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If you are age 50 plus, you might be thinking about how to create tax free income in retirement. Get your Retirement Checklist of over 30 things that you need to think about for your retirement. Well, there are a lot of strategies to help you get there. Finding out how to maximize your Roth IRA contributions can be a great start. Get in Touch With Us Mark Fonville, CFP® Mark has over 18 years of experience helping individuals and families invest and plan for retirement. He is a CERTIFIED FINANCIAL PLANNER™ and President of Covenant Wealth Advisors . Schedule a free intro call with Mark

While market downturns can be unnerving for any investor, they can be devastating for retirees who have begun spending down investments and must sell depleted shares of stock. If the market rebounds, those shares are no longer there. A string of bad years early in retirement, called sequence-of-return risk, can devastate a portfolio. So how to help protect against sequence of return risk? Barron's magazine, Neil Templin, interviewed Mark Fonville to help contribute to this article: How a Cash Stash Can Help Retirees Keep Peace of Mind, if Not Portfolio

Outliving a retirement nest egg is retirees’ #1 fear. That’s understandable. You have saved your entire working life to build it, and you know that the idea of going back to work in your golden years could be undesirable, or even impossible. That makes withdrawal planning a critical aspect of your retirement portfolio. Perhaps the most well-known withdrawal strategy is the 4% rule. Download Now: Master List of Retirement Goals to Consider [New for 2021] In this article, we will look at how the 4% rule works and provide some guidance for you to consider if it is the best strategy to optimize your retirement savings. We want to help make sure you enjoy retirement without outliving your money. What's The 4% Rule? An inherent problem in retirement planning is that you don’t know exactly how long you will live after you retire. If you did, planning your retirement spending would be significantly easier because you’d know how many years your money needed to last. But since that isn’t the case, we must incorporate that uncertainty into our withdrawal plans. The 4% rule is one way of approaching this variable. It is based on a comprehensive retirement withdrawal study conducted by William Bengen in 1994 . Bengen wanted to know was how much a retiree could plan to withdraw each year, as a percentage of their portfolio, without running out of money (regardless of the unknown future performance of markets or the economy). We’ll spare you the gritty details, but essentially what Mr. Bengen discovered was that historically, there was not a single 30-year period in which a retiree would have depleted their portfolio (if managed prudently) if they withdrew 4% in the first year of retirement and adjusted their withdrawal for inflation every year after. Thus, the “4% rule” has become a staple of retirement income planning as a safe withdrawal rate, and many retirees use it as a starting point. As an example, suppose a retiree has a $1,000,000 nest egg. In the first year of retirement, their initial withdrawal is $40,000. If the inflation rate for the year is 3%, then the next year’s withdrawal would be $41,200. Critical Limitations of the 4% Rule Now that you’re familiar with the basics of the 4% rule, it’s time to dig a little deeper to point out where the study falls short in practice. While the study is valid, it's just a rule of thumb based on a specific set of factors. It’s important to be aware of these parameters because you may need or want to adjust your own withdrawal plan and planned withdrawal rate based on how your situation differs from the study’s assumptions. The 4% rule doesn't consider other sources of income Most people will have several retirement accounts as well as other income sources. Social Security benefits are the most common, but you may also have IRAs, real estate, part-time employment, annuity, or another pension. With these other sources of income, do you need to withdraw 4%? In some years you may need to withdraw much more and in others much less. The 4% rule is based on a 30-year retirement horizon. Perhaps the most glaring aspect of the study is that it assumes a 30-year retirement. Your family history, personal health, life expectancy, and age at which you retire weigh heavily on how long you will live in retirement and should be considered in your withdrawal plan. This also doesn't account for early retirement. Someone retiring in their early 50s will likely be in retirement longer than someone who waits until their mid-70s. The 4% rule assumes a specific portfolio mix of stocks and bonds. The study was conducted on portfolios whose asset allocations ranged from 50-80% in equities. You should build your own allocation that is best for you considering your risk tolerance, time horizon, and tax considerations. If your ideal allocation doesn’t fall within that range, your safe withdrawal rate would likely change. The 4% rule is based upon consistent spending. The rule assumed that retirees withdrew a consistent inflation-adjusted amount each year. But many retirees spend differently from year to year. I know our clients do. It’s typical for retirees to spend more in the early years, usually for travel or other big-ticket items like a move, than they do in later years. It's also important to note that cost of living increases each year, and that number isn't always consistent with inflation. You may get more out of retirement by planning for higher withdrawals in your first years rather than getting to your later years and realizing you’ve been too frugal. The 4% rule is based on historical market returns. Past returns can’t predict future investment returns. It's tricky to create a plan based on historical assumptions—especially considering market volatility. Market conditions change all the time—just take a look at the past year. Different downturns and high-points will impact your portfolio value, which should be considered when determining the appropriate withdrawal amount. Additionally, current interest rates are much lower than in Bergen’s study. Lower interest rates could mean lower withdrawal rates long-term. The 4% rule is rigid. Since the rule calls for a fixed inflation-adjusted annual withdrawal, there is no room for flexibility or creativity, especially with tax planning. A Customized Withdrawal Strategy Can Suit Your Retirement Plan The 4% rule is likely not a perfect fit for you, so what do you do if it doesn’t align with your situation? You can modify the rule or start from scratch to create a customized withdrawal strategy that incorporates all of your list of goals for retirement. A huge piece missing from the 4% rule is tax planning. Proactive tax planning is an integral component of our financial planning practice. Reducing taxes in retirement is key to making sure you get the most out of your retirement nest egg. You can do this by coordinating your savings withdrawals with Social Security or taking advantage of low tax years with Roth conversions. Is the 4% Rule Right For You? While the 4% rule contributed a great deal to retirement planning, its limitations signal that a custom plan could be better suited to meet your unique and changing needs throughout your golden years. A customized plan is often better than a rule of thumb. Our team is skilled and highly trained to craft customized retirement withdrawal strategies that are built to complement your needs and circumstances. Call us today to find out more about how we can help you. About Mark Fonville, CFP® Mark is the President of Covenant Wealth Advisors and a Certified Financial Planner ™ professional specializing in retirement income planning, tax planning, and investment management. He has been featured in the New York Times, Barron's, Kiplinger Magazine, and the Chicago Tribune. Learn more Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place.

