid inflation of medical expenses. Healthcare costs have historically risen faster than general inflation, averaging 3.3% annually over the past decade compared to the general inflation rate of 2.9%. For affluent retirees with substantial assets, these costs represent more than just numbers on a spreadsheet. They can significantly impact even well-funded retirement portfolios if unplanned for. The good news?  With proper planning and the right strategies, you can protect your retirement assets while ensuring access to quality healthcare. This guide will walk you through everything you need to know about planning for healthcare costs in retirement, from understanding Medicare to creating tax-efficient funding strategies. Key Takeaways Healthcare costs can consume 4.4 to 13.2% of your retirement budget, requiring dedicated planning beyond general retirement savings Medicare covers only about 80% of healthcare costs , leaving significant gaps that require supplemental coverage Tax-advantaged accounts like HSAs offer triple tax benefits and should be maximized before retirement Long-term care planning is essential, as 70% of people over 65 will need some form of long-term care services Healthcare inflation typically outpaces general inflation by 2-3% annually , requiring inflation-adjusted planning Delaying retirement until 65 can save hundreds of thousands in healthcare costs by avoiding pre-Medicare coverage gaps Creating a dedicated healthcare reserve fund separate from general retirement savings provides financial security Creating a retirement income plan may substantially improve your readiness for healthcare costs in retirement. Table of Contents Understanding the True Cost of Healthcare in Retirement Medicare Basics: What's Covered and What's Not Supplemental Insurance Options Tax-Advantaged Healthcare Savings Strategies Long-Term Care Planning Creating Your Healthcare Budget Managing Healthcare Costs in Early Retirement Estate Planning Considerations Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. Understanding the True Cost of Healthcare in Retirement The cost of health increases significantly as people age, making it crucial to factor these expenses into retirement planning. Healthcare costs in retirement extend far beyond monthly Medicare premiums. The  average retiree spends approximately $4,500 to $6,500 annually on healthcare , but this figure can vary dramatically based on your health status and coverage choices. Consider the components of healthcare spending in retirement. Health care spending is a significant and variable component of retirement costs, especially when accounting for Medicare expenses such as premiums, co-payments, deductibles, and the potential for unforeseen health-related expenses that can impact your overall retirement budget. Medicare Part B premiums  alone cost most retirees $164.60 per month in 2024, with high-income earners paying up to $594 monthly due to income-related monthly adjustment amounts (IRMAA) . Prescription drug costs add another layer of expense. Even with  Medicare Part D coverage , the average retiree spends $1,500 to $2,000 annually on medications. Those with chronic conditions requiring speciality drugs may face costs exceeding $10,000 annually. Pro Tip:  Track your current healthcare spending for 12 months before retirement to establish a baseline. Most people underestimate their actual healthcare costs by 20-30%. Out-of-pocket expenses often surprise new retirees. Medicare’s deductibles, co-payments, and coinsurance can add up quickly and may vary based on the specific health plan you choose and your individual circumstances. For example, a hospital stay under Medicare Part A includes a $1,676 deductible per benefit period in 2025  , plus daily coinsurance after 60 days. Dental, vision, and hearing care represent significant uncovered expenses. These services, not covered by Original Medicare,  average $2,000 to $3,000 annually for routine care , with major procedures like dental implants or hearing aids costing thousands more. It’s a common misconception that Medicare covers dental, vision, and hearing. In reality, these services often require separate coverage. In addition to these, retirees should be prepared for potential costs and other costs that may arise due to inflation, advanced treatments, or unexpected medical needs. Medicare Basics: What's Covered and What's Not Understanding Medicare’s structure is fundamental to planning for healthcare costs in retirement. Medicare consists of several parts Part A (hospital insurance) Part B (medical insurance) Part C (Medicare Advantage) Part D (prescription drug coverage). Each part functions differently, covering specific services with varying costs and coverage gaps. Choosing the right plan or combination of plans is essential for meeting your healthcare needs in retirement. Medicare Part A covers hospital insurance, including inpatient care, skilled nursing facility care, hospice, and some home healthcare. Most people pay no premium for Part A if they’ve worked and paid Medicare taxes for at least 10 years. Part B covers medical insurance, including doctor visits, outpatient care, preventive services, and medical equipment. The standard monthly premium for 2025 is $185.00 , but some beneficiaries pay a higher premium due to income-related adjustments. Part D provides prescription drug coverage through private insurance plans. Premiums vary by plan but average $3 to $128 monthly . When comparing plans, consider annual premiums as a key factor in estimating your total healthcare expenses. Medicare Advantage (Part C) plans offer an alternative to Original Medicare, combining Parts A, B, and usually D into one plan. These plans often include additional benefits like dental and vision but may restrict your choice of healthcare providers. When you become eligible, it’s important to know when to join Medicare to avoid penalties and gaps in coverage. Understanding enrollment periods and the implications for your plan choices is crucial for a smooth transition into retirement healthcare. Supplemental Insurance Options Medigap policies fill many of the coverage gaps in Original Medicare. These standardized plans, labeled A through N, are offered by private insurance companies and help cover costs not paid by Medicare. They offer different levels of coverage for deductibles, co-payments, and coinsurance, and can help pay for co-pays as well. Plan G , the most comprehensive option available to new enrollees, covers virtually all Medicare cost-sharing except the Part B deductible. Monthly premiums range from $118 to $279 , depending on your location and insurance company. Choosing between Original Medicare with Medigap and Medicare Advantage requires careful consideration. Out of pocket costs are a key factor—Original Medicare with Medigap offers maximum flexibility in choosing healthcare providers but costs more upfront. Medicare Advantage plans typically have lower premiums but may limit your provider network. Pro Tip:  Enroll in Medigap during your six-month open enrollment period starting when you turn 65 and enroll in Part B. During this time, insurers cannot deny coverage or charge higher premiums based on pre-existing conditions. Consider your health status and travel plans when selecting supplemental coverage. Frequent travelers often prefer Original Medicare with Medigap for nationwide coverage, while those who primarily stay local might find Medicare Advantage more economical. Tax-Advantaged Healthcare Savings Strategies A health savings account (HSA) is a powerful investment vehicle for future healthcare expenses , offering the ultimate triple tax advantage for healthcare planning. To contribute to an HSA, you must be enrolled in a high deductible health plan. Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses can be withdrawn tax free. For 2025,  individuals can contribute $4,300 to a health savings account, with an additional $1,000 catch-up contribution for those 55 and older. Families can contribute $8,550 plus the catch-up amount . These funds can be invested and grow tax-free for decades. Payroll deductions can be used to fund HSAs during your working years, making it easy to save consistently. Unlike Flexible Spending Accounts (FSAs), HSA funds roll over year to year with no expiration. After age 65, you can withdraw HSA funds for non-medical expenses without penalty, though you’ll pay income tax on non-qualified withdrawals. Strategic HSA planning involves maximizing contributions during your working years and allowing the funds to grow untapped if possible. By paying current medical expenses out of pocket and saving receipts, you can reimburse yourself tax-free years later when healthcare costs are higher. “We encourage clients to think of their HSA as a specialized retirement account specifically for healthcare,” notes Megan Waters, CFP® at Covenant Wealth Advisors. “It’s often more valuable than additional 401(k) contributions once you’ve received your employer match. Taking advantage of the tax benefits and growth potential of HSAs can significantly improve your retirement healthcare planning.” Long-Term Care Planning Long-term care represents the largest unfunded healthcare liability for most retirees. With 70% of people over 65 requiring some form of long-term care , and  costs averaging $5,000 to $10,000 monthly  and often times more, this expense can devastate even substantial retirement portfolios. Nursing home care, especially for a private room, can be particularly expensive, often exceeding these averages. Long-term care insurance can help cover the high costs of nursing home stays, including private room accommodations, making it an important consideration in comprehensive retirement planning. Traditional long-term care insurance provides dedicated coverage but comes with escalating premiums and the risk of paying for coverage you might never use. Hybrid life insurance policies with long-term care riders offer an alternative, providing death benefits if care isn’t needed. Self-insuring requires substantial assets – we generally see clients self insuring when they have $2 million in investable assets or more. This strategy works for high-net-worth individuals who can absorb potential care costs without jeopardizing their retirement lifestyle. Pro Tip:  Consider long-term care insurance in your 50s when premiums are more affordable and you’re more likely to qualify medically. Waiting until your 60s can double or triple the cost. Asset protection strategies become crucial for long-term care planning. Certain trusts  and asset transfers can help preserve wealth while potentially qualifying for Medicaid, though these strategies require careful planning with qualified professionals. Creating Your Healthcare Budget Building a realistic healthcare budget requires analyzing both predictable and unpredictable health care expenses. Start with fixed costs like Medicare premiums, supplemental insurance, and regular prescriptions. Factor in variable health care expenses including deductibles, co-payments, and over-the-counter medications.  Historical data  suggests budgeting 20% above your estimated costs to account for unexpected medical events. It is crucial to plan ahead to ensure you have sufficient funds set aside for rising healthcare costs in retirement. Consider healthcare inflation in your projections. While  general inflation might average 2-3%, healthcare costs typically rise 3-5% annually . A healthcare expense of $6,000 today could exceed $10,000 in ten years. Preparing for future health care expenses is essential—strategies such as utilizing Health Savings Accounts and maintaining tax-efficient savings can help cover these increasing costs over time. At Covenant Wealth Advisors , we often recommend creating cash flow projections that include healthcare costs for each spouse in a relationship. Costs can very across individuals based on your health and your life expectancy. Managing Healthcare Costs in Early Retirement Retiring before Medicare eligibility at 65 presents unique challenges. Early retirees must carefully evaluate health insurance options to bridge the gap until Medicare. Private health insurance for early retirees can cost $621 to $1,319 monthly per person , with high deductibles and limited networks. Your retirement age will directly impact your healthcare costs and eligibility for different insurance options, so it’s important to plan accordingly. COBRA continuation coverage  offers 18 months of employer plan access but at full cost plus a 2% administrative fee. This temporary solution often costs $500 to $1,500 monthly but maintains your current coverage and provider network. In some cases, employer offers such as retiree health benefits or health savings accounts (HSAs) may be available, providing additional ways to manage healthcare expenses before Medicare. Affordable Care Act (ACA) marketplace  plans provide another option, with potential premium tax credits based on income. Strategic income and tax planning in early retirement can maximize these subsidies, potentially reducing premiums by 50% or more. It’s crucial to maintain medical coverage until you become eligible for Medicare to avoid gaps in care and unexpected expenses. At Covenant, we like to create a game plan before you retire, if possible.  Health sharing ministries offer an alternative for some early retirees, though these aren’t insurance and don’t guarantee coverage. These faith-based programs typically cost less than traditional insurance but come with coverage limitations and eligibility requirements. Estate Planning Considerations Healthcare costs significantly impact estate planning strategies. Medical expenses in the final years of life can consume substantial assets, potentially reducing inheritances and charitable bequests. Proper beneficiary designations on HSAs ensure tax-free transfers to surviving spouses. Non-spouse beneficiaries must withdraw HSA funds within 10 years, paying income tax on the distributions. Consider how healthcare costs affect your legacy goals. Long-term care expenses averaging more than $100,000 annually can quickly deplete estates, making insurance or asset protection strategies essential for wealth preservation. Power of attorney documents and healthcare directives become crucial as healthcare needs increase. These documents ensure trusted individuals can make medical and financial decisions if you become incapacitated, potentially avoiding costly court proceedings. Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. FAQ Section Q: When should I enroll in Medicare?  A: Enroll during your Initial Enrollment Period, which begins three months before your 65th birthday month and extends three months after. Delaying enrollment can result in permanent premium penalties unless you have qualifying employer coverage. Contact Social Security three months before turning 65 to begin the process. Make sure your retirement plans align with your Medicare enrollment timing and coverage choices. Q: How much should I budget for healthcare costs in retirement?  A: Plan for $5,000 to $7,000 annually per person in today’s dollars for comprehensive coverage including Medicare, supplemental insurance, and out-of-pocket expenses. Couples should budget $10,000 to $14,000 annually, adjusting upward for inflation. Consider adding 20-30% to these estimates if you have chronic health conditions. Keep in mind that a significant portion of your social security benefits may be allocated to medical expenses. Q: Is long-term care insurance worth the cost?  A: Long-term care insurance may make sense if you have assets between $500,000 and $2 million that you want to protect. Below this range, you might qualify for Medicaid; above it, you might self-insure. The younger and healthier you are when purchasing, the more affordable and valuable the coverage becomes. Q: Can I use my 401(k) to pay for healthcare expenses?  A: Yes, but withdrawals are subject to income tax and potentially increase your Medicare premiums through IRMAA. HSA funds are more tax-efficient for healthcare expenses. Consider using 401(k) funds for general living expenses while preserving HSA funds specifically for healthcare costs. When planning for healthcare expenses, it's important to consider all your retirement income sources. Q: How do I choose between Original Medicare and Medicare Advantage?  A: Original Medicare with Medigap offers maximum provider flexibility and predictable costs but higher premiums. Medicare Advantage plans cost less upfront but may restrict your provider choices and have higher out-of-pocket maximums. Consider your health status, travel habits, and preferred doctors when deciding, and tailor your choice to your personal situation, including your health needs and lifestyle. Conclusion Planning for healthcare costs in retirement requires more than hoping Medicare will cover everything. As we've explored, retirees face significant expenses from Medicare premiums, supplemental coverage, prescription drugs, and services Medicare doesn't cover. By understanding these costs and implementing smart strategies like maximizing HSA contributions, choosing appropriate supplemental coverage, and planning for long-term care needs, you can protect your retirement assets while ensuring access to quality healthcare. The key is starting early – the sooner you begin planning for healthcare costs in retirement, the more options you'll have and the better prepared you'll be for whatever health challenges arise. Don't let healthcare costs derail your retirement dreams; take action today to secure your financial future and health security. Would you like our team to just do your retirement planning  for you? Contact us today for a free Strategy Session experience . About the author: Adam Smith, CFP® Senior Financial Advisor Adam is a Senior Financial Advisor with Covenant Wealth Advisors and a CERTIFIED FINANCIAL PLANNER™ practitioner. He has over 17 years of experience in the financial services industry in the areas of financial planning for retirement, tax planning, and investment management. Schedule your free Strategy Session today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