Leaving your current employer requires much more than putting in your two weeks, packing up your desk, and having a parting happy hour with peers. You need to decide what to do with your 401(k)—leave it be, consolidate it with your new employer's plan, cash it out, or roll it over to an IRA. While all of these options have their merits, rolling over your 401(k) from your former employer to an IRA can offer investors more flexibility, customization, and room for growth. Download Free Cheat Sheet: Should I Rollover My Old 401(k)? Knowing how to rollover your 401 (k) to an IRA is just part of the puzzle. You'll also need to know the pros and cons of doing it in the first place. Here's how to rollover your 401 (k) to an IRA and many of the considerations you should think about before making it happen. Top Benefits of a 401(k) to IRA Rollover There are some potential advantages to rolling over your 401(k) into an IRA account. General Rollover IRA Benefits For starters, it can make your financial life simpler to manage. Having fewer accounts from consolidating old 401(k)s makes investment management more straightforward and helps streamline your withdrawal management in retirement—fewer accounts, fewer required minimum distributions (RMDs). Many IRAs provide far greater investment options than a typical 401(k) plan, giving you the ability to craft a well-diversified portfolio tailored to your needs. You can invest in nearly anything under the sun, from stocks and bonds to index mutual funds and ETFs, REITs, commodities, and more. These investment options offer more freedom for customized asset allocation for your risk tolerance and financial goals. Doing so can also be a nice catalyst to your retirement savings. Technical Rollover IRA Benefits Rollovers provide more technical benefits as well. Unless you have an exceptionally good 401(k), it’s entirely possible that you can lower your account fees by rolling over funds to an IRA. Investment fees are the antithesis of returns, so this particular benefit can make a substantial difference. However, fees aren’t everything in this decision. It can make sense to roll your 401(k) over even if the IRA fees are higher than your 401(k). Why? Perhaps the investment choices provides greater financial opportunities. Having an IRA can also make it much easier to manage Roth conversions . With both a traditional and Roth IRA at the same custodian, it’s straightforward to accomplish. Housing IRAs at the same custodian also opens the door to implement an asset location strategy along with your Roth conversions. An example could be placing your income-generating assets in the traditional IRA, where they would be taxed at regular income tax rates anyway, and your high-growth assets like stocks in the Roth IRA, to grow tax-free. IRAs also give you a significant charitable benefit over 401(k)s. The IRS allows you to make a Qualified Charitable Distribution of up to $100,000 tax-free from your IRA to donate to a qualified charity. A QCD can even count as your annual RMD. That benefit doesn’t exist for 401(k)s. Finally, having an IRA may make it easier to consult with a professional advisor and allow them to manage your account per your financial plan. It can be difficult—sometimes impossible—to defer management to an independent advisor with a 401(k). Should You Invest In a Traditional or Roth IRA? Not all Individual Retirement Accounts are created equal—so which should you choose? As with most financial questions, there isn’t a universal answer. It depends on several factors unique to you. This free checklist can help you figure out if a Traditional IRA or a Roth IRA is best for you. But, we will address the key differences below. The Case For a Rollover to a Traditional IRA Perhaps the best part about investing in a traditional IRA is that you can rollover your 401(k) without incurring a tax penalty. Traditional IRAs and 401(k)s are both tax-deferred accounts, meaning they are funded with pre-tax dollars. If you’ve already paid taxes on your 401(k) contributions, you won’t have to pay them again when you roll them over to a traditional IRA. If you plan to make additional contributions to the IRA, a traditional IRA allows you to deduct them up to certain income limits. You will need to take required minimum distributions once you turn 72 and will owe ordinary income tax on any distributions you take. Why Consider Investing in a Roth IRA The most significant benefit of a Roth IRA is obvious: tax-free money in retirement. However, be mindful of any status difference between your 401(k) and Roth IRA. Unless you roll over a Roth 401(k), you'll need to pay taxes on the rollover, which could be costly. Knowing how to reduce taxes in retirement , both in the short and long-term, is critical to making this decision. Splitting The Difference You could also split your rollover between a Roth and a traditional IRA. The right choice for you is all about managing your tax rate, both now and in the future. If you're in a lower tax bracket now and anticipate being in a higher one later, prioritizing Roth dollars could go a long way. You can also switch later if your situation changes. If a traditional IRA makes the most sense to start, you can do a Roth conversion—converting traditional IRA funds to Roth IRA—later. Keep in mind that IRAs carry much smaller contribution limits than 401(k)s. You can contribute $6,000 with an extra $1,000 in catch-up contributions to your IRA in 2021. While a rollover can bypass these limits, it's worth noting that your monthly contributions to an IRA will be lower. Step by Step Guide To Rollover Your 401(k) to an IRA If you’ve decided that rolling your 401(k) into an IRA is the right decision, here is a step-by-step guide to getting you through the rollover process. Start by researching and selecting a new IRA custodian. There are several choices, and it can seem overwhelming. The main things to look for in a new financial institution are, Robust investment selection, Low fees, and User-friendly applications. We use both Charles Schwab and Fidelity with our clients and have been very happy with Fidelity’s service. They also have an easy-to-understand interface for seeing all of your balances and positions. Once you have picked a custodian follow these steps: Open an account with your new custodian. You’ll be prompted during the process to identify how you are funding the account, so make sure to select the rollover option. Contact your 401(k) plan administrator to initiate the rollover. Each firm has its own process, and you may be prompted to complete a few additional documents at this stage. Deposit money into the new account. The rollover may happen from custodian to custodian if you choose the direct rollover option. If you do an indirect rollover, the 401(k) provider could send you a check that you then have to deposit in the new account. A direct transfer is usually the better and simpler option. Start investing! On the surface, rolling over your 401(k) can seem easy. Unfortunately, there are a lot of "small" details that can cost you a lot of money if overlooked. If you want expert help, just contact us for help. Key Issues to Consider for Your 401(k) Rollover If you are thinking about rolling your 401(k) into an IRA, here are some additional points to consider. While these situations may not apply to you, it’s worth double-checking as the impact could be enormous. Before you initiate the rollover, identify any pre-tax or after-tax amounts in your 401(k). You’ll want to direct those to the appropriate account, whether it's a Roth or traditional. This is a significant point, and a qualified financial advisor such as Covenant Wealth Advisors can assist with sorting this information out and the mechanics of the rollover. It's also critical to seek out your tax advisor. If you plan to retire before 59 ½, be aware that some employers allow pre- 59 ½ withdrawals from the company retirement plan without an IRS early withdrawal penalty. An IRA does not allow this, so it may make sense to wait until you turn 59 ½ to initiate the rollover. If you hold company stock in your 401(k), make sure to consider any potential net unrealized appreciation (NUA). This can have HUGE tax implications and should be prioritized over a rollover. We would be happy to discuss this with you if you think it may apply. You have several decisions to make when you change jobs, managing your investments with your previous employer is one of them. While your new job may boast a lucrative retirement plan, it's worth evaluating whether or not an IRA rollover is the right move for you. Our advisors at Covenant Wealth want to help you maximize your entire investment strategy. For you, that might mean a 401(k) to IRA rollover. Since everyone’s situation is different, set up a call with our team to see if a rollover could be an advantageous strategy for you. We offer a free, no-obligation consultation to individuals age 50 plus who have over $1 million in investment assets. Scott is a Wealth Manager for Covenant Wealth Advisors and is a CERTIFIED FINANCIAL PLANNER™ (CFP © ) practitioner and a Certified Public Accountant (CPA). Scott has over 16 years of experience in the financial services industry and specializes in helping individuals age 50 plus with over $1 million in investment assets. Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place.