While there's no magic number for when you need a trust, you may consider one when your net worth exceeds $1 million or if you have complex family situations. The decision depends more on your specific circumstances, goals, and estate planning needs than a specific dollar amount. At What Net Worth Do I Need a Trust: An Introduction Sarah, a hypothetical investor, thought she had everything figured out. At 58, with a net worth of $1.8 million, she assumed her simple will would be enough to protect her family’s future. Then her financial advisor asked a question that stopped her in her tracks: “Have you considered setting up a trust?” Like many successful individuals approaching retirement , Sarah had built substantial wealth through decades of hard work and smart investing. But she’d never really thought about whether she needed more sophisticated estate planning tools. The question of “at what net worth do I need a trust” is one that puzzles many affluent Americans. It’s a common misconception that trusts are only for the ultra-wealthy or those with estates worth tens of millions. In reality, the decision to establish a trust depends on much more than just a number on your balance sheet. Your family situation, the types of assets you own, your tax concerns, and your legacy goals all play crucial roles in determining whether a trust makes sense for you. Your personal situation—including your unique financial circumstances and family dynamics—should always be considered when deciding if a trust is right for your needs. Let’s explore when a trust becomes not just beneficial, but potentially essential for protecting your wealth and ensuring your wishes are carried out exactly as you intend. In these cases, having a comprehensive estate plan that incorporates trusts and other legal tools is key to managing and distributing your assets according to your goals. Key Takeaways There’s no universal net worth threshold for needing a trust - the decision depends on your unique circumstances and goals You may consider a trust when your net worth exceeds $1 million Trusts offer benefits beyond tax savings, including privacy, probate avoidance, and asset protection Different types of trusts serve different purposes - from revocable living trusts to irrevocable life insurance trusts State laws significantly impact trust benefits, making local expertise essential The cost of setting up a trust  typically ranges from $1,500 to $5,000 but can save much more in taxes and fees. Some professionals charge a flat fee for trust creation, while others may charge hourly rates. Regular trust reviews and updates are crucial as laws and personal circumstances change A comprehensive estate plan often includes trusts as a core component for managing and protecting assets. Ongoing costs, such as trustee fees and legal reviews, should be considered when evaluating the long-term value of a trust. Table of Contents Understanding Trusts: The Basics Net Worth Thresholds: When to Consider a Trust Benefits Beyond the Numbers Types of Trusts for Different Needs State-Specific Considerations Cost-Benefit Analysis Common Misconceptions Working with Professionals FAQ Section Conclusion Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. Understanding Trusts: The Basics A trust is essentially a legal arrangement where you transfer ownership of your assets to a separate entity managed by a trustee for the benefit of your chosen beneficiaries. Think of it as a protective container for your wealth that comes with its own set of rules and instructions. A trust is established through a trust agreement or trust document, which is a legal document that outlines the terms, parties involved, and instructions for managing and distributing the trust assets. Unlike a will, which only takes effect after death, many trusts can provide benefits during your lifetime. They offer a level of control and flexibility that simple estate planning documents cannot match. The three key players in any trust are the grantor (you), the trustee (who manages the assets), and the beneficiaries (who receive the benefits). In many cases, you can serve as your own trustee during your lifetime, maintaining complete control over your assets. Net Worth Thresholds and Estate Taxes: When to Consider a Trust While there’s no magic number that automatically triggers the need for a trust, certain net worth levels do warrant serious consideration. The old rule of thumb suggested trusts were only necessary for estates exceeding the federal estate tax exemption , currently $13.99 million per person in 2025. However, this outdated thinking overlooks the many non-tax benefits of trusts. There is certainly no net worth minimum required to create a trust, but you may consider establishing a trust when your net worth reaches $1 million or more. Why $1 million? At this level, the cost of establishing and maintaining a trust becomes relatively minor compared to the potential benefits. Your estate likely includes multiple types of assets that could benefit from centralized management. When evaluating the need for a trust, consider your personal property, total assets, and complex assets such as business interests or real estate. Pro Tip:  Don’t wait until you hit a specific net worth number to explore trust options. If you own a business, have minor children, or face unique family situations, a trust might make sense regardless of your current wealth level. Additionally, your state's probate threshold may influence whether a trust is necessary, as estates below this threshold may avoid probate. For those with net worth between $1 million and $5 million, a revocable living trust often provides the ideal balance of flexibility and protection. As Mark Fonville, CFP® at Covenant Wealth Advisors in Richmond, VA , explains, “Many of our clients are surprised to learn that trusts aren’t just about taxes. Even if you’re well below the estate tax threshold, a trust can provide invaluable benefits for asset management, privacy, and ensuring your wishes are followed precisely.” Once your net worth exceeds $5 million, more sophisticated trust strategies often come into play. If you are looking to manage sudden wealth , this might include irrevocable trusts for asset protection, charitable remainder trusts for philanthropy, or generation-skipping trusts for long-term family wealth preservation. Trust Planning by Net Worth: Under $1M:  Trusts are optional. Consider only for unique cases (e.g., disabled beneficiaries, out-of-state property).   New York Life Guide  and   The Wiser Group  both note that trusts may be helpful even for estates starting at $100K, but are more situational under $1M. $1M–$3M:  Consider a revocable trust for probate avoidance and control.   RBC Wealth  recommends revocable trusts once estates reach the $1M threshold due to added complexity. $3M–$5M:  Add irrevocable trusts to protect high-risk assets or prepare for estate tax changes. As outlined by   Forbes , gifting and asset protection strategies often become optimal here. $5M–$10M+:  Estate tax exposure looms. Irrevocable trusts become essential.   Investopedia  notes this range is where high-net-worth estate tax planning becomes critical. $10M+:  Sophisticated trust planning is a must. Combine revocable and irrevocable structures for multi-generational planning.   Investopedia  stresses advanced structures like GRATs, DAPTs, and dynasty trusts at this tier.. Consider only for unique cases (e.g., disabled beneficiaries, out-of-state property). Benefits Beyond the Numbers The decision to establish a trust extends far beyond simple net worth calculations. Trusts offer numerous advantages that can benefit families at various wealth levels. Probate Avoidance:  One of the most immediate benefits is that trusts can help bypass probate and the lengthy probate process, avoiding the need for probate court involvement. Probate can take months or even years, during which your beneficiaries may have limited access to inherited assets. According to professionals , probate costs typically range from 3% to 7% of the estate’s value. Privacy Protection:  Unlike wills, which become public record during probate, trusts remain private documents. Trusts allow for private distribution of assets, ensuring confidentiality for beneficiaries. This confidentiality can be invaluable for protecting your family from unwanted attention or solicitation. Incapacity Planning:  A properly structured trust can seamlessly manage your assets if you become incapacitated, without the need for court-appointed guardianship. Trusts play a key role in ensuring assets are managed and distributed according to your wishes, even if you become incapacitated. This feature alone can save thousands in legal fees  and preserve family harmony during difficult times. For individuals with many assets, trusts can simplify the legal process and distribute assets efficiently to beneficiaries. Types of Trusts for Different Needs Understanding the various trust options helps you make informed decisions about which might best serve your needs. Each type offers unique advantages depending on your circumstances. Revocable Living Trusts:  The most common type, these trusts allow you to maintain full control during your lifetime. You can modify or revoke them at any time, making them ideal for those who want flexibility. They’re particularly useful for avoiding probate and managing assets during incapacity. Irrevocable Trusts:  An irrevocable trust is a trust that, once established, cannot be easily changed or revoked. While less flexible, they offer superior asset protection and potential tax benefits, making them valuable for shielding assets from creditors and reducing estate taxes. They’re often used for Medicaid planning or protecting assets from creditors. Pro Tip:  Consider starting with a revocable trust that includes provisions to become irrevocable upon certain triggering events. This hybrid approach offers maximum flexibility while ensuring future protection. Charitable Remainder Trusts:  For the philanthropically inclined, these trusts allow you to support favorite charities while receiving income during your lifetime. Charitable trusts are a key tool for charitable giving and tax-efficient philanthropy , providing significant tax deductions and helping reduce estate taxes. Special Needs Trusts:  If you have a family member with disabilities, these trusts can provide supplemental support without jeopardizing government benefits. They require careful structuring to comply with complex regulations. Complicated trusts, such as asset protection trusts and trust funds, may be necessary for high-net-worth individuals or those with unique estate planning needs. These arrangements often involve greater management complexity, higher trustee fees, and detailed legal and tax considerations. Professional guidance is essential to ensure these complicated trusts provide the intended protections and benefits. At the end of your planning, remember that joint tenancy with right of survivorship is another method to avoid probate, but it lacks the flexibility and control of a trust. State-Specific Considerations Trust laws vary significantly by state, making local expertise crucial. Some states offer particularly favorable trust environments with enhanced asset protection or tax benefits. Virginia , for example, has modernized its trust code to provide flexibility and strong protections for trust assets. The state allows for directed trusts, where different parties can handle investment and distribution decisions separately. A trust company can also serve as a professional trustee, managing the trust's assets according to the grantor's instructions. State estate taxes also play a role in trust planning. While Virginia doesn’t impose a state estate tax, neighboring states like Maryland do. State laws may affect the calculation of your taxable estate and influence your trust planning decisions. This geographic consideration becomes important if you own property in multiple states or plan to relocate in retirement. Some states have adopted the Uniform Trust Code , which standardizes many trust provisions and procedures. Understanding whether your state follows this code can impact how your trust operates and what protections it offers. Pro Tip:  If you own real estate in multiple states, a trust can help avoid ancillary probate proceedings in each state where you hold property. This single benefit often justifies the cost of establishing a trust. Cost-Benefit Analysis The financial aspect of trust planning involves weighing upfront costs against long-term benefits. Establishing a basic revocable living trust typically costs between $1,500 and $3,000 , while more complex trusts can run $5,000 or more; some attorneys may charge a flat fee for trust creation. Compare these costs to potential probate expenses , which often reach 3% to 7% of your estate value. For a $2 million estate that is probated, probate could cost $60,000 to $140,000, not including the time delays and loss of privacy. Ongoing trust administration costs vary based on complexity and whether you use professional trustees. Trustee fees and professional's fees are important ongoing costs to consider when you create a trust, as these can be a percentage of the trust's assets and may impact the overall cost-effectiveness of the trust. Many people serve as their own trustee initially, incurring minimal ongoing expenses beyond occasional legal reviews. Probate costs are calculated at 5% of estate size. As Matt Brennan, CFP® at Covenant Wealth Advisors in Reston, VA , notes, “The cost conversation often focuses too heavily on setup fees. When clients understand the comprehensive benefits - from creditor protection to ensuring their grandchildren’s education funding - the value proposition becomes clear.” When funding a trust, even a simple bank account or multiple bank accounts can be included as assets, making it easy to create a trust regardless of the size or type of your holdings. To fully understand the tax and cost implications of creating and maintaining a trust, it is recommended to consult a tax professional or seek accounting advice. Common Misconceptions Several myths about trusts prevent people from exploring these valuable planning tools. Let’s address the most common misconceptions. “Trusts are only for the ultra-wealthy”:  This outdated belief stems from when trusts were primarily used for estate tax avoidance. Today’s trusts serve many purposes beyond tax planning, making them relevant for middle-class millionaires. “I’ll lose control of my assets”:  With a revocable living trust, you maintain complete control during your lifetime. You can buy, sell, or transfer assets just as you would with personal ownership. “Trusts are too complicated”:  While trusts involve legal complexity, your daily interaction with them can be quite simple. Once established and funded, they often require less ongoing attention than managing multiple investment accounts. “My will is sufficient”:   Wills serve important purposes but have limitations . They don’t avoid probate, provide no incapacity planning, and become public record. Trusts address these shortcomings while still working in conjunction with your will. For simple estates, a will may be enough since the estate can often be settled quickly and with minimal cost. However, more complex situations benefit from the additional protections and flexibility that trusts provide. Pro Tip:  Don’t let perfect be the enemy of good. Start with a basic trust structure that addresses your immediate needs. You can always add complexity later as your wealth and circumstances evolve. Trusts can also help you preserve more money for your heirs by minimizing taxes and legal costs. Working with Professionals Establishing an effective trust requires coordinating several professional advisors. Your team typically includes an estate planning attorney, financial advisor, and possibly a CPA for tax considerations. It is essential to work with an estate attorney to navigate the legal aspects of creating a trust, ensuring all legal requirements are met and minimizing potential issues. Choose an estate planning attorney with specific experience in trust creation and administration. Look for someone who regularly updates their knowledge as tax laws and regulations change. The American College of Trust and Estate Counsel  maintains a directory of qualified specialists. Your financial advisor  plays a crucial role in funding the trust and ensuring your investment strategy aligns with trust provisions. At Covenant Wealth Advisors , the planning team coordinates closely with clients’ attorneys to ensure seamless implementation. Don’t overlook the importance of properly funding your trust. A trust without assets is like a safe without anything inside - it serves no practical purpose. Creating a trust involves transferring various types of assets, including intellectual property, into the trust. Work with our advisors to retitle accounts and property into the trust’s name. Regular reviews keep your trust current with changing laws and life circumstances. Plan to review your trust every three to five years or after major life events  like marriage, divorce, or significant changes in net worth. Financial tools and strategies should be updated as your family members and circumstances change. Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. FAQ Section Q: Can I set up a trust myself using online services?  A: While online services offer basic trust templates, they can’t provide the customized advice necessary for effective estate planning. Given the complexity of trust law and the significant assets involved, working with an experienced attorney is strongly recommended. The cost savings from DIY approaches are minimal compared to the risks of improper structuring. Q: What types of trusts are there?  A: There are many types of trusts, including revocable trusts, irrevocable trusts, and asset protection trusts. Revocable trusts and asset protection trusts serve different purposes in estate planning—revocable trusts offer flexibility and control, while asset protection trusts are designed to shield assets from creditors, lawsuits, and long-term care costs. Q: How do trusts affect my income taxes?  A: Revocable living trusts are typically “grantor trusts” for tax purposes, meaning you report income on your personal tax return just as you would without a trust. Irrevocable trusts may have their own tax obligations and can sometimes provide tax benefits. Your specific situation will determine the tax implications, making professional guidance essential. Q: How do trusts affect estate taxes?  A: Trusts  can be used as part of estate planning strategies to minimize estate taxes. The value of your taxable estate may determine whether estate taxes apply, and using trusts and gifting techniques can help reduce the overall value subject to taxation. Q: What happens to my trust when I die?  A: Upon your death, your successor trustee takes over management of the trust assets. They’ll follow your written instructions for distributing assets to beneficiaries. This process typically happens much faster than probate and without court involvement. Your trust can continue operating for years if you’ve included provisions for minor children or other long-term planning goals. Q: Do I need a trust if I already have beneficiary designations on my accounts?  A: Beneficiary designations work well for simple situations but have limitations. They don’t provide management for minor children, offer no incapacity planning, and can’t include specific conditions or timing for distributions. Trusts provide much more control and flexibility, especially for complex family situations or when you want to protect beneficiaries from their own potential poor decisions. Q: How is a trust managed, and what are the costs?  A: A trust fund is managed by a trustee, who is responsible for following the terms of the trust and managing the assets for the benefit of the beneficiaries. Ongoing costs, such as trustee fees and administrative expenses, are part of maintaining a trust fund and should be considered when deciding if a trust is right for you. Q: How often should I update my trust?  A: Review your trust every three to five years or after significant life events. Changes in tax laws, family circumstances, or net worth may necessitate updates. Regular reviews with your attorney ensure your trust continues serving its intended purpose and takes advantage of any new planning opportunities. Conclusion The question "at what net worth do I need a trust" doesn't have a one-size-fits-all answer. While the $1 million threshold serves as a useful guideline, your specific circumstances matter more than any arbitrary number. Trusts offer benefits that extend far beyond tax planning. From avoiding probate and protecting privacy to managing incapacity and protecting beneficiaries, trusts provide solutions to real-world challenges faced by successful individuals and families. The key is starting the conversation with qualified professionals who can assess your unique situation. Whether your net worth is approaching $1 million or already exceeds $10 million, exploring trust options ensures you're making informed decisions about protecting and preserving your wealth. Don't wait for a specific net worth target to begin trust planning. The best time to establish a trust is before you need it, when you have the clarity and flexibility to make thoughtful decisions about your legacy. Would you like our team to just do your retirement planning  for you? Contact us today for a free Strategy Session experience . About the author: Megan Waters, CFP® Financial Advisor Megan Waters is a CERTIFIED FINANCIAL PLANNER™ professional and Financial Advisor at Covenant Wealth Advisors . Megan has over 14 years of experience in the financial services industry. Raised in Williamsburg, VA, Megan graduated from the Honors College at the College of Charleston with a BS in Economics and a minor in Environmental Studies. Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