Most people have a pretty good idea of what they want their retirement to look like by the time they hit their 40s. For some, it means leaving work before 60, with plenty of time to golf, fish, travel, and follow your passions. For others, it means pursuing your career as long as possible, then sharing your time and resources with family, friends or a favored charity. Get your Retirement Checklist of over 30 things that you need to think about for your retirement. Whatever your ideal retirement looks like, if you’ve planned carefully, it should be the stage of life when your money and your values align—and that happens at different ages for different people. So, what age should you retire? Let’s start by looking at social security. Understanding Social Security Retirement Age Full retirement age for Social Security purposes is the age at which you can claim your full benefits whether you continue to work in retirement or not. If you retire before you reach full retirement age, your monthly check may be permanently lower than if you wait. Not only that, if you continue to work after you retire, Social Security can deduct a percentage of your salary from your monthly benefit check until you reach full retirement age. If you were born before 1937, your full retirement age is 65. For those born after 1960, you’re eligible for full retirement at 67. If you were born somewhere between 1937 and 1960, your full retirement age is somewhere in between (you can check yours with the Social Security Benefits Planner ). The Social Security full retirement age isn’t as important today as it was in the past, at least according to the Bureau of Labor Statistics. More seniors age 65 and over are working than at any time in the past 50 years, and it’s not because they can’t afford to retire. Nearly 11 million seniors , with a median net worth of nearly $1 million, have chosen to remain in the workforce well past age 65. Longevity may play a part: A person turning 65 today can expect to live at least another 20 years . Important milestones to keep in mind Seniors can elect to receive their Social Security benefits as much as 36 months before they reach full retirement age. However, the monthly benefit is permanently reduced by 0.55% for each month you collect Social Security before full retirement age. If your full retirement age is 65 and you begin collecting benefits at age 62 and 6 months, your monthly check will be reduced by about 17%. On the other hand, you can delay collecting Social Security until age 70 and permanently increase your monthly benefit by as much as 32%. There’s no advantage to delaying beyond age 70 because the increase tops out once you reach your 70th birthday. If you have an IRA or 401(k), you can take distributions without penalty once you reach age 59-½. If you take early distributions, they may be subject to a 10% penalty. If you use the money for a hardship, such as to pay health insurance premiums after a job loss, the withdrawal may be exempt from the penalty. Even if you continue to work past full retirement age, you can’t leave your money in your IRA or 401(k) indefinitely. Your required minimum distributions (RMDs) kick in at age 72 as of January 1st, 2020. When you turn 72, you need to take either a lump-sum withdrawal or schedule a series of withdrawals based on your date of birth, account balance and estimated annual return. When can you afford to retire? Your first step is calculating your income needs in retirement. It’s impossible to predict with certainty what you’re actual expenses will be, but most experts suggest you need between 70% and 85% of your income just before retiring to live comfortably after you leave work. It’s a good starting figure to create your retirement plan. Next, you need to estimate your guaranteed income. In 2020, the maximum monthly Social Security benefit at full retirement age is $3,011, or $3,790 if you delay benefits until age 70. If you’re married, your spouse can claim benefits based on his or her work history or 50% of your benefit, whichever is greater. You can get up-to-date estimates (and check the accuracy of your work record) by logging into your account on the Social Security website . Although the majority of retirees will depend on an IRA or 401(k) for income in retirement, some—mostly public employees—are entitled to pension payments. If you receive pension retirement benefits, you probably know what you’ll receive when you leave your job. If you’re married, it’s important to consider how your payout is structured. Most pensions offer a payout based solely on your life expectancy or a “joint and survivor” option that pays your surviving spouse after you die. If this is all beginning to seem overwhelming, you may benefit from a retirement cash flow analysis to give you a snapshot of where you are today and how your financial habits now will affect your retirement savings goal . Getting an accurate estimate of your income needs in retirement is essential; even small increases in your planned distributions can have a major impact on your nest egg. Check out the chart below showing the depletion date for a $1 million account based on different monthly distributions*: * Based on an annual rate of return of 4.5% in retirement, 3% annual inflation increase, and a 22% federal marginal tax rate. As you can see, if you underestimate your needs by just $1,000 a month, you lose four years of income. And if you’re not investing your retirement savings with an eye toward protecting and growing your capital, you could struggle to achieve 4.5% returns, depleting your nest egg even more quickly. What Age Should You Retire? 4 Ages to Consider for Retirement Your retirement savings strategy looks different depending on when you want to retire. Someone planning an early retirement is operating with an entirely different set of assumptions than someone planning to work until 70. As you’ll see, a lot of factors should be considered to help you decide what age you should retire. Retiring at age 55 In our experience, people who plan to retire before age 60 are typically very frugal in their financial habits. They save and invest aggressively right from the start because they understand their nest egg will have to sustain them for 30 years or more. In addition, they’ll need enough money tucked away in savings or brokerage accounts to cover all their expenses until they can start drawing down their IRAs and 401(k)s. They’ll also need to cover their health care costs for 10 years until Medicare kicks in. If you’re planning to retire early, you may want the equivalent of 10 years’ salary in your retirement accounts—at a minimum—before you leave work. Retiring at age 62 This is the earliest age you can begin taking Social Security benefits, but it’s not always in your best interests