The one big beautiful bill introduces sweeping tax changes for 2025 that could dramatically impact your retirement planning and wealth preservation strategies. From permanent estate tax relief to new deductions for seniors, these eight key provisions require immediate attention from high-net-worth and high income individuals and retirees. Introduction to The Big Beautiful Bill Changes Tax season just got more complicated—and potentially more rewarding. The one big beautiful bill, officially known as the  One Big Beautiful Bill Act , has reshaped the tax landscape for 2025, bringing both opportunities and challenges that every retiree and high-income earner needs to understand immediately. Picture this: You’ve spent decades building your wealth, carefully planning for retirement, and now the rules have changed overnight. The familiar tax strategies you’ve relied on? They might not work anymore. Some provisions could save you thousands, while others might catch you off guard if you’re not prepared. Here’s the challenge that’s keeping many of our clients up at night: Navigating these changes without a clear roadmap could cost you significantly in missed opportunities or unexpected tax bills. The complexity isn’t just overwhelming—it’s potentially expensive. But here’s the good news: When you understand these changes and plan accordingly, you can turn this complexity into your advantage. The key is knowing exactly what’s changed, how it affects your specific situation, and what actions to take now, especially since these changes are now law as part of the final bill passed by Congress. Pro tip:  Avoid costly retirement mistakes with these handy guides, checklists, and workflows. Download our free cheat sheet: 15 Free Retirement Planning Checklists . Key Takeaways Current marginal tax rates are now permanent, providing long-term planning certainty as an extension of the tax cuts made permanent by the Jobs Act. Estate and gift exemptions jump to $15 million per person starting in 2026, and these higher exemptions also apply to the gift tax. New age 65+ deduction of $6,000 per person offers immediate tax relief with income limitations, and this deduction is in addition to the standard deduction. SALT cap increases to $40,000 through 2029, benefiting people in high-tax states. Charitable deduction changes create both new opportunities and new restrictions. Auto loan interest becomes deductible for qualifying vehicles through 2028, introducing a new tax break for eligible taxpayers. Child tax credit increases to $2,200 with permanent inflation adjustments. Table of Contents Permanent Tax Rate Changes: Your New Planning Foundation Estate Planning Revolution: $15 Million Exemption Changes Everything Senior-Friendly Deductions: New Benefits for Age 65+ SALT Relief: Higher Deduction Caps for State and Local Taxes Child Tax Credit Enhancement Charitable Deduction Modifications Auto Loan Interest Deduction Tip and Overtime Income Relief FAQ Conclusion Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. 1. Permanent Tax Rate Changes: Your New Planning Foundation The biggest news? These changes are part of a comprehensive tax bill that locks in today’s marginal-rate structure and eliminates the looming 2026 rate spike, giving high-income taxpayers a clearer runway for long-term planning. For high-income earners, this means you can finally plan with confidence. The permanent rates are an extension of the tax cuts from the 2017 Tax Cuts and Jobs Act, now made permanent by the latest tax bill.  No more worrying about whether that Roth conversion strategy will backfire if rates jump in a few years. “This permanence is a game-changer for our clients,” says Megan Waters, CFP®, at Covenant Wealth Advisors in Richmond, VA . “We can now build long-term investment strategies and retirement plans  without the constant worry about shifting tax rates disrupting our carefully laid plans.” The stability affects everything from when to take Social Security to how you structure your retirement withdrawals. You can now optimize your financial planning with a clear understanding of the tax environment. The Congressional Budget Office  has projected that making these tax cuts permanent could increase federal deficits over the next decade. 2. Estate Planning Revolution: $15 Million Exemption Changes Everything Starting in 2026, the estate and lifetime gift exemption  permanently increases to an inflation-indexed $15 million per person. That's $30 million for married couples. This change fundamentally alters wealth preservation strategies. Many families who previously worried about   estate taxes  can now focus on other aspects of wealth transfer. For business owners, this could mean new opportunities for succession planning. The higher exemption allows for more generous transfers to the next generation without triggering estate taxes. 3. Senior-Friendly Deductions: New Benefits for Age 65+ Here’s where things get interesting for retirees. The one big beautiful bill adds   an extra deduction  of $6,000 per person for those 65 and older starting in 2025. Married couples filing jointly can claim $12,000 in total. This applies to both itemizers and non-itemizers, making it valuable regardless of your deduction strategy. But there’s a catch—several actually. The deduction phases out based on annual income thresholds, starting at $75,000 for single filers and $150,000 for married filing jointly. It completely disappears at $175,000 and $250,000 respectively. The deduction expires after 2028, so it’s temporary relief. This also does not make Social Security tax-free. It simply provides a larger deduction to lower your overall taxable income. “Many of our clients initially thought this would impact their Medicare premiums, but it doesn’t,” explains Adam Smith, CFP® at Covenant Wealth Advisors in Reston, VA . “Social Security is still included in the MAGI calculation for IRMAA purposes, so your Medicare Part B and D premiums won’t change based on this deduction alone.” 4. SALT Relief: Higher Deduction Caps for State and Local Taxes The   state and local tax (SALT) deduction  cap increases to $40,000 starting in 2025, allowing for a higher local tax deduction and reducing federal taxes for many filers. That’s four times the previous $10,000 limit. The cap grows by 1% annually through 2029, then returns to $10,000 in 2030. There is a phaseout for incomes above $250,000 for single filers and $500,000 if married filing jointly, so higher earners won’t get the full benefit but will at least get the previous $10,000 cap at a minimum. This change particularly benefits residents of high-tax states like New York, California, and New Jersey. If you’ve been considering relocation for tax purposes, this might change your calculus. US States were ranked 1 to 50 based on their State and Local Tax (SALT) rate. 1 being the state with the highest State and Local Tax (SALT), shown by the lighter blue. 50 being the state with the lowest State and Local Tax (SALT), shown by the darker blue. For retirement planning, this could influence where you choose to spend your golden years.   States with no income tax   become less attractive when you can deduct more state taxes from your federal taxes. Pro Tip:  If you’re planning a move in retirement, run the numbers with the new SALT caps. The “tax-friendly” state might not save you as much as you think. 5. Child Tax Credit Enhancement The  child tax credit  increases to $2,200 in 2025 and becomes permanent with inflation adjustments. While this primarily affects younger families,   grandparents providing support  might find new gifting opportunities. 6. Charitable Deduction Modifications Charitable giving gets more complex starting in 2026. There’s now a permanent $1,000 above-the-line  deduction for charitable contributions  ($2,000 for married filing jointly) if you do not itemize deductions. However, there’s also a new 0.50% of adjusted gross income (AGI) floor for charitable deductions on Schedule A. You need to exceed this threshold, calculated based on your adjusted gross income, before claiming any charitable deduction. 7. Auto Loan Interest Deduction New   auto loan interest becomes deductible   for cars with final assembly in the United States. The deduction is limited to $10,000 and phases out at higher incomes. This temporary provision runs for tax years 2025 through 2028. It applies to both itemizers and non-itemizers, making it broadly accessible. 8. Tip and Overtime Income Relief There’s a temporary $25,000 deduction for tip wages in traditionally tipped industries. There’s also a $12,500 deduction for overtime compensation. Both deductions phase out at higher income levels and expire after 2028. While these might not directly affect most retirees, they could impact adult children or grandchildren in service industries. Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. FAQ Q: How do these changes affect my retirement income strategy? A: The permanent tax rates provide stability for withdrawal planning. The age 65+ deduction also offers immediate relief if your income qualifies. Consider adjusting your   withdrawal sequence from different account types  to optimize your tax situation under the new rules. Q: Should I accelerate my estate planning before 2026? A: Not necessarily. The new $15 million exemption is permanent and inflation-indexed, making it more generous than current rules. However, review your existing estate plan to ensure it still aligns with your goals under the new framework. Q: Will the new SALT cap affect my decision about where to retire? A: Possibly. The higher cap makes high-tax states more attractive for retirees with significant income. Run projections comparing your total tax burden in different states, considering both income and property taxes. Q: How does the age 65+ deduction interact with Social Security taxation? A: The deduction reduces your overall taxable income but   doesn’t change how Social Security is taxed . You’ll still include Social Security in your AGI calculation, so Medicare premium calculations (IRMAA) remain unchanged. Q: Are these changes permanent or temporary? A: It varies. Tax rates and estate exemptions are permanent. The  age 65+ deduction ,  enhanced SALT cap, tip and overtime income deductions, and auto loan interest deduction  are temporary, mostly expiring between 2028-2030. The final bill was passed after negotiations between the House version and Senate version, with   some provisions differing  from the initial house version. Q: Should I change my charitable giving strategy? A: Review your approach carefully. The new above-the-line deduction helps all donors who don’t itemize, but the AGI floor reduces benefits for Schedule A itemizers. Consider bunching strategies through a donor-advised fund, or gift directly from your Traditional IRA via the qualified charitable distribution (QCD) to optimize your charitable tax benefits. Note that federal funding for social programs can be affected by the error payment rate, which may influence future program resources. Q: How do I know if these changes benefit my specific situation? A: Tax planning is highly individual. The interaction between these provisions and your unique circumstances requires careful analysis. Consider working with a qualified financial advisor to model different scenarios and optimize your strategy, and  ask your financial advisor these important questions about your tax plan . Q: How does the bill affect the Supplemental Nutrition Assistance Program (SNAP) and food stamps? A: The bill introduces  changes to the Supplemental Nutrition Assistance Program (SNAP) , also known as the nutrition assistance program SNAP or food stamps. These changes include updated work requirements, eligibility criteria, and adjustments to federal funding formulas, which may impact benefit levels and access for some recipients. Q: What are the changes to Medicaid eligibility and health coverage? A: The bill modifies Medicaid eligibility rules, which could affect access to Medicaid services and overall health coverage for low-income individuals.  Changes   and  reductions   to provider taxes are intended to control Medicaid costs, which may impact the scope of Medicaid services and the number of people covered. Q: What is the fiscal impact of the bill? A:  According to congressional budget office estimates , the spending bill will have significant effects on federal funding, the national debt, and the deficit. The legislation addresses the debt ceiling and debt limit, ensuring the government can meet its obligations, but also raises concerns about long-term fiscal sustainability. Q: How does the bill impact rural hospitals? A: The bill includes provisions affecting rural hospitals, particularly through  changes to provider taxes . These adjustments may influence the financial stability of rural hospitals and their ability to provide care, especially in areas heavily reliant on Medicaid funding. Q: What are the bill’s effects on clean energy and fossil fuels? A: The bill  modifies clean energy tax credits , impacting incentives for renewable energy production. It also addresses the role of fossil fuels in energy production and  cancels funding for the Greenhouse Gas Reduction Fund . Q: What should I know about the legislative process for this bill? A: The legislative process involved multiple steps: the  house version were reconciled with the Senate version , with the Senate parliamentarian ensuring compliance with reconciliation rules. The joint committee provided official scoring. President Trump signed the final bill into law, with the White House and Senate Republicans playing key roles. Vice President JD Vance cast a tie-breaking vote. The process also included negotiations on border security, immigration enforcement, customs enforcement, and homeland security, as well as restrictions on clean energy tax credits for projects linked to a foreign entity. Comparisons were made to similar legislative efforts in the same period. Q: How do work requirements apply under the new law? A: The bill  strengthens work requirements  for able bodied adults receiving benefits such as SNAP. Some states,  like Alaska and Hawaii , may receive waivers if they demonstrate a good faith effort to comply with the new rules. Conclusion The one big beautiful bill represents the most significant tax reform in years, creating both opportunities and complexities for retirees and high-income earners. From permanent rate certainty to enhanced deductions, these changes require immediate attention and strategic planning. The key is understanding how these provisions interact with your specific financial situation. Some changes offer immediate benefits, while others require long-term strategic thinking. The temporary nature of many provisions means you have limited time to maximize their value. Don't let complexity paralyze you. These changes can significantly benefit your retirement security and wealth preservation goals when properly implemented. The families who act quickly and strategically will be the ones who benefit most from these new opportunities. Would you like our team to just do your  retirement planning  for you? Contact us today for a free Strategy Session experience . About the author: Scott Hurt, CFP®, CPA Senior Financial Advisor Scott is a Financial Advisor for Covenant Wealth Advisors , a CERTIFIED FINANCIAL PLANNER™ practitioner and a Certified Public Accountant (CPA). He has over 17 years of experience in the financial services industry in the areas of financial planning, tax planning, and investment management. Schedule your free Strategy Session today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

We’re pleased to share that Covenant Wealth Advisors was mentioned in a recent article published by Fortune.com  titled, “Warren Buffett’s Go-To Advice for Staying Calm During a Stock-Market Correction Is Over 100 Years Old—and It Comes from a Famous Poem.” The article, published on March 12, 2025, discusses strategies for maintaining perspective during periods of market volatility. It includes commentary and perspectives from several financial professionals, including a mention of Covenant Wealth Advisors in the context of how how many stock market corrections there have been since WWII. You can read the full article here: 👉 Warren Buffett’s advice for staying calm when stocks are falling comes from a 130-year-old poem: ‘Keep your head’ At Covenant Wealth Advisors, we strive to help our clients make informed decisions and remain confident in their financial plans—even when markets are uncertain. We believe that sound financial planning, combined with a disciplined investment approach, can help clients stay focused on what matters most. Mention in third-party media is for informational purposes only and should not be construed as an endorsement or testimonial. Covenant Wealth Advisors did not compensate Fortune or any other party for inclusion in the article. About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free Strategy Session today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

We’re pleased to share that Covenant Wealth Advisors was referenced in a recent Business Insider  article titled, “Market Jitters? Let's Learn From History,”  published on March 17, 2025. The article explores how markets have historically performed following corrections and what investors might expect going forward. In the article, Business Insider  highlights data sourced from Covenant Wealth Advisors—originally cited by Axios —showing that stock market corrections have historically recovered within approximately four months. Additionally, the data illustrates that the S&P 500 has delivered an average return of 14.7% in the 12 months following a correction since 1955. You can read the full article here:👉 Business Insider – Market Jitters? Let’s Learn From History Our goal at Covenant Wealth Advisors is to equip investors with objective, historically grounded insights that support confident, long-term financial decision-making. Third-party mentions are provided for informational purposes only and should not be construed as an endorsement, testimonial, or indication of investment performance. Covenant Wealth Advisors did not compensate Business Insider, Axios, or any third party for inclusion in this article. About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free Strategy Session today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

Retirement planning can feel overwhelming—especially when you're managing a seven-figure portfolio and wondering if it's enough. After years of disciplined saving and smart financial decisions, new questions arise and the stakes get higher. Market volatility becomes more worrisome when you’re no longer earning a paycheck. Tax strategies become more complex with multiple account types. Decisions around Social Security can feel permanent and daunting. Even highly successful individuals can feel paralyzed by these challenges. Building wealth requires discipline; preserving and distributing it in retirement demands a different kind of skillset. That’s where a retirement planning advisor comes in. Unlike general financial advisors, these professionals specialize in retirement income planning, distribution strategies, and coordinating every element of your financial life—from investments and taxes to income and estate planning. They offer both technical knowledge and emotional support to help you retire with clarity and confidence. Table of Contents Common Concerns for Wealthy Retirees How Advisors Help You Prepare for the Unexpected Making Retirement Planning Easier Emotional and Behavioral Benefits of Professional Guidance Conclusion FAQ Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. Common Concerns for Wealthy Retirees You’re not alone if retirement planning feels more complicated than building wealth. The concerns I hear most often from successful professionals center around three core fears: running out of money, losing purchasing power, and making irreversible mistakes. Fear of Outliving Your Money Longevity risk and early market downturns ( sequence of returns risk ) can erode your portfolio faster than expected. Tax Uncertainty and Optimization Anxiety Roth conversions, withdrawal sequencing, and law changes make tax optimization tricky. Many retirees worry they’re paying unnecessary taxes or missing opportunities to  optimize their tax situation . Healthcare Cost Inflation Healthcare expenses represent one of the fastest-growing retirement costs.   For wealthy individuals, these costs can be even higher due to premium insurance plans and potential long-term care needs.  Pro Tip:  Start having detailed conversations about your retirement vision at least 5-10 years before you plan to retire. This gives you time to make adjustments without feeling pressured or rushed. But, it's never too late to get qualified advice. How Advisors Help You Prepare for the Unexpected Smart retirement planning assumes that surprises will happen. Your advisor’s job is helping you build a robust retirement strategy that can weather various economic storms, manage unexpected events, and provide financial protection when unforeseen circumstances arise. Inflation Protection Strategies High inflation erodes purchasing power faster than many retirees expect. Your retirement portfolio needs  assets that can maintain their value during inflationary periods . Healthcare Cost Planning Professional advisors help you plan for both routine medical costs and potential long-term care needs.  This planning might include evaluating long-term care insurance, setting aside dedicated healthcare reserves, or incorporating Health Savings Accounts (HSAs) into your retirement strategy. Market Volatility Management Bad stock markets inevitably occur during retirement. Your advisor helps you prepare through proper asset allocation, maintaining adequate cash reserves, and developing flexible withdrawal strategies. In addition, Monte Carlo simulations  help stress test your financial plan against thousands of potential market scenarios.  Scott Hurt, CFP®, CPA at Covenant Wealth Advisors in Richmond, VA , explains: “We help clients understand that market volatility is normal, but your response to it determines your long-term success. Having a plan you can stick with during tough times is more valuable than trying to time the market.” Making Retirement Planning Easier Your advisor brings technical knowledge that most individuals don’t have time to develop. Working with financial planners and financial advisors  can provide you with detailed reports, grant access to specialized resources, and help determine if you are eligible for certain retirement benefits. Pro Tip:  Checklists can help you select the retirement financial advisor that is right for you. Download   our free cheat sheet: 25 Questions to Ask a Financial Advisor Before You Hire. Withdrawal Strategy Optimization The sequence and timing of withdrawals from different account types significantly impacts your tax burden and portfolio longevity . Your advisor develops a dynamic withdrawal strategy that adapts to market conditions, tax law changes, and your evolving needs.  Social Security Timing Optimization Social Security timing decisions can add or subtract tens of thousands of dollars from your lifetime income. The optimal claiming strategy depends on your health, other income sources, and spousal benefits. Your advisor analyzes various claiming strategies to determine the approach that maximizes your household’s lifetime benefits.  Source: https://www.ssa.gov/benefits/retirement/planner/delayret.html Advanced Tax Planning Retirement tax planning goes far beyond basic withdrawal strategies. It includes Roth conversion timing, charitable giving optimization, order of account withdrawal, and maximizing the after-tax value of your estate.  Mark Fonville, CFP® at Covenant Wealth Advisors in Richmond, VA , notes: “ Tax planning in retirement  is like playing chess – you need to think several moves ahead. What looks optimal today might not be the best strategy when tax laws change or your circumstances evolve.” Estate Planning Integration Your retirement strategy should align with your estate planning goals. This coordination helps prevent your wealth transfer plans from conflicting with your retirement income needs. Professional advisors work with your estate planning attorney to optimize strategies like charitable remainder trusts, family limited partnerships, and generation-skipping transfer planning.  Moreover, proper investment management can significantly maximize the after-tax dollars that heirs receive through strategic asset location and thoughtful retirement drawdown planning. By placing growth-oriented investments like stocks in taxable accounts, these assets benefit from the stepped-up basis rule upon inheritance, allowing heirs to receive the full appreciated value without paying capital gains taxes on the growth that occurred during the original owner's lifetime. Meanwhile, positioning fixed-income investments in tax-deferred accounts like IRAs takes advantage of their steady, compound growth while shielding it from current taxation. This strategy recognizes that heirs would much rather inherit $1 from a taxable account (which they receive tax-free due to stepped-up basis) than $1 from a tax-deferred IRA (which they must pay ordinary income taxes on when withdrawn). During retirement, savvy investors can further optimize their legacy by prioritizing withdrawals from tax-deferred accounts first, satisfying required minimum distributions and spending down these tax-burdened assets while preserving more of their tax-free Roth accounts and step-up eligible taxable investments for their beneficiaries. This coordinated approach to asset location and retirement spending ensures that the most tax-efficient assets remain intact for the next generation, dramatically increasing the after-tax wealth transfer. Emotional and Behavioral Benefits of Professional Guidance The psychological aspects of retirement planning are often more challenging than the technical ones.  Your advisor provides emotional support and behavioral coaching that helps you make better long-term decisions. Overcoming Behavioral Biases Even sophisticated investors fall victim to behavioral biases that can derail retirement success. Common biases include loss aversion, recency bias, and overconfidence in market timing abilities. Your advisor helps you recognize these biases and develop systems to overcome them.  Confidence and Peace of Mind Working with a retirement planning advisor provides something that’s difficult to quantify but invaluable: confidence. You sleep better and can focus on enjoying retirement knowing that professionals are monitoring your situation and ready to make adjustments when needed. Lifestyle Optimization Your advisor helps you maximize your retirement lifestyle within your financial constraints. This involves balancing current enjoyment with long-term sustainability.  The goal is achieving the retirement lifestyle you want without compromising your financial security. Family Communication Support Retirement planning often involves family discussions about inheritance, long-term care, and financial responsibilities. Your advisor can facilitate these conversations and help educate everyone on the plan. Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. FAQ Q: How much does a retirement planning advisor typically cost? A:  Fees vary based on the advisor’s model and your asset level. Many advisors charge 0.5% to 1.15% of assets annually, while others use project-based or hourly fee structures . For high-net-worth clients, the value often far exceeds the cost through tax savings and optimized strategies alone. Q: When should I start working with a retirement planning advisor? A: Ideally, start working with an advisor 5-10 years before retirement. This timeline allows for strategic planning, tax optimization, and course corrections. However, it’s never too late to benefit from professional guidance, even if you’re already retired. We often have individuals contact us within 12 months of retirement. Q: How do I know if my current advisor is qualified for retirement planning? A: Advisors should have the CFP® designation at a minimum. More designations, like the CPA, are an added bonus. They should have specific experience with retirees in your asset range and be able to explain complex strategies clearly. Ask about their approach to withdrawal strategies, tax planning, and risk management. Q: What’s the difference between a retirement planning advisor and a general financial advisor? A: Retirement planning advisors specialize in the unique challenges of retirement, including withdrawal strategies, Social Security optimization, healthcare planning, and estate planning integration. They understand the psychological aspects of transitioning from wealth accumulation to wealth distribution. Q: How often should I meet with my retirement planning advisor? A: Most advisors recommend regular check-ins, with additional meetings for major life changes or market volatility. The frequency depends on your comfort level and the complexity of your situation. Q: What should I expect during my first meeting with a retirement planning advisor? A: Expect a comprehensive review of your financial situation, retirement goals, and concerns. The advisor should ask about your lifestyle expectations, risk tolerance, and family considerations. They’ll likely request financial documents and begin developing a customized strategy during subsequent meetings.  Conclusion Retirement planning for wealthy individuals requires specialized knowledge that goes beyond basic investment management. A qualified retirement planning advisor brings technical knowledge, strategic thinking and emotional support that helps you navigate this complex transition with confidence. The best advisors understand that retirement planning isn't just about numbers – it's about helping you live the retirement you've envisioned while protecting your financial security. They provide the peace of mind that comes from knowing your strategy can weather unexpected surprises and adapt to changing circumstances. Working with a retirement planning advisor isn't an expense – it's an investment in your financial future and emotional well-being. Would you like our team to just do your retirement planning for you? Contact us today to see if you're a good fit for our services. About the author: Megan Waters, CFP® Financial Advisor Megan Waters is a CERTIFIED FINANCIAL PLANNER™ professional and Financial Advisor at Covenant Wealth Advisors . Megan has over 14 years of experience in the financial services industry. Raised in Williamsburg, VA, Megan graduated from the Honors College at the College of Charleston with a BS in Economics and a minor in Environmental Studies. Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

We’re thrilled to announce that Covenant Wealth Advisors  has been named to the 2025 Inc. 5000*  list of fastest-growing private companies in the U.S., earning a ranking of No. 3,054  thanks to an impressive 133% three‑year revenue growth . This milestone reflects the collective dedication of our team and the trust our clients place in us. Since our founding in 2010 , we have remained steadfast in our mission—delivering fiduciary, fee‑only wealth management and financial planning  to individuals 50+ preparing for and living in retirement. Our operations span Richmond, Reston, and Williamsburg, Virginia , underscoring our deep roots across the region. What This Achievement Means Recognition for growth. Earning a spot on the Inc. 5000 highlights our trajectory as a private company and reflects strong business development over the past three years. The 133% revenue growth was measured over a three-year period from 2021 to 2024 and is based on company-submitted data verified by Inc. Magazine.* A shared success. This recognition celebrates our team and the clients who place their trust in us. Our approach —fee‑only and fiduciary—helps us focus on client alignment and personalized financial planning. With a targeted 60-to-1 client-advisor ratio, we aim to provide a more individualized experience How We Got Here Focused advice. We focus on retirement income planning, investment and tax-efficient strategies, and tax planning. Clients benefit from our disciplined, evidence-based methodology and our unwavering fiduciary standard. Service geography and footprint. Our offices in Richmond, Williamsburg, and Reston enable us to serve Virginians across the spectrum—and increasingly, clients nationwide—through a fully integrated, virtual-friendly model. Consistent recognition. This isn’t our first nod from the industry. In recent months, we’ve earned multiple honors: Newsweek’s “America’s Top Financial Advisory Firms” (2025)   Forbes Best‑In‑State Wealth Advisor for Virginia (2025)   USA Today’s Best Financial Advisory Firms (2025) (See below for full disclosures) Looking Ahead Being named among America’s fastest-growing private companies is both humbling and motivating. We’re more committed than ever to: Innovating our client experience Expanding educational outreach and value-add services Maintaining the personal, relationship-driven ethos that defines us To our clients, partners, and team—thank you. This recognition reflects your trust and partnership. We’re energized to build even more meaningful financial futures together. Would you like to see if you're a fit for our services? Click here to learn more. About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free Strategy Session today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice. *Awards and Recognition Covenant Wealth Advisors was nominated by Inc. 5000 on Tuesday, August 12, 2025 as one America's fastest growing private companies. Companies on the 2025 Inc. 5000 list are ranked according to their percentage revenue growth over three years, from 2021 to 2024. To qualify, companies must be privately held, for-profit, based in the U.S., and independent (not subsidiaries or divisions of other companies) as of December 31, 2024. Since then, some companies on the list may have gone public or been acquired. Companies must have been founded and generating revenue by March 31, 2021. The minimum revenue requirement is $100,000 for 2021 and $2 million for 2024. All honorees must pass Inc.’s editorial review. See full methodology. Covenant Wealth Advisors was nominated by Newsweek/Plant-A-Insights Group in November of 2024 as one of America's Top Financial Advisory Firms for 2025. You may access the nomination methodology disclosure here and a list of financial advisory firms selected. ​ CWA was nominated for the Forbes Best-In-State Wealth Advisor 2025 ranking for Virginia in April of 2025. Forbes Best-In-State Wealth Advisor full ranking disclosure. Read more about Forbes ranking and methodology here.   USA Today’s 2025 ranking is compiled by Statista and based on the growth of the companies’ assets under management (AUM) over the short and long term and the number of recommendations they received from clients and peers. Covenant was selected on March 19th, 2025. No compensation was paid for this ranking. See USA state ranking here . See USA Today methodology here. See  USA Today  for more information.   CWA was awarded the #1 fastest growing company by RichmondBizSense on October 8th, 2020 based on three year annual revenue growth ending December 31st, 2019. To qualify for the annual RVA 25, companies must be privately-held, headquartered in the Richmond region and able to submit financials for the last three full calendar years. Submissions were vetted by Henrico-based accounting firm Keiter.    Expertise.com  voted Covenant Wealth Advisors as one of the best financial advisors in Williamsburg, VA   and best financial advisors in Richmond, VA for 2025 last updated as of this disclosure on February 12th, 2025 based on their proprietary selection process.   ​​ CWA is a member of the Better Business Bureau. We compensate the BBB to be a member and our BBB rating is independently determined by the BBB.   CWA did not compensate any of the entities above for the awards or nominations. These award nominations were granted by organizations that are not CWA clients. However, CWA has compensated Newsweek/Plant-A Insights Group, Forbes/Shook Research, and USA Today/Statista for licensing and advertising of the nomination and compensated Expertise.com to advertise on their platform.   While we seek to minimize conflicts of interest, no registered investment adviser is conflict free and we advise all interested parties to request a list of potential conflicts of interest prior to engaging in a relationship. ​