to do so. Let’s look at lifetime benefits for someone entitled to the maximum monthly payment in 2020*: * This table does not factor in potential cost of living increases in Social Security. If you’re in poor health and don’t expect to live to age 75, you come out ahead taking your Social Security benefits early. As the table illustrates, you don’t come out ahead delaying benefits to age 70 unless you live at least to age 90. You also need to factor in the additional depletion of your retirement account to cover your health insurance and income needs until you reach Medicare eligibility and you elect to take Social Security. Remember, if you continue to work, even part-time, your Social Security benefits may be lowered until you reach full retirement age. How much do you need to retire comfortably at age 62? That depends on your income needs, but you can check out our case study on early retirement with a $2 million portfolio to see how you might fare. Retiring at age 66 Unsurprisingly, most Americans choose to retire between age 63 and 66, when they reach full Social Security retirement age at 66 and 2 months. At 65, you’re eligible for Medicare, and as the table above illustrates. Additionally, you get a higher lifetime Social Security benefit by retiring at 66, unless you live past age 90, which is a definite possibility given today’s higher life expectancies. Retiring at age 70 Some people love working longer and see no reason to retire—and that’s perfectly okay! At this stage, there’s no reason to delay Social Security benefits because you’re already entitled to the maximum. You need to stay on top of your RMDs, however, because the penalties can be severe : 50% for every dollar not withdrawn on time. What if I’m not on track for my retirement goals? For some people, gaming out retirement scenarios is a real wakeup call. If you’re not on track to retire at your chosen age, there’s still time to make changes. Diversify your portfolio It’s easy to get into a set-it-and-forget-in mindset with your IRA and 401(k) investments, but that approach usually means you’re missing out on opportunities to grow your nest egg. Although the U.S. stock market has outperformed its global counterparts in recent years, that isn’t always the case: In six of the last 11 decades, the global market delivered better returns. Diversifying your portfolio to capture the growth potential in global and emerging markets may boost your returns and help you reach your retirement goals without significantly increasing your contributions. Make catch-up contributions If you haven’t maxed out your IRA and 401(k) contributions every year—and only 12% of U.S. workers do —you can take advantage of catch-up contributions after you reach age 50. Depending on the type of account, you may be able to contribute an extra $1,000 to $7,000 a year in catch-up contributions. These contributions not only get you closer to your retirement savings goals, but they also lower your taxable income, a win-win situation. Take advantage of health savings accounts HSAs are underrated as retirement savings vehicles, but they are one of the most advantageous accounts you can have. First, they are triple-tax advantaged: Contributions are not taxed, the money grows tax-free, and you pay no taxes on qualifying withdrawals. Plus, contributions rollover indefinitely; there are no RMDs on HSAs. Before age 65, tax-free withdrawals are limited to qualifying medical expenses, but once you reach age 65, you can withdraw the money tax-free for any reason at all. This is a huge advantage over distributions from traditional IRAs and 401(k)s, which are taxed as normal income. Roth IRAs get around the income tax requirement in retirement, but your contributions are taxed. HSAs are the most efficient savings vehicles from a tax perspective . If you’re eligible to open an HSA, you can contribute up to $3,500 a year for individuals, or $7,000 for a family. If you’re 55 or over, you can make additional $1,000 a year catchup contributions. Retiring Confidently As you can see, ” what age should you retire? ” isn’t an easy question to answer. At Covenant Wealth Advisors, our goal is to help you achieve your financial goals so you can enter retirement with the income you need to enjoy your life. Ultimately, avoiding running out of money is a major goal, but so is maintaining your lifestyle. We are one of the few fully independent, fee-only wealth management firms in the Richmond and Williamsburg area. We look forward to working with you to create a financial plan so you can retire confidently at whatever age you choose. Get in Touch With Us Mark Fonville, CFP® Mark has over 18 years of experience helping individuals and families invest and plan for retirement. He is a CERTIFIED FINANCIAL PLANNER™ and President of Covenant Wealth Advisors . Schedule a free intro call with Mark Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like accounting, tax or legal advice, you should consult with your own accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place.

Goals are the foundation of your financial plan. They help chart the course for your investments, daily habits, and your money outlook. But sometimes, your goals can start to feel too comfortable and you lose excitement and momentum toward reaching them. Download Now: Master List of Personal Financial Goals [New for 2021] We want to help you change that. Your financial goals shouldn't remain idle—lying dormant on a piece of paper or planning software. Instead, your goal-setting journey should be active and purposefully drive you forward while also informing your daily choices. The trick? Adhere to SMART guidelines for personal financial goals. What are SMART goals and how will this strategy transform the way you approach your money? Here's everything you need to know about SMART guidelines for personal financial goals. Breaking Down The S.M.A.R.T Acronym Daydreaming about your goals is just phase one. You can talk the talk all day long but with your goals, it’s also important to usher in phase two: walk the walk. SMART goals can help you do that. They bring intention, purpose, and meaning to each goal you set. Let's take a look at what each of these letters means. S: specific Ditch the general, here is where you can start to narrow down your goals and give them a purpose. Instead of saying your goal is to establish an emergency fund, you could say that your goal is to save $10,000 in a high-yield savings account. That's a specific goal. M: measurable SMART financial goals must be measurable, meaning you have to be able to track your progress. If saving $10,000 is one of your short-term goals, you need a strategy to ensure you're staying on track. Perhaps that's saving about $850 a month for a year. This gives you a benchmark to help with your