Learning how to strategically reinvest your dividends in retirement, with careful management of dividend payouts as your source of income, can significantly extend your portfolio’s longevity while providing steady income. The key is balancing immediate income needs with long-term wealth preservation through a thoughtful mix of reinvestment and cash distribution strategies. A few years ago a new client sat across from me in my office, his dividend statements spread across the conference table like a financial puzzle he couldn't quite solve. "I've been automatically reinvesting dividends for decades," he said, "but now that I'm retired, should I still reinvest the dividends or start taking them as cash?" It's a question I hear from clients who've spent years building wealth and now face the delicate transition to preserving and using it. The decision of whether to reinvest your dividends in retirement isn't just about numbers on a statement. It's about creating a sustainable financial strategy that helps you sleep well at night while maintaining your lifestyle. Unlike your accumulation years when reinvesting dividends was often a no-brainer,  retirement  requires a more nuanced approach. You're now balancing the need for current income against the desire to keep your money growing ahead of inflation. The good news? With the right strategy, you can have both. Many of my clients here in Reston, Virginia, the broader DC Metro area and all around the country have discovered that a thoughtful approach to dividend reinvestment can actually enhance their retirement security rather than threaten it. Key Takeaways Automatic dividend reinvestment may not be optimal during retirement years A hybrid approach often works best - reinvesting some dividends while taking others as cash Your dividend strategy should align with your overall retirement income plan Tax implications change significantly when you shift from reinvestment to cash distributions Regular portfolio rebalancing becomes more critical when managing dividend flows Consider your asset allocation and whether you're overweighted in dividend-paying stocks Professional financial planning can help optimize your dividend strategy for long-term success Table of Contents The Retirement Dividend Dilemma: Why Your Old Strategy May Not Work Smart Strategies for Dividend Reinvestment in Retirement Tax Considerations and Cash Flow Management Balancing Growth and Income in Your Golden Years FAQ Conclusion Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. The Retirement Dividend Dilemma: Why Your Old Strategy May Not Work For decades, the advice was simple: reinvest those dividends and let compound growth work its magic. But retirement changes everything about how you should think about investment income. The challenge isn’t just about money - it’s about mindset. During your working years, you had a paycheck covering your expenses while your investments grew quietly in the background. Now, your portfolio has become your paycheck, and every decision carries more weight. “Many retirees fall into the trap of thinking they need to completely stop reinvesting dividends,” explains Matt Brennan, CFP® at Covenant Wealth Advisors in Reston, VA . “But the reality is more nuanced. You still need growth to combat inflation, but you also need to be strategic about how you manage that growth alongside your income needs. When considering whether to reinvest dividends, it's important to focus on long term returns, as reinvestment can help your portfolio keep pace with inflation over time.” Here’s what’s different now: First, you likely need some current income from your investments. Dividends paid to shareholders can be reinvested or taken as cash, depending on your needs. Shareholders must decide how to allocate their dividends to balance income and growth. Second, you’re more sensitive to market volatility because you have less time to recover from major losses. Third, your tax situation has probably changed, potentially making dividend income more or less attractive depending on your bracket. The old “set it and forget it” approach to dividend reinvestment often leaves retirees either cash-poor (because everything’s reinvested) or growth-poor (because they’re taking all dividends as cash). Neither extreme serves you well. Pro Tip : Review your dividend reinvestment elections annually, not just when you first retire. Your needs and market conditions change, and your strategy should evolve with them. Smart Strategies for Dividend Reinvestment in Retirement The most successful retirees I work with rarely use an all-or-nothing approach to dividend reinvestment. Instead, they create a thoughtful system that serves multiple goals simultaneously. One effective strategy is the  “bucket approach”  to dividend management. You might reinvest dividends from your growth-oriented holdings while taking cash from your income-focused investments. This keeps your growth engine running while providing the cash flow you need for expenses.  A dividend reinvestment plan  can be used to automatically reinvest dividends and purchase additional shares, helping you accumulate more shares over time without manual effort. Another approach involves  using dividends to rebalance your portfolio  automatically. If your stock allocation has grown too large, you might take those dividends in cash and use them to buy bonds or other assets that have become underweighted. Dividends can also be  automatically reinvested through a brokerage account , allowing you to purchase additional shares without manual intervention. Mutual funds and other types of funds  can also be used for dividend reinvestment. The key benefits of using these vehicles include simplified diversification, cost-effectiveness, and the potential for portfolio growth through compounding. The key is matching your dividend strategy to your broader retirement plan. If you’re in early retirement and don’t need the income yet, continued reinvestment might make sense. But if you’re supplementing Social Security and pension income, a mixed approach often works better. Some plans or accounts may reduce or eliminate fees, making reinvestment even more attractive. Pro Tip : Don’t forget about dividend-paying funds in tax-advantaged accounts.  Reinvesting dividends in your IRA or 401(k) avoids immediate tax consequences  and can be an excellent way to maintain growth while taking needed distributions from taxable accounts. Tax Considerations and Cash Flow Management The tax implications of dividend reinvestment can feel more complicated in retirement, especially when you’re balancing multiple account types—like IRAs, Roth IRAs, and taxable brokerage accounts—and trying to optimize your overall tax strategy . In a taxable brokerage account , dividends are generally taxable in the year they’re paid, regardless of whether you reinvest them or take them in cash. The main difference lies in how they affect your cost basis: Cash dividends : You receive the dividend as cash. Your cost basis in the investment doesn’t change. Reinvested dividends : The dividend is automatically used to buy more shares. These new shares are added to your cost basis, which can reduce your taxable capital gain when you eventually sell the investment. In addition to dividends, retirees may also receive capital gains distributions  from mutual funds or ETFs. These are taxed in a similar way to qualified dividends—often at long-term capital gains rates—and can increase your overall tax bill in a given year. “Understanding the tax efficiency of your dividend strategy is crucial,” notes Megan Waters, CFP® at Covenant Wealth Advisors in Richmond, VA . “Many retirees can improve their tax situation by deciding strategically which dividends to reinvest and which to take as cash, especially when they’re managing multiple account types.” Strategy Considerations for Retirees Tax bracket management : In taxable accounts, dividends are taxed whether reinvested or not. But in tax-deferred accounts  like IRAs or 401(k)s, dividends grow without creating current-year taxable income as long as they stay inside the account. That means reinvesting in those accounts can help you avoid unnecessary withdrawals that might push you into a higher tax bracket this year. Cash flow timing : Dividends don’t always arrive when you need them. For example, if your living expenses are due in January but your dividends are paid in March, you may need to draw from other accounts to bridge the gap. Planning ensures your income sources align with your spending needs. Account location : Many retirees benefit from reinvesting dividends inside tax-advantaged accounts  (IRAs, Roth IRAs), where they don’t generate taxable income. Meanwhile, dividend-paying investments in taxable accounts  can be useful for providing regular cash flow. By coordinating how dividends are used across your different account types, you can better manage both your tax exposure  and your liquidity needs  throughout retirement. Balancing Growth and Income in Your Golden Years The biggest mistake I see retirees make is treating dividend reinvestment as an either/or decision. The most successful approach usually involves both strategies working together within a comprehensive financial plan, allowing investors to accumulate more shares and benefit from the compounding effect over time. Your asset allocation should drive your dividend strategy, not the other way around. Many companies offer  dividend reinvestment plans (DRIPs) , and shareholders can select stocks or individual stocks to participate in these plans. If you’re holding too much in dividend-paying stocks (a common issue for income-focused retirees), reinvesting all those dividends might push you further away from your target allocation. Think of your portfolio as a garden. Some plants (growth stocks) need their “fruit” (dividends) replanted to grow bigger. Others (income investments) are meant to be harvested regularly. Investing in  equity, mutual funds, and other assets  can help diversify portfolios and manage risk. The key is knowing which is which and adjusting based on the season of your financial life. Dividend payments are paid to shareholders on a regular basis, and companies pay dividends to investors as a way to share profits. Dividend reinvestment plans (DRIPs) allow investors to buy fractional shares and accumulate additional shares over time, enhancing the compounding effect and portfolio growth. Pro Tip :  Checklists can help avoid costly mistakes with your investment portfolio and tax strategy.  Download our free cheat sheet: What Issues Should I Consider When Reviewing My Investments? Inflation protection remains crucial even in retirement. While you need current income, you also need your purchasing power to grow over time. Long term investors focus on compounding effect and portfolio growth to achieve their long term goals. A thoughtful dividend reinvestment strategy can help you achieve both goals without taking excessive risk. Many successful retirees use a  “glide path”  approach - gradually shifting allocation over time to align with an investor's risk tolerance as they age. Investors can adjust their dividend reinvestment plans over time to match their changing needs and initial investment. Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. FAQ Q: Should I stop reinvesting dividends as soon as I retire? A: Not necessarily. The optimal approach depends on your specific financial situation, income needs, and overall investment strategy. Many retirees benefit from a hybrid approach that combines reinvestment with cash distributions. Consider your current cash flow needs, tax situation, and long-term financial goals when making this decision. Q: How do taxes change when I switch from reinvesting to taking dividends as cash? A: The tax obligation remains the same - you owe taxes on dividends whether reinvested or taken as cash. However, reinvesting increases your cost basis, which can reduce future capital gains taxes. Taking dividends as cash provides immediate liquidity but doesn’t increase your cost basis. The optimal choice depends on your current tax bracket and long-term tax strategy. Q: Can I have different dividend strategies for different investments? A: Absolutely. Many successful retirees use a selective approach, reinvesting dividends from growth-oriented investments while taking cash from income-focused holdings. This strategy allows you to maintain growth potential while generating needed cash flow. You can set different dividend elections for each investment based on your overall portfolio strategy. Dividend reinvestment plans typically reinvest dividends into the same stock automatically, and shareholders can choose which investments to enroll in these plans. Q: What’s the best way to manage dividend timing with my spending needs? A: Consider creating a  cash buffer  to smooth out timing differences between dividend payments and expenses. Many retirees maintain 1-2 years of expenses in cash or short-term investments to avoid having to sell investments at inopportune times. Coordinate your dividend strategy with your broader cash flow planning. Q: Should I focus on high-dividend stocks in retirement? A: Not necessarily. While dividend income can be attractive, don’t sacrifice diversification or total return for yield alone. High-dividend stocks can be more volatile and may not provide the inflation protection you need. Focus on total return and appropriate asset allocation rather than dividend yield alone. Keep in mind that being a shareholder in a company is often a prerequisite for participating in some dividend reinvestment plans. Q: How often should I review my dividend reinvestment strategy? A: Review your strategy annually or when your financial situation changes significantly. Your needs, market conditions, and tax situation evolve over time, and your dividend strategy should adapt accordingly. Major life events, changes in tax law, or shifts in your financial goals may warrant strategy adjustments. Regular reviews can help you maximize portfolio growth by ensuring your reinvestment approach remains aligned with your objectives. Q: What role should dividend-paying funds play in my retirement portfolio? A: Dividend-paying funds can provide diversification and professional management while generating income.  Funds and ETFs can be used for dividend reinvestment , often through automated plans, which can contribute to portfolio growth by compounding returns over time. They’re particularly useful in tax-advantaged accounts where you can reinvest dividends without immediate tax consequences. Consider them as part of a balanced approach that includes both individual securities and funds based on your investment preferences and account types. Conclusion The decision of how to reinvest your dividends in retirement isn’t just about maximizing returns - it’s about creating a sustainable strategy that supports your lifestyle while preserving your wealth for the future. The most successful retirees I work with recognize that this decision requires ongoing attention and periodic adjustment as their needs evolve. Remember, there’s no one-size-fits-all answer. Your dividend strategy should align with your overall retirement plan, tax situation, and personal comfort level. Whether you choose to reinvest all dividends, take them all as cash, or use a hybrid approach depends on your unique circumstances and goals. The key is making an intentional choice rather than defaulting to what you did during your accumulation years. By thoughtfully managing your dividend reinvestment strategy, you can help position your retirement savings to continue working as hard as you did to build them. Would you like our team to just do your retirement planning for you? Contact us today for a  free Strategy Session experience . About the author: Andrew Casteel, CFP® Chief Investment Officer Andrew is the Chief Investment Officer for Covenant Wealth Advisors and a CERTIFIED FINANCIAL PLANNER™ practitioner. He has over 11 years of experience in the financial services industry in the areas of wealth management and financial planning for retirement. Schedule your free Strategy Session today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

Most people should save a minimum 15% of their gross income for retirement, including employer contributions. But, uncontrollable factors, like a job loss or health issues, can disrupt your savings plan. As a result, a better target is to save 20%. If you start later or have higher income, you may need to save more. One of the most common financial planning questions is: What percentage of your income should you save for retirement?   Deciding how much to save for retirement can feel overwhelming, especially when you balance lifestyle expenses, children’s education, and rising costs of living. But the truth is, the earlier you set a clear savings target, the easier it becomes to reach financial independence. At Covenant Wealth Advisors, we work with affluent individuals and families who want clarity and confidence in their retirement plan. The right savings percentage can vary, but research and experience point to practical benchmarks that work for most people. Key Takeaways Saving 15% of gross income  (including employer match) is a widely accepted baseline for retirement readiness. Social Security typically replaces about 40%  of average pre-retirement income, but less for higher earners. The later you start saving, the higher your contribution rate needs to be—often 20–30%+ if starting in your 40s or 50s. Use salary-multiple milestones  (1x by 30, 3x by 40, 6x by 50, 8x by 60, 10x by retirement) to stay on track. Automating increases of 1–2% per year makes saving painless and effective. High earners should often aim for 20–25% savings rates  to replace income Social Security won’t cover. Diversifying between Roth and pre-tax accounts  provides flexibility for retirement tax planning. Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. Why 15% Is the Standard Rule of Thumb Many financial institutions, including Fidelity and Vanguard, recommend saving around 15% of gross income  for retirement. This figure includes your contributions and any employer match you receive. This rule assumes: You begin saving in your 20s or early 30s. You invest consistently in a diversified portfolio. You plan to retire around age 65–67. When followed, this approach helps most households replace 70–80% of their pre-retirement income when combined with Social Security. Pro Tip:  If you’re already saving 10% through payroll deductions and your employer matches 5%, you’re hitting the 15% target without increasing your own contribution. How Your Age Impacts Savings Percentages The ideal savings rate depends heavily on when you start. The later you begin, the higher your savings rate must be. Example Savings Rate by Age (Including Employer Match) Current Age Suggested Savings Rate 25 9–13% 30 13–18% 35 17–22% 40 21–28% 45 26–35% 50 33–43%+ If you’re starting in your 40s or 50s, saving 25% or more may be necessary to catch up. Pro Tip:  Maximize catch-up contributions to retirement accounts after age 50. In 2025, you can contribute an extra $7,500 to 401(k)s beyond the $23,000 base limit ( IRS.gov ). High Earners Need to Save More Social Security benefits replace a smaller percentage of income for higher earners. While average workers may get 40% of pre-retirement earnings from Social Security, high earners may only replace 20–30%. This means a larger share must come from personal savings. Megan Waters, CFP®, notes: “High-net-worth individuals can’t rely on Social Security the way average earners can. The more you earn, the more intentional your retirement savings strategy must be.” For affluent families, aiming for 20%+ savings rates  is often necessary, especially if retirement goals include travel, gifting, or legacy planning. Case Studies: Saving Early vs. Saving Late Consider two individuals: John (Age 30):  Saves 15% of his $200,000 income until age 67. Assuming 6% annual returns and flat contributions of $30,000 per year, John accumulates roughly $3.82 million  by retirement. If his contributions rise over time with salary increases, his nest egg could grow significantly larger. Susan (Age 45):  Starts saving 15% of her $200,000 income at age 45. By 67, she accumulates about $1.3 million  under the same assumptions. To catch up, Susan would need to save closer to 30% of income  or plan for later retirement. The difference comes down to time in the market . The earlier you begin, the more compounding works in your favor. Investment Strategy and Savings Rates Here's the thing, a simple rule of thumb isn't enough. Why? Your investment strategy directly impacts how much you need to save. Conservative investors who hold too much in bonds early in their career may need to save more to compensate for lower growth. On the other hand, a diversified mix of stocks and bonds typically allows the 15% rule to hold true. Scott Hurt, CFP®, CPA, explains: “The right savings rate depends on both contributions AND returns. A disciplined savings plan combined with long-term stock exposure gives you the best chance to meet your goals without over-saving.” At Covenant Wealth Advisors, one problem we often see with younger investors is that they don't invest aggressively enough. This can create catastrophic problems down the road in retirement. Behavioral Finance: Why People Under-Save Many individuals struggle to save consistently because of behavioral biases: Present bias:  Favoring today’s spending over future security. Lifestyle creep:  Increasing spending as income rises. Procrastination:  Delaying retirement saving because it feels far away. The antidote? Automation. Setting automatic contributions and auto-escalation takes emotion out of the equation and ensures steady progress. Pro Tip:  Tie annual contribution increases to your annual raise. If you receive a 4% raise, allocate 1–2% toward retirement savings before you see the difference in your paycheck. But, there are additional savings disruptions that can interfere with your retirement savings game plan. These include a job loss, supporting aging parents, market downturns, and health issues. So, how do you mitigate these risks? Megan Waters, CFP® at Covenant Wealth Advisors in Richmond, VA , notes: “Life rarely follows a straight line. Clients who plan for 20% minimum savings rates, instead of 15%, can weather these inevitable disruptions without derailing their retirement timeline.” Pro Tip:   Build emergency savings equal to 12 months of expenses before maximizing retirement contributions to avoid tapping retirement accounts during financial disruptions. What Happens If You Can't Save 20% Right Now? If you cannot save 15 to 20% of gross income, immediately focus on increasing earnings or reducing lifestyle expenses rather than accepting lower savings rates. Compromising on retirement savings creates compounding problems that become exponentially harder to solve over time. Start with a comprehensive expense audit. Many high earners discover significant savings opportunities in subscription services, dining expenses, luxury purchases, and lifestyle inflation areas. Even temporary expense reductions can jumpstart higher savings rates. If you can't reach 20% immediately, set a reasonable target for short term savings, such as building an emergency fund, and gradually increase your goal as your financial situation improves. Consider income optimization strategies including negotiating salary increases, developing additional income streams, or accelerating career advancement. Professional development investments often generate substantial returns through higher earning potential. Lifestyle adjustments may feel uncomfortable initially but become routine quickly. Downsizing housing, choosing less expensive vehicles, or reducing discretionary spending can free substantial funds for retirement savings. The mathematical reality is unforgiving: starting retirement savings late or at insufficient rates requires dramatically higher future contributions or lifestyle compromises in retirement. Neither option is appealing compared to current adjustments. Pro Tip:  Automate savings increases tied to income growth, directing at least 50% of raises toward retirement contributions before lifestyle inflation takes hold. Set up automatic transfers from your paid income into a dedicated savings account to support consistent progress toward your goals. If you need to reduce your savings rate temporarily, it makes sense as long as you have a plan to increase it over time. When Should You Start Aggressive Retirement Saving? Begin aggressive retirement saving immediately, regardless of age, to prevent lifestyle creep and maximize compound growth benefits. The earlier you start saving, the more time your money has to grow, leading to a more secure financial future.   Early aggressive saving is exponentially more effective than attempting to catch up later with higher contribution rates. Lifestyle creep represents the greatest threat to retirement security among affluent professionals. As income increases, expenses naturally expand to match earning levels. Developing good spending habits early in your savings journey can help you stay motivated and stick to your savings strategy, making it easier to resist lifestyle creep. Reversing established lifestyle patterns becomes increasingly difficult as family obligations, housing costs, and social expectations solidify. Starting aggressive savings early creates powerful compound growth. A 30-year-old saving 20% has dramatically different retirement outcomes than a 45-year-old saving 20%, even with identical contribution amounts. The 15-year head start can represent millions in additional retirement assets. Young professionals often delay aggressive saving, assuming future income growth will enable catch-up contributions. This savings strategy consistently fails because   lifestyle expenses grow alongside income , leaving the same percentage available for savings despite higher absolute earnings. Family complexity increases with age, making lifestyle adjustments more challenging. Single professionals can more easily modify spending patterns than parents managing mortgages, school expenses, and extended family obligations. How Do Modern Economic Realities Affect Retirement Planning? Contemporary economic factors including inflation, healthcare costs, and extended lifespans require substantially higher retirement savings than previous generations needed. Traditional retirement planning models cannot adequately address these modern challenges. Inflation has averaged over 3% annually in recent years , dramatically higher than the 2% assumptions in many retirement calculators. Higher inflation rates require proportionally larger retirement nest eggs to maintain purchasing power over 20-30 year retirement periods. Additionally, rising interest rates can impact both savings growth—by offering higher returns on certain accounts—and borrowing costs, making it important to consider these factors in your planning. For example, higher healthcare costs and inflation can erode savings faster than expected. Healthcare represents the fastest-growing retirement expense categor y.  Long-term care costs average $100,000 annually for nursing home care , while  comprehensive health insurance premiums continue rising above general inflation rates . Extended lifespans mean retirement funds must last decades longer than originally anticipated.   Americans retiring at 65 can expect to live 20-25 years in retirement , requiring larger accumulations to fund extended non-working years. Planning for long term goals, such as retirement savings and healthcare needs, is essential to achieving financial stability throughout these extended periods. Market volatility creates   sequence-of-returns risks  that weren’t prominent when pensions provided guaranteed retirement income. Early retirement years’ investment performance disproportionately impacts overall retirement security, requiring larger initial balances as buffers. Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. Pro Tips for Staying on Track Use a simple retirement calculator: Project the savings rate you need based on your current situation using our simple excel retirement calculator. Automate contributions:  Set an annual auto-increase of 1–2% to reach your savings goal without noticing the difference. Prioritize retirement over college funding:  You can borrow for education, but not for retirement. Consolidate old accounts:  Roll over old 401(k)s to streamline investment management. Work with a fiduciary advisor:  Covenant Wealth Advisors helps clients build tailored retirement plans to maximize wealth and minimize taxes. FAQs Q: Is saving 20% of after-tax income realistic for most people? A:  Yes, 20% is achievable through proper budgeting and priority setting. Setting clear savings goals and using savings accounts for both short term and long term needs can help you stay on track. Most high earners can reach this target by eliminating lifestyle inflation and directing income growth toward savings. The key is starting before lifestyle creep makes adjustments more difficult. Q:   Should I prioritize 401(k) or Roth IRA contributions? A:  Maximize your employer match in a 401(k) first, as employer matches and employer contributions are valuable parts of your retirement savings. After that, diversify between traditional and Roth accounts, including an individual retirement account (IRA), based on your current versus expected   retirement tax brackets . High earners often benefit from traditional contributions during peak earning years and   Roth conversions  in lower-income periods. Q: What if my employer doesn’t offer retirement benefits? A:   Open a retirement account  such as an individual retirement account (IRA) and taxable investment accounts to reach your 15-20% target. Self-employed individuals can use SEP-IRAs or Solo 401(k) accounts that allow higher contribution limits than traditional IRAs. Q: Should I reduce retirement savings to pay off debt faster? A:  Continue minimum retirement savings while aggressively paying high-interest debt. Don’t completely stop retirement contributions, as you’ll lose years of compound growth. Prioritize employer matching, then focus on debt elimination, then maximize retirement savings. Make sure your money is working toward your savings goal even as you pay down debt. Q: How does Social Security factor into retirement planning? A:  Social Security provides minimal income replacement for high earners, typically 15-25% of pre-retirement income. Don’t rely heavily on Social Security in retirement planning calculations. Treat it as supplemental income rather than a primary funding source. Q: Is it too late to start aggressive saving in my 50s? A:   It’s never too late, but you’ll need higher savings rates to compensate for lost time.  Professionals starting aggressive saving at 50 may need to save 30-40% of after-tax income to achieve adequate retirement funding by 65. Set up automatic transfers to savings accounts and aim to save as much as possible to catch up. Q: How do I handle retirement planning during career transitions? A:  Maintain retirement contributions during transitions by using emergency funds, short term savings, or temporary income reductions rather than stopping savings completely. Use your checking account to manage daily expenses and roll over employer accounts to maintain investment growth and avoid early withdrawal penalties. Q: What investment strategy should I use for retirement savings? A:  Diversified portfolios aligned with your   risk tolerance  and time horizon work best. Set clear savings goals and long term goals to guide your investment choices. Younger savers can emphasize growth investments, while those closer to retirement should gradually shift toward more conservative allocations. Consider working with a qualified   financial planner  to develop appropriate investment strategies. Q: How do I avoid lifestyle creep while increasing income? A:  Automatically direct income increases toward savings before adjusting lifestyle expenses. Set specific savings rate targets that increase with income growth, and track your progress monthly to keep yourself on target. Prioritize spending goals such as a home down payment, avoiding unnecessary upgrades like a new car, and keeping mortgage payments manageable to prevent lifestyle inflation. Conclusion So, what percentage of your income should you save for retirement? The answer depends on your age, income, and retirement goals, but a strong baseline is 15% of gross income, including employer match . High earners and late starters should aim higher, often 20–30% or more. Combining disciplined saving, tax-smart investing, and milestone tracking can help ensure your retirement years are comfortable and financially secure. The key is starting aggressive savings immediately, before lifestyle creep makes adjustments more difficult. Whether you're earning $100,000 or $500,000 annually, your retirement security depends on adapting to modern economic realities rather than relying on outdated conventional wisdom. Don't let the your own behavior compromise your retirement dreams. Take action now to implement appropriate savings rates that will actually fund the retirement lifestyle you've worked so hard to achieve. Would you like our team to do your retirement planning for you? Contact us today for a   free Strategy Session experience . About the author: Matt Brennan, CFP® Senior Financial Advisor Matt is a Senior Financial Advisor with Covenant Wealth Advisors and a CERTIFIED FINANCIAL PLANNER™ practitioner. He has over 20 years of experience in the financial services industry in the areas of financial planning for retirement, tax planning, and investment management. Schedule your free Strategy Session today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

Once required minimum distributions (RMDs) begin, you can’t avoid them—but you can lower taxable income through strategies like Qualified Charitable Distributions (QCDs), Roth conversions , and Qualified Longevity Annuity Contracts (QLACs). Done right, these moves can help reduce taxes, protect Medicare premiums from increasing, and keep retirement income more efficient. Key Takeaways RMDs typically begin at age 73 , and failing to take them triggers steep IRS penalties. QCDs  are the most effective way to lower taxable income once RMDs start, especially for charitably inclined retirees. QLACs  allow you to move up to $210,000 (2025 limit)  outside of RMD calculations until as late as age 85. Roth conversions  above the RMD amount can shrink future distributions and shift growth to tax-free accounts. Tax-loss harvesting, asset location, and state-level strategies  (like Virginia529 deductions) can fine-tune tax efficiency. Timing matters—bracket management and Medicare IRMAA thresholds should guide your decisions. Professional advice from a fiduciary firm like Covenant Wealth Advisors helps align strategies with your goals. Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. The RMD Problem Turning 73 triggers a new phase of retirement planning: required minimum distributions (RMDs) . The IRS requires retirees to withdraw a set amount from traditional IRAs and most employer retirement plans each year, and every dollar is taxed as ordinary income. For high-net-worth retirees, this can mean six-figure RMDs , pushing you into higher tax brackets, exposing more of your Social Security benefits to taxation, and increasing Medicare premiums. In our experience, the first RMD alone can sometimes bump adjusted gross income (AGI) by 30% or more. That’s why so many retirees ask: How can I lower my taxable income once I start taking required minimum distributions? The good news: while you can’t avoid RMDs, you can strategically reduce their tax impact with proper planning . Let’s explore the most effective ways to do it under 2025 IRS rules. Qualified Charitable Distributions (QCDs) What it is:  A Qualified Charitable Distribution allows you to transfer money directly from your IRA to a qualified charity once you reach age 70½ . Why it matters:  QCDs count toward your RMD but do not show up in AGI . That means you reduce taxable income, avoid higher Medicare premiums (IRMAA), and can still support causes you care about. Limits in 2025: Up to $108,000 per person  can be given as QCDs. Married couples with separate IRAs can each contribute up to the limit. A one-time option exists to fund a charitable gift annuity or CRT with up to $54,000 . What doesn’t qualify: Donor-advised funds (DAFs) Most private foundations Supporting organizations “For charitably inclined retirees, QCDs are the cleanest and most powerful way to reduce taxable income after RMDs begin,”  says Megan Waters, CFP® , lead advisor at Covenant Wealth Advisors in Richmond, VA. Pro Tip: Consider processing your QCDs early in the year. Many custodians process these slowly, and waiting until December risks missing the IRS deadline. Qualified Longevity Annuity Contracts (QLACs) What it is:  A QLAC is a deferred income annuity purchased inside your IRA or 401(k). The money used to buy the QLAC is excluded from your RMD calculation until the annuity begins paying (no later than age 85). Why it matters:  This directly reduces the size of your annual RMDs  while also creating guaranteed income later in life. Limits in 2025: Maximum QLAC purchase: $210,000 . The old “25% of account balance” cap was removed by SECURE 2.0. Pros: Shrinks RMDs now. Provides longevity insurance. Predictable late-life cash flow. Cons: Irrevocable decision. Payments taxed as ordinary income when they start. Pro Tip: Run cash-flow projections before committing to a QLAC. It’s best suited for retirees who want to hedge against longevity risk and have other sources of liquidity. Roth Conversions After RMDs Begin Rule to remember:  You cannot convert your RMD itself to Roth. You must first withdraw the RMD, then convert any additional pre-tax assets. Why it matters:  Conversions won’t lower this year’s taxable income, but they reduce future RMDs  and shift growth to tax-free Roth accounts. This can be powerful if you expect higher tax rates later or want to leave Roth assets to heirs. Key considerations: Watch your marginal tax bracket—don’t convert blindly. Track nondeductible contributions (Form 8606) to avoid double taxation. Conversions increase AGI now, which may temporarily raise Medicare premiums. “Roth conversions after RMD age can still make sense—but only when bracket management and estate goals align,”  notes Scott Hurt, CFP®, CPA , a financial planner at Covenant Wealth Advisors in Richmond, VA. The “Still Working” Exception for Employer Plans If you’re still employed at age 73 and not a 5% owner , you can delay RMDs from your current employer’s plan until you retire. This doesn’t apply to IRAs, and it won’t help business owners. But if your plan allows roll-ins, you may consolidate old IRA accounts into the active retirement plan, such as a 401 (k) to reduce RMD exposure. Portfolio and Taxable Account Strategies Beyond retirement accounts, you can use other levers to lower taxable income: Tax-loss harvesting:  Use realized losses in taxable accounts to offset gains and up to $3,000 of ordinary income  annually. Asset location:  Keep tax-inefficient assets (like REITs or bonds) in IRAs and growth assets in Roth accounts to slow RMD growth. In-kind RMDs:  Transfer securities instead of cash to meet RMD requirements. This doesn’t reduce AGI, but it gives you a new cost basis in taxable accounts. Virginia-Specific Deduction Opportunity For residents of Virginia: contributions to Virginia529  plans are deductible from state income taxes . Normally capped at $4,000 per account per year, the rule changes once you’re 70 or older . At that age, you can deduct the full contribution amount  made during the year. While this doesn’t lower federal taxable income, it can significantly reduce your Virginia tax bill. Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. Pro Tips for RMD Planning Coordinate QCDs with your charitable giving plan—don’t double dip with a separate deduction. Consider doing partial Roth conversions even in RMD years to manage future tax brackets. Use professional software to test Medicare IRMAA thresholds before making large moves. Keep meticulous records: custodians rarely code QCDs correctly on 1099-Rs. FAQs Q: Can QCDs satisfy my entire RMD? Yes. If you donate up to the annual QCD limit directly from your IRA, it fully counts toward your RMD and is excluded from taxable income. Q: Can I do a QCD from my 401(k)? No. QCDs are only available from IRAs. You may roll 401(k) assets into an IRA to enable QCDs. Q: What is the maximum I can put into a QLAC in 2025? The inflation-indexed limit is $210,000  per person. This amount is excluded from RMD calculations until income starts. Q: Do Roth 401(k)s still have RMDs? No. Since 2024, designated Roth accounts in employer plans have no pre-death RMDs, aligning them with Roth IRAs. Q: What happens if I miss an RMD? The IRS penalty is 25%  of the amount not withdrawn (reduced to 10% if corrected quickly). Always work with your custodian early to avoid mistakes. Conclusion Lowering taxable income once RMDs start is less about avoidance and more about smart redirection . Tools like QCDs, QLACs, Roth conversions, and tax-aware portfolio design help manage income, protect Medicare premiums, and keep your wealth working for you. At Covenant Wealth Advisors, we help affluent retirees navigate these complexities with strategies tailored to their financial goals. Want to find out how to reduce your taxable income in retirement? Contact us for a free Strategy Session today! About the author: Adam Smith, CFP® Senior Financial Advisor Adam is a Senior Financial Advisor with Covenant Wealth Advisors and a CERTIFIED FINANCIAL PLANNER™ practitioner. He has over 17 years of experience in the financial services industry in the areas of financial planning for retirement, tax planning, and investment management. Schedule your free Strategy Session today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice. Our free retirement assessment is provided at no cost and with no obligation for investors with over $1 million in savings and investments, excluding real estate. Contact information may be required to schedule the assessment, but you are not obligated to purchase any products or services as a result of this offer.