monthly budgeting. A: achievable Your financial goals should be attainable. If you start saving for a downpayment on your retirement house today, odds are you won't reach that 20% mark within a year or two. The average home price in Richmond, VA is about $275,000 according to Zillow. You'd need about $55,000 for a 20% downpayment. If you're starting from scratch, make your house-hunting timeline more reasonable. R: relevant Personal finance is all about aligning your money with your life, and your goals are a significant part of that equation. Your savings goals should be relevant to both your short-term and long-term vision for your life. Perhaps in the short term, you want to get out of credit card debt. Offloading that bad debt will help boost your credit score and put you in a better position for when you want to buy your retirement house. Being debt-free is a relevant goal that puts you in a strong financial position. T: time-bound Time is an important element in financial planning. Your goals should have a timeline behind them as it can help you make progress and maintain motivation. Let's say you have a 10-year time frame until retirement. You and your advisor can make a plan to prepare and maximize your money during that time. Here is an example of a SMART goal for a young physician couple who wants to retire early. Specific: Retire by 50. Measurable: Create an active debt repayment plan and reallocate current spending to max out retirement opportunities from the start. Build a withdrawal plan that supports early retirement by avoiding early withdrawal penalties and investing tax-efficiently. Achievable: This is a high-earning field (physician) that allows them to save aggressively early on and live below their means to achieve this goal. Relevant: Retiring early is important for their future lifestyle as they want to travel and focus on creating experiences. Time-bound: The couple has 20 years to amass their desired retirement number. You can apply this formula to any short or long-term financial goal you have: retirement, paying for your kid’s college, creating a career you love, leaving a legacy, etc. Knowing your goals will help you make more informed and intentional financial decisions to help you reach your desired outcome. We have a master goal document that we walk through with clients to help them start to think more deeply about the different goal categories that are part of their financial lives. Set up a call with us and we can walk through it together. Create Intentional Retirement Goals Saving for retirement, especially the amount needed to support your ideal lifestyle, won't be a simple task. One thing that can help is setting specific and intentional goals about what you envision your retirement plan to look like. Where do you want to live? How will you spend your time? Where will you find meaning and fulfillment? Do you want to work? How will volunteering or charity work fit into your plans? The more specific you can be, the better because then we can make your plan even more tailored. Think about it like this, there is a huge difference between buying something pre-packaged or something you get to customize, the latter is nearly always more favorable. The example of the physician couple who wants to retire at 50 will need a different plan than a couple who wants to start a business together later in life. Each will require different investing, withdrawal , spending, and tax planning considerations. When it comes to retirement, it’s all about balancing your ideal life with the resources you need to help you get there. Consider Your Asset and Debt Goals There are two essential components to wealth building: create an investment plan and eliminate your debt. Take some time to create goals tailored to this category of your financial plan. What are your investment goals? (retirement, vacation, building a dream house, education costs for kids, etc.) Are your allocations properly-suited to help you reach those goals? Is there refinancing or consolidation opportunities for your mortgage, credit cards, student loans, and other debt? When would you like to see all of your debt paid off? What lifestyle shifts may you need to make to reach that goal? Remember, creating your goal is just step one. There are several action items (some long-term some short-term) that come after to help you get there. If one investment goal is to save up for building your dream house, you’ll likely need several years to amass enough to afford real hardwoods and a marble slab backsplash. Think Through Estate Planning and Wealth Transfer Estate planning is an essential component of your wealth plan, and as such, you want to handle it with thoughtfulness and care. Your financial advisor can help you shape your vision for your estate plan . How would you define your legacy? Do you have hopes and wishes for your estate and your beneficiaries? How can you best protect your wealth as it passes to the next generation? What are your best options for wealth transfer? There are several ways that you can fortify your estate plan as your assets change hands. Our team can help ensure that the right people efficiently receive the right assets. We can help you consider the differences in value, taxes, etc. for each account to make sure you and your loved ones can make the most of any potential inheritance. Set Family and Lifestyle Goals Your financial goals and personal goals are inextricably linked. Think through the personal and professional goals on the horizon. Do you hope to start or add to your family? Will you want to save for major events like a wedding or school? Would you like to move or purchase a vacation house? How do you see your career progressing? What additional education or certifications will you need to pursue those dreams? Do you want to open your own business? These are exciting conversations that you can talk through with your family and your advisor. We can then take your goals and map out a way to help you bring them to life. Your Advisor Should Know Your Goals and Help Make Them Achievable It’s not enough that your financial advisor is aware of your short and long-term goals. They should help you make smart and strategic plans to take productive steps toward those goals. Our team loves crafting unique and tailored strategies to help you live your dream life. We’d love to help you put your goals into action. Get in touch with us to learn more! About Mark Fonville, CFP® Mark is the President of Covenant Wealth Advisors and a Certified Financial Planner ™ professional specializing in retirement income planning, tax planning, and investment management. He has been featured in the New York Times, Barron's, Kiplinger Magazine, and the Chicago Tribune. Learn more Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place.