While traditional  retirement planning  focuses on accumulating wealth, retirement lifestyle planning focuses on aligning your money with your actual retirement dreams and daily activities. Without this planning, you may reach retirement financially prepared but emotionally and practically unprepared for the transition. At Covenant Wealth Advisors, we've seen it all too often. That’s why it’s essential to prepare in advance—proactively planning for your retirement lifestyle can help create a smoother and more fulfilling transition. Retirement lifestyle planning goes beyond traditional financial planning by mapping your actual day-to-day life in retirement, ensuring your money supports the experiences and activities you truly want. . Most wealthy individuals focus solely on accumulating assets but skip the crucial step of designing how they’ll actually live and spend their time in retirement, often overlooking how to maintain their current lifestyle once they stop working. Key Takeaways Retirement lifestyle planning focuses on designing your actual day-to-day life in retirement, not just accumulating money Most wealthy individuals have sufficient assets but lack a clear vision for how they’ll spend time and energy during retirement Goal setting is essential in retirement lifestyle planning, as it helps define clear objectives for your retirement, including lifestyle, legacy, and financial goals Lifestyle planning should begin 10-15 years before retirement to allow for gradual transitions and course corrections The process involves identifying core values, desired activities, relationships, and legacy goals Without lifestyle planning, retirees often experience depression, purposelessness, and relationship strain despite financial security Successful lifestyle planning requires ongoing adjustments as your priorities and circumstances evolve The integration of financial planning with lifestyle planning creates a more fulfilling and sustainable retirement experience  Table of Contents What Exactly Is Retirement Lifestyle Planning? Why Do So Many Wealthy Retirees Struggle Despite Financial Security? How Do You Begin Planning Your Ideal Retirement Lifestyle? Spending Time with Loved Ones: The Social Side of Retirement Maintaining Mental Health and Emotional Well-being Staying Active and Engaged: Hobbies, Fitness, and Community What Are the Most Common Lifestyle Planning Mistakes? How Much Should Your Lifestyle Influence Your Financial Strategy? Frequently Asked Questions Conclusion Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. What Exactly Is Retirement Lifestyle Planning? Retirement lifestyle planning  is the systematic process of designing your post-career life around your values, interests, and relationships rather than just your financial capacity. Unlike traditional retirement planning that focuses primarily on accumulating sufficient assets, lifestyle planning starts with your vision for how you want to live and works backward to create the financial and practical framework to support that vision. The process involves several key components. First, you identify your core values and what gives your life meaning. Take time to reflect on your values and priorities when designing your retirement lifestyle. Second, you envision how you want to spend your time, including work, hobbies, travel, and relationships. Goal setting is crucial here, as it helps clarify your retirement vision and define the objectives you want to achieve. Third, you consider practical matters like housing, healthcare, and geographic preferences. Finally, you integrate these lifestyle elements with your financial strategy to create alignment. ”Most of our clients come to us thinking they need a certain dollar amount to retire,” explains  Megan Waters, CFP® at Covenant Wealth Advisors in Richmond, VA . “But when we dig deeper, we discover many individuals haven’t thought about what they actually want to do with their time or how they want to feel in retirement. The money is just a tool to support their vision.” This approach differs significantly from traditional retirement planning. Traditional planning typically starts with retirement calculators and withdrawal rates. Lifestyle planning begins with questions like: What activities energize you? What relationships matter most? What legacy do you want to create? How do you want to contribute to your community? The lifestyle planning process also addresses the emotional and psychological aspects of retirement. Many successful professionals derive significant identity and purpose from their careers. Lifestyle planning helps you develop new sources of meaning and structure before you retire. Pro Tip:  Start by writing a detailed description of your ideal retirement day, from morning to evening. This exercise is an example of how to begin the retirement lifestyle planning process and often reveals preferences and priorities you hadn’t consciously considered. Get started by downloading our Master List of Retirement Goals. Why Do So Many Wealthy Retirees Struggle Despite Financial Security? Financial security doesn’t automatically translate to retirement satisfaction. As more people enter retirement, a growing number are experiencing challenges that go beyond money. Many retirees experience what researchers call “ retirement syndrome ” – a combination of depression, anxiety, and loss of purpose that occurs despite having adequate financial resources.  This phenomenon affects an estimated 25-30% of retirees , with higher rates among previously high-achieving professionals. While managing finances is important, focusing only on finances can leave retirees unprepared for the emotional and lifestyle aspects of retirement. The primary reason for this struggle is the lack of intentional life design . Most successful individuals spend decades building their careers and accumulating wealth but give little thought to what comes after. They assume that financial freedom automatically equals life satisfaction, but retirement requires different skills and mindsets than career building. Identity loss represents another significant challenge. When you’ve defined yourself by your professional achievements for 30-40 years, retirement can feel like losing a fundamental part of who you are. Without a clear sense of purpose and structure, many retirees feel adrift and purposeless. Relationship dynamics often shift dramatically in retirement as well. Couples who functioned well while both were working may struggle when they’re together 24/7 . Adult children may resist their parents’ increased involvement in their lives. Social connections based on work relationships may fade without professional context. The abundance of choice in retirement can also be overwhelming. When you can do anything, deciding what to do becomes paralyzingly difficult. This is particularly true for high-achievers who are accustomed to clear objectives and measurable progress. Physical and mental health challenges compound these issues. The stress of major life transitions can trigger health problems , and the loss of structure can lead to declining physical fitness and mental sharpness . Many retirees underestimate how much their work routine contributed to their overall well-being. How Do You Begin Planning Your Ideal Retirement Lifestyle? Starting your retirement lifestyle planning requires a systematic approach that balances dreaming with practical planning. The process begins with deep self-reflection about your values, interests, and aspirations. This isn’t about creating a bucket list but rather understanding what gives your life meaning and satisfaction. Begin by conducting a  values assessment . What matters most to you: family time, intellectual stimulation, creative expression, community service, adventure, or spiritual growth? Your retirement lifestyle should align with and amplify these core values. Many people discover that their true values differ from what they assumed during their working years. Next, envision your ideal retirement across multiple dimensions. Consider your daily routine, seasonal patterns, and long-term goals. Where do you want to live? How do you want to spend your time? What relationships do you want to prioritize? What new experiences do you want to pursue? What legacy do you want to create? Don’t be afraid to explore new ideas for your retirement lifestyle—sometimes an off-the-wall idea can lead to the perfect plan. Mark Fonville, CFP® at Covenant Wealth Advisors in Richmond, VA , emphasizes the importance of practical considerations: “We encourage clients to think beyond the vacation phase of retirement. What will you do when you’re 75 or 80? How will you maintain purpose and connection as you age? These questions help create a more comprehensive and realistic retirement vision.” Create a detailed lifestyle budget that goes beyond basic living expenses. Include costs for hobbies, travel, entertainment, gifts, and unexpected opportunities. Many wealthy retirees underestimate their spending in these areas because they’ve been too busy working to fully explore their interests. Test your retirement vision through trial runs. Take extended vacations to places you’re considering for retirement. Volunteer for causes you might want to support. Pursue hobbies you’ve always wanted to try. These experiences provide valuable data about what you actually enjoy versus what you think you’ll enjoy. One benefit of experimenting with different activities before fully retiring is that you can refine your plans and make more informed decisions about your future lifestyle. Pro Tip:  Create a “retirement budget” that includes not just expenses but also time allocation. How will you spend your 40-50 hours per week of newly available time? Spending Time with Loved Ones: The Social Side of Retirement One of the most rewarding aspects of a fulfilling retirement lifestyle is the opportunity to spend more quality time with loved ones. After years of balancing work and family, retirement offers the chance to reconnect and strengthen relationships with family and friends. However, many retirees find that leaving the workplace can also mean losing the daily social connections that came with their job. To maintain a vibrant social life, it’s important to be intentional about nurturing these relationships. Consider making regular plans with family—whether it’s weekly dinners, monthly outings, or annual vacations. Scheduling time with friends, joining group activities, or even volunteering together can help maintain strong social connections and provide a sense of community. These shared experiences not only enrich your retirement lifestyle but also support your mental health and overall well-being. Don’t overlook the practical side of staying connected. Travel expenses to visit children, grandchildren, or friends can add up, so it’s wise to include these costs in your retirement plans. A financial professional can help you account for these expenses, ensuring your retirement adjustment is smooth and your social life remains active. By prioritizing relationships and planning for the associated costs, you can create a retirement lifestyle that’s both emotionally and financially fulfilling. Maintaining Mental Health and Emotional Well-being A truly enjoyable retirement lifestyle goes beyond financial security—it also means taking care of your mental health and emotional well-being. Retirement is a major life transition, and it’s normal to experience a mix of emotions, from excitement to uncertainty. To support your well-being, make it a priority to engage in activities that bring you joy and a sense of purpose. Staying connected with others is a powerful way to boost mental health. Whether it’s joining a community group, participating in local events, or simply spending time with friends and family, social connections are essential for happiness and resilience as you age. Pursuing hobbies, spending time in nature, or volunteering can also provide fulfillment and help you maintain a positive outlook. It’s important to be proactive about your health as you get older. Regular exercise, a balanced diet, and mental stimulation can help reduce the risk of age-related issues like cognitive decline or depression. If you notice changes in your mood or mental health, don’t hesitate to seek support from professionals or community resources. By making your mental health a central part of your retirement lifestyle, you’ll be better equipped to enjoy this new chapter and maintain your overall well-being. Staying Active and Engaged: Hobbies, Fitness, and Community An active and engaged lifestyle is a cornerstone of a fulfilling retirement. With more free time, retirees have the perfect opportunity to explore new interests, revisit old passions, and become more involved in their communities. Whether you’re interested in painting, gardening, learning a new language, or playing music, pursuing hobbies can add excitement and meaning to your daily routine. Physical activity is equally important for maintaining both mental health and physical well-being. Consider incorporating regular exercise into your retirement plans—activities like walking, swimming, yoga, or group fitness classes can help you stay healthy and energized. Community involvement, such as volunteering, joining clubs, or participating in local events, not only keeps you active but also fosters a sense of belonging and purpose. When planning your retirement lifestyle, remember to factor in the costs of staying active and engaged. Expenses like gym memberships, class fees, or hobby supplies can add up, so it’s wise to work with a financial professional to align these interests within your retirement plans. By prioritizing activity and engagement, you’ll set the stage for a retirement that’s both enjoyable and rewarding. What Are the Most Common Lifestyle Planning Mistakes? The most frequent mistake in retirement lifestyle planning is waiting too long to begin the process. Many people start thinking seriously about their retirement lifestyle only months before they retire, leaving insufficient time to make necessary adjustments or prepare emotionally for the transition. While many plan to retire at a certain age, unexpected circumstances may require them to adjust their plans.  Ideally, lifestyle planning should begin 10-15 years before retirement. But, if you've passed that window, start now. What's important is that you think about your lifestyle before you actually retire in the first place! Another common error is planning retirement as a permanent vacation. While relaxation and recreation are important, most people need more structure and purpose than constant leisure provides.  The initial honeymoon phase of retirement typically lasts 6-18 months , after which many retirees crave more meaningful activities and challenges. Underestimating the importance of social connections represents another significant mistake. Work provides built-in social interaction and professional relationships. Without intentional planning, many retirees find themselves isolated and lonely. Successful retirement lifestyle planning includes strategies for maintaining and developing new social connections. Many couples make the mistake of assuming they’ll automatically enjoy spending significantly more time together in retirement. While some couples thrive with increased togetherness, others need space and individual pursuits. Failing to discuss and plan for these dynamics can create unexpected relationship stress. Financial integration errors are also common. Some people create elaborate lifestyle plans without considering the financial implications, while others let financial constraints completely dictate their retirement vision. The most successful approach involves iterative planning where lifestyle goals and financial resources are balanced and adjusted together. Perfectionism can paralyze the planning process. Some individuals spend years trying to create the perfect retirement plan instead of starting with a good plan and adjusting as needed. Retirement lifestyle planning should be viewed as an ongoing process rather than a one-time decision. Finally, many people fail to consider their evolving needs and capabilities. A retirement lifestyle that works at 62 may not work at 75 or 85. Successful planning includes flexibility and contingency planning for different life stages and circumstances. It's also important to have a plan in case you need to retire earlier than expected, as unforeseen events can force a change in your retirement timeline. How Much Should Your Lifestyle Influence Your Financial Strategy? Your desired retirement lifestyle should significantly influence your financial strategy, but the relationship should be bidirectional. Your lifestyle goals inform your financial planning, while your financial reality may require lifestyle adjustments. The key is finding the right balance between dreams and practicality. Start by quantifying your lifestyle vision. If you want to travel extensively, research actual costs for the types of trips you envision. If you plan to pursue expensive hobbies, get realistic estimates for equipment, instruction, and ongoing expenses. If you want to support family members or charitable causes, factor these goals into your financial projections. Consider the timing of your lifestyle goals. Some retirement activities are more expensive in the early years (adventure travel, active hobbies) while others may increase with age (healthcare, assistance with daily living). Your financial strategy should account for these changing expense patterns throughout retirement. Plan when you will access different investments or retirement funds to support your lifestyle at various stages, ensuring you have the right resources available as your needs evolve. Geographic arbitrage can significantly impact your lifestyle possibilities. Your retirement dollars may stretch further in certain locations, potentially funding a more luxurious lifestyle or extending your financial security. However, don’t let cost considerations completely override your lifestyle preferences. The  sequence of returns risk  becomes particularly important when lifestyle planning drives higher early retirement spending. If you plan to front-load your retirement with expensive activities, you’ll need larger cash reserves and a more conservative early withdrawal strategy to protect against market volatility. Tax planning should also align with your lifestyle goals. If you plan to be in a higher tax bracket in early retirement due to increased spending, it may make sense to accelerate  Roth conversions  or other tax-planning strategies while you’re still working. Pro Tip:  Create three lifestyle scenarios (conservative, moderate, and ambitious) with corresponding financial requirements. This approach provides flexibility while ensuring you have a realistic baseline plan. Not Sure If You're Making the Right  Retirement Decisions? Schedule a free Strategy Session  to discuss your situation and get honest answers. What's keeping you up at night  about retirement How we approach tax planning, income, and investments  differently Whether we're the right fit —or if you're better off on your own No pressure. No obligation. Just an honest conversation. Frequently Asked Questions Q: How much money do I need to support my desired retirement lifestyle? A:  The amount depends entirely on your specific lifestyle vision, but most financial advisors recommend having 10-12 times your annual expenses saved by retirement.  