Estate planning may conjure images of a lawyer's office and mountains of paperwork. While your estate planning attorney is an essential professional, your financial advisor can also play a significant role in helping you create an estate plan that truly reflects your resources, goals, values, and legacy. The estate planning process comes with many moving pieces: legal liabilities, tax considerations, and financial elements. This makes it essential that you, your advisor, attorney, and tax professional are all on the same page. Coordination in estate planning is key! Your financial advisor should play a central role in crafting your estate plan. They can help you understand your financial goals and wishes and empower you to build a plan that lets your legacy shine. Today, we’ll explore five essential ways your financial planner can help you with your estate plan. Download Now: Key Issues to Consider Before You Retire [Free Access] Help You Build A Foundation Let's face it, the legal system is far from simple. Sometimes it can be difficult to make the association between a legal estate planning document and your specific plan. Your advisor can help you make those valuable connections each step of the way. Since an estate plan is one part of your total wealth strategy, it makes sense to have a comprehensive financial advisor involved to ensure consistency with your financial plan. An estate attorney may not consider your investments, and a life insurance agent may not think about taxes, for example. When you work with a comprehensive financial advisor, such as Covenant Wealth Advisors, the financial and personal impact on other important areas like taxes and insurance are considered with the investments as one integrated picture. Having an advisor in your corner will establish a foundation that you can build the rest of your plan on. Ensure Beneficiaries and Titles Are Updated Estate beneficiary designations must be kept current. As major life events unfold (e.g. divorce, remarriage, death of a previous beneficiary), updates to beneficiaries are needed. Your advisor will help identify the accounts that are affected and can help make the appropriate changes to support your plan. Changes to account titles and updated tax identification may be called for as well. It’s vital to keep accounts up to date because any named beneficiaries on the account paperwork will supersede directions provided in your will. Failure to update can lead to undesired outcomes, such as former spouses receiving inheritances when accounts aren’t changed after a divorce. That’s a rough surprise for a grieving spouse! Your advisor can also help ensure that you have considered a plan for your health care long-term. That likely means drawing up a power of attorney for your medical care known as a medical directive. This is a document that authorizes a person to make medical decisions on your behalf should you become incapacitated. It's also important to establish a power of attorney for your finances. This document gives a person of your choice the ability to make financial decisions on your behalf like paying taxes, debts, investments, and more if you become incapacitated. These powers of attorney have a great deal of responsibility and are essential parts of your estate and retirement plans. Map Out Avenues for Wealth Transfer Your advisor can help you understand the various paths available to you for passing assets on to family members, friends, and charities. There are benefits and efficiencies, as well as pitfalls to avoid, as you consider the transfer of various types of assets and accounts to different kinds of beneficiaries. Should you establish a trust (living trust, revocable/irrevocable trust, etc.), and if so, what kind will best suit your needs? What are your options for leaving an IRA to a non-spouse beneficiary? Does it make sense to take a different strategy after the elimination of the “stretch” provision? Are you planning to leave a Roth IRA or other retirement accounts? Where does your life insurance policy fit into your estate plan? Do you have a living will? Have you made a plan for distributing personal property? Do you plan to pass on real estate or other property? Are there important considerations regarding how and when children receive inheritances? Do you have minor children? Who will care for them (guardian) and oversee their financial situation (trustee) Would you like your estate to have a charitable component? While it will take an attorney to draft the legal documents, we can work through different scenarios to determine the best strategies for wealth transfer so you know what your options are. Your financial assets should have a clearly documented plan. You've worked hard to secure this financial future and it should be considered with diligence and care. We can also ensure that your estate plan is integrated into your complete wealth management strategy, so no stone is left unturned. Consider Tax Implications Of course, taxes are an immense part of estate planning. Tax planning is our bread and butter. We work closely with your tax professional to build a tax-efficient estate plan to make sure more of your money goes to loved ones and charities as opposed to the government. Considerations include optimizing estate tax exemptions, gifting during life, using trusts as appropriate , and leaving certain assets for heirs while using others for income in retirement. We will consider the total tax impact across your entire finances across multiple years, and not just the immediate impact of isolated choices. We know what to look for as we review your complete financial picture, and make recommendations that will provide you and your heirs with the best possible solution for accomplishing your goals with minimum taxes. Build a Legacy You Love The technical aspects of estate planning are important, but they aren’t the only consideration. Think about the legacy you want to leave. Legacy planning and estate planning are intimately linked. Ask yourself: How can your estate be an extension and reflection of your goals, values, and priorities? How can your legacy live on for generations to come? What does “legacy” mean to you? Maybe you want to leave money to a cause you care about or leave it to your grandkids so they won’t have to worry about paying for college. When you develop your estate plan with your legacy goals in mind, you’ll be better able to maximize the impact you make. We Help You Craft a Custom Estate Plan Few firms combine the independence, skill, experience, and personalization that Covenant Wealth Advisors does as an RIA (Registered Investment Advisor). We have a credentialed CPA and CFPs on staff, and our top priority is customized financial planning. Before you hire a financial advisor, be sure to ask them these questions . You want to make sure that your advisor is working for you, operates with your best interests in mind, and is highly specialized to serve you in the best way possible. This should give you peace of mind that your advisor is always on your side. Don’t settle or take shortcuts for “good-enough” solutions. You should have a personalized estate plan focused on your goals and legacy. Call us today to learn more about how we can help you maximize the value of your estate and leave a legacy you are proud of. Katherine Fonville Katherine has over 15 years of experience helping individuals and families invest and plan for retirement. She is the founder of Covenant Wealth Advisors and helps clients across the United States. Schedule a free intro call with Katherine Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place.