Start by creating a detailed budget for your desired retirement lifestyle, then work backward to determine the required savings. Remember to account for inflation, healthcare costs, and taxes when calculating your needs. Q: What if my spouse and I have different retirement visions? A: Conflicting retirement visions are common and require open communication and compromise. Schedule regular conversations about your individual dreams and concerns. Consider creating separate budgets for individual pursuits while maintaining a joint budget for shared goals. Professional counseling or financial planning sessions can help facilitate these discussions. Q: Should I pay off my mortgage before retiring? A: This depends on your overall financial situation and lifestyle goals. If having a mortgage payment stresses you or limits your retirement activities, paying it off may be worth it even if it's not mathematically optimal. Consider your interest rate, tax situation, and how the payment affects your desired lifestyle when making this decision. Q: What if I get bored in retirement? A: Boredom is a common concern, especially for high-achievers. Combat this by maintaining some structure in your schedule, pursuing challenging activities, and continuing to learn new skills. Consider setting goals for your retirement years, whether they're related to fitness, travel, creativity, or service to others. Q: How do I handle the loss of identity when I retire? A: Identity transition is one of the most challenging aspects of retirement. Begin developing interests and relationships outside of work before you retire. Consider how your professional skills might transfer to volunteer work or hobbies. Many people find that retirement allows them to explore aspects of their personality that were suppressed during their working years. Q: Should I move to a different location for retirement? A: Moving can be a positive change if it aligns with your lifestyle goals and financial situation. Consider factors like cost of living, climate, proximity to healthcare, social connections, and activities. Try extended visits to potential locations before making a permanent move. Remember that you can always move again if your first choice doesn't work out. Q: How do I plan for   healthcare costs in retirement ? A:  Healthcare costs can be substantial in retirement, potentially consuming about 15% of your income.  Research Medicare options and supplement insurance well before you retire. Consider long-term care insurance and health savings accounts if eligible. Factor geographic location into your healthcare cost planning, as costs vary significantly by region. Q: What if the stock market crashes right before or during my retirement? A: This scenario, known as  sequence of returns risk , is a major concern for retirees. Mitigate this risk by maintaining 2-3 years of expenses in cash, using a conservative withdrawal strategy, and maintaining flexibility in your spending. Consider delaying retirement or working part-time if markets are unfavorable when you planned to retire. Q: How much should I plan to spend on travel and hobbies in retirement? A: This varies greatly based on your interests, but many financial advisors suggest  budgeting 5-10% of your retirement income for discretionary activities like travel and hobbies . Front-load these expenses in your early retirement years when you're more likely to be active and healthy. Create specific budgets for your planned activities to foster realistic expectations. Conclusion Retirement lifestyle planning transforms retirement from a financial finish line into a purposeful life design project. The most successful  retirees are those who invest  as much time and energy in planning how they'll live as they do in planning how they'll pay for it. This planning process requires honest self-reflection, practical research, and ongoing adjustments as your circumstances and priorities evolve. The integration of lifestyle planning with financial planning creates a more holistic and satisfying retirement experience. Rather than simply accumulating assets and hoping for the best, you can create a retirement that reflects your values, supports your relationships, and provides ongoing meaning and purpose. The key is starting early, remaining flexible, and viewing retirement as an opportunity for growth rather than just an endpoint. Remember that retirement lifestyle planning is not a one-time event but an ongoing process. Your vision may change as you age, experience new things, or face unexpected challenges. The most important step is simply beginning the conversation with yourself and your loved ones about what you want your retirement to look like. Would you like our team to just do your retirement planning for you? Contact us today for a free Strategy Session experience. Our comprehensive approach integrates lifestyle planning with financial strategy to help your retirement vision become reality. About the author: Scott Hurt, CFP®, CPA Senior Financial Advisor Scott is a Financial Advisor for Covenant Wealth Advisors, a CERTIFIED FINANCIAL PLANNER™ practitioner and a Certified Public Accountant (CPA). He has over 17 years of experience in the financial services industry in the areas of financial planning, tax planning, and investment management. Schedule your free Strategy Session today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

EXECUTIVE SUMMARY This week's Retirement Brief offers critical insights for high-net-worth investors navigating an evolving retirement landscape. From the revolutionary "90+ rule of retirement"  that challenges conventional planning wisdom to Medicare's surprisingly stable 2026 outlook , we're seeing significant shifts in how affluent retirees should approach their golden years. As October tax deadlines  approach and cyber threats against seniors escalate—with $4.8 billion lost to fraud in 2024 alone —proactive planning has never been more essential. Meanwhile, savvy retirees are discovering that strategic travel hacking  can transform bucket-list adventures from prohibitively expensive to surprisingly affordable. These articles provide the actionable intelligence you need to optimize your financial security, protect your assets, and maximize the quality of your retirement years. Wishing you a thoughtful and rewarding read this weekend. This Week's Essential Reading for High-Net-Worth Individuals Age 50+ The 90+ Rule of Retirement: Live Long and Prosper (Kiplinger) The traditional retirement planning playbook is being rewritten as advances in medicine and longevity research suggest many of today's retirees could easily live into their 90s or beyond. This fundamental shift demands a complete rethinking of every major retirement decision—from investment allocation to Social Security timing. The article introduces the "90+ rule," which advocates planning every financial move with the assumption you'll live past 90. This isn't pessimism; it's prudent preparation. The implications are profound: working even three to six months longer can boost retirement income as much as increasing contributions by 1% annually over 30 years. Financial advisors emphasize maintaining equity exposure for inflation protection, as many retirees actually increase spending post-retirement rather than scaling back as once assumed. Perhaps most critically, the piece highlights the importance of delaying Social Security until age 70 when possible. For someone with a $2,000 monthly benefit at age 67, waiting until 70 could increase it to $2,480—an extra $480 per month that, compounded over a 25-year retirement with cost-of-living adjustments, represents hundreds of thousands in additional lifetime income. The message is clear: if you're planning to live long, plan accordingly. Medicare 2026 Update: Premium Costs, Benefits, and Plan Options (Newsweek) In a rare piece of positive news for the 65 million Americans relying on Medicare, the Centers for Medicare and Medicaid Services announced that premiums for Medicare Advantage and Part D prescription drug plans will actually decrease in 2026. This stability stands in stark contrast to the premium spikes affecting commercial health insurance. Average monthly Medicare Advantage premiums are projected to drop from $16.40 in 2025 to $14 in 2026, while standalone Part D premiums will fall from $38.31 to $34.50. The annual out-of-pocket maximum for Part D will rise modestly to $2,100 from $2,000, but overall the news is encouraging for retirees on fixed incomes. Access remains robust, with over 99% of beneficiaries having access to at least one MA plan and 97% having access to ten or more options. The Medicare Open Enrollment period runs from October 15 through December 7, 2025, providing a critical window for beneficiaries to review and potentially switch plans. Healthcare experts emphasize the importance of comparison shopping during this period, as many beneficiaries stay in suboptimal plans despite better options being available. High-net-worth individuals should be particularly mindful of the "Medicare Advantage trap"—switching back to traditional Medicare can become prohibitively expensive for those with chronic conditions due to risk-rated Medigap premiums. October Tax Reminders & Year-End Financial Moves (Wedbush Securities) October represents a critical inflection point for tax planning, with the October 15th extension deadline looming for 2024 returns and year-end 2025 tax optimization opportunities still within reach. This timely advisory from Wedbush Securities highlights both immediate action items and strategic planning moves that can significantly impact your tax liability. For those who filed extensions, October 15, 2025 is the absolute deadline to submit 2024 federal returns—missing it triggers failure-to-file penalties and interest charges that compound quickly. Beyond this immediate concern, the piece emphasizes leveraging the One Big Beautiful Bill tax legislation passed in mid-2025, which introduced increased standard deductions and new provisions including qualified overtime deductions and auto loan interest limits. The strategic opportunity lies in year-end planning: maximizing retirement account contributions before December 31st, particularly for those over 50 who can take advantage of catch-up contributions. For high-net-worth investors, this is the time to review portfolio allocations in light of recent inflationary pressures and interest rate shifts, harvest tax losses to offset gains, and ensure optimal positioning for 2026. The message is clear: October's deadlines are just the beginning—proactive planning now prevents costly surprises later. Senior Cyber: Best Security Practices for Your Golden Years (Cybersecurity Ventures) The statistics are sobering: seniors aged 60 and over collectively lost $4.8 billion to internet fraud in 2024, according to the FBI's Internet Crime Complaint Center. As cybercriminals increasingly target older adults—who statistically have substantial savings, may be less tech-savvy, and tend to be more trusting—cybersecurity has become an essential component of retirement planning. This newly released guide, "Senior Cyber: Best Security Practices for Your Golden Years," along with its companion 40-minute video, addresses the alarming reality that seniors face disproportionate targeting by online criminals. The resource covers everything from basic internet security to the critical issue of healthcare privacy protection—particularly important for the aging population managing sensitive medical information online. The timing couldn't be more critical as October is National Cybersecurity Awareness Month. From phishing scams and tech support fraud to sophisticated social engineering attacks, the threats are evolving rapidly. For affluent retirees, the stakes are even higher—protecting substantial assets requires constant vigilance, strong password practices, two-factor authentication, and a healthy skepticism toward unsolicited communications. The fundamental message: in the digital age, cybersecurity isn't optional—it's an essential wealth preservation strategy. The 10 Best Travel Hacks Every Active Retiree Should Know (Kiplinger) While 70% of seniors plan to travel in retirement, 45% cite cost as their biggest barrier, according to a 2025 AARP national poll. This comprehensive guide shatters that barrier with ten proven strategies that can slash travel costs by 20-50% without sacrificing quality or experiences. The tactics range from maximizing senior discounts—including the $80 lifetime National Parks pass for those 62+—to strategic timing like traveling off-season for 20-40% savings on airfare and accommodations. One particularly compelling strategy for retirees: extended stays. Monthly apartment rentals through Airbnb or Vrbo often come with 20-50% discounts compared to weekly rates, and when you're retired, why rush? You can cook your own meals, truly immerse yourself in a destination, and dramatically reduce per-day costs. Technology becomes a powerful ally through apps like Kayak and Momondo for price comparisons, while group tours from operators like Road Scholar offer bulk discounts plus the social benefits of traveling with like-minded peers. The piece also covers often-overlooked savings opportunities like credit card rewards programs specifically designed for retirees, travel insurance that can prevent financial disasters, and even creative options like home swapping or volunteering for conservation projects that provide free accommodations. The bottom line: with smart planning, the world remains accessible even on a retirement budget. Final Thoughts This week's readings underscore a fundamental truth about modern retirement: longevity is both a blessing and a planning imperative. The convergence of extended lifespans, evolving healthcare costs, sophisticated cyber threats, and the desire for enriching experiences demands a more comprehensive and proactive approach to retirement planning than previous generations required. Whether you're recalibrating your portfolio for a potential 30+ year retirement, navigating Medicare's complexities, safeguarding your digital assets, or optimizing your travel budget, the common thread is clear—informed, strategic decision-making today creates security and opportunity tomorrow. The retirees who thrive in their 90s won't be those who simply hoped for the best, but those who planned for it. We hope you enjoyed this week's reading. Have thoughts on these articles or suggestions for future topics? We'd love to hear from you. Maintaining financial security up to and through retirement can be hard. Would you like to just have our team do your retirement planning for you? Request a free Strategy Session today! Wishing you a wonderful weekend, About the author: Mark Fonville, CFP® CEO and Senior Financial Advisor Mark is the CEO of Covenant Wealth Advisors and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine. Schedule your free Strategy Session today   Disclosures:  Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER ™ professional  with the assistance of AI.  No  advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.