We often have conversations with potential clients about our investment philosophy and why we invest the way we do. It’s great when we hear questions because most individual investors (and financial advisors) don’t have an investment philosophy beyond trying to get the best return. We thought all our clients might be interested in hearing a bit more detail on what guides our investment decisions. Get your Retirement Checklist of over 30 things that you need to think about for your retirement. When it comes to investing we believe it’s important to have tested principles that guide investment decisions. Specifically, we pursue factors of return that are persistent, pervasive, robust, implementable and intuitive. Prospective clients often ask what we mean by these qualifications, and we thought all our clients might be interested in hearing our answer. First off, let’s define what we mean by a factor of return . Academic and industry research has shown there are certain ways we can group securities with similar characteristics (i.e., factors), and then use those characteristics to find what parameters get rewarded (i.e., return). While many trusted studies support factor investing, the Booth School of Business at the University of Chicago has been instrumental in contributing to factor research . Eugene Fama also won the Nobel Prize in economics in 2013 for his research around markets and factor investing. For example, we can group stocks into two categories based on size: In one group, we can put large market capitalization stocks (big companies), and in the other, we can put small market capitalization stocks (small companies). We can then look at how big companies have historically performed versus small companies and determine if we should invest in one group versus the other. Research has shown that small stocks outperform large stocks over the long term, and we call this the size factor of return. To test the hypothesis that small companies should outperform large companies long-term, we can easily apply our “philosophy test” by asking if the size factor is persistent, pervasive, robust, implementable, and intuitive. Persistence: Small stocks outperformed large over many different historical time periods Pervasive: Small stocks historically outperformed large stocks in markets all over the world, and not just in the United States. Robust: Small stocks historically outperformed large stocks by a meaningful amount of return over time. Implementable: It is easy to sort stocks based on size and it doesn’t cost much to buy small stocks. Intuitive: Small stocks are riskier than large stocks and investors should be rewarded for taking that risk. Notice that the small company factor passes all 5 litmus tests above. As a result, we can be confident (but not guaranteed), that owning small companies in retirement portfolios may improve expected returns going forward. Now, let’s consider a silly example of what isn’t intuitive. There are many ways to group stocks, so let’s group them by the first letter of the company’s name. Hypothetically, let’s say we did the research and found that investing in companies that begin with the letter “A” produced the best historical return versus all the other letters in the alphabet. To make our case, we might say that Apple, Amazon and Alphabet (the parent company of Google) are all part of the strategy, and they have all performed well over the past decade. Does investing in companies that start with the letter "A" pass our litmus test? Persistence: Companies beginning with the letter "A" do not outperform over different time frames. Pervasive: Companies beginning with the letter "A" do not outperform in different geographic areas across the world. Robust: Companies beginning with the letter "A" do not produce sizable out-performance consistently over time. Implementable: It is easy to sort stocks based on the letter "A". Intuitive: Grouping companies based on a letter doesn’t make sense, and, therefore, isn’t intuitive. Companies that begin with the letter “A” aren’t successful (or unsuccessful) because they named their company with that letter, and letters tell us nothing about the risk we are taking. So, how you leverage this test for your own investment portfolio? For starters, most investment ideas you hear about on CNBC or read about in Money Magazine likely don't hold water. The next time you hear a financial expert pitching an investment idea, push back and ask him if the "strategy" passes the test above. If not, let him know you'll take a pass. We want the bedrock of our investment philosophy to make practical sense and be supported by historical evidence. We are dealing with the life savings for many families and how those savings can help reach their life goals. We don’t want to leave client goals up to chance, a good sales story or some current trend. If you have any questions about your investments, need to inform us of family or work-related changes or want to discuss your financial planning needs, please reach out. We are here to help you reach your financial life goals! Get in Touch With Us Mark Fonville, CFP® Mark has over 18 years of experience helping individuals and families invest and plan for retirement. He is a CERTIFIED FINANCIAL PLANNER™ and President of Covenant Wealth Advisors . Schedule a free intro call with Mark Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like accounting, tax or legal advice, you should consult with your own accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Information provided by Dimensional Fund Advisors LP and Loring Ward. In USD. Based on monthly rolling differences in annualized returns over the periods listed. Rolling multiyear periods overlap and are not independent. Profitability is measured as operating income before depreciation and amortization minus interest expense, scaled by book. Indices are not available for direct investment. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Past performance is no guarantee of future results. Actual returns may be lower. See “Index Descriptions” in the appendix for descriptions of Dimensional and Fama/French index data. Eugene Fama and Ken French are members of the Board of Directors of the general partner of, and provide consulting services to, Dimensional Fund Advisors LP. “One-Month Treasury Bills” is the IA SBBI US 30 Day TBill TR USD, provided by Morningstar. All rights reserved. MSCI data © MSCI 2019, all rights reserved.

Get your Retirement Checklist of over 30 things that you need to think about for your retirement. Get in Touch With Us Mark Fonville, CFP® Mark has over 18 years of experience helping individuals and families invest and plan for retirement. He is a CERTIFIED FINANCIAL PLANNER™ and President of Covenant Wealth Advisors . Schedule a free intro call with Mark