Investing and planning for retirement can be stressful. But the key is preparation.
Oftentimes, thinking of retirement finances can be overwhelming because there is so much involved. Bright Wealth Management encourages people to have an integrated plan.
Whether you have a professional to help with your finances or not, having investments, taxes, estate planning and income strategies all under one umbrella helps mitigate risks and underlying fees.
Bright Wealth Management brings all those areas together, and they have a free service to get a second look at your finances and the trajectory toward your retirement.
“I would suggest just getting a second opinion, and you’re going to be armed with the knowledge and the wisdom, whether you want to move forward or not,” founder and president of Bright Wealth Management Matt Dages said. “You’re going to leave with a complimentary written financial plan, and you’re going to know exactly what you need to do to make that dream a reality.”
3 of Bright Wealth Management’s tips to optimize retirement savings
1. Tax and estate planning
The first part is having an estate plan. Some people don’t have one and don’t even know it.
Many factors, such as multiple residences, differing legal requirements and family dynamics can affect how assets are distributed. Knowing those answers will help minimize tax implications and legal challenges.
One of the most crucial aspects of tax planning is knowing the implications of withdrawing funds from tax-deferred accounts.
401(k)s and IRAs have required minimum distributions and other withdrawals that will push individuals into higher tax brackets if not followed correctly. Methods like Roth conversions and income timing can reduce individuals’ risk.
Another strategy to maintain control and reduce risk is preparing for higher tax rates. That way, you are proactively planning rather than being reactive when rates go above what’s expected and setting yourself up better long-term.
“Risk mitigation is the name of the game. We don’t want to wait until after a market crash to then lick our wounds,” Dages said. “We want to have a balanced, diversified portfolio, and we want to help people strategize, to say, ‘Hey, based on where you’re at in your life, your age and your timeline for retirement, or your overall goals in life and where you are looking to achieve, here’s how we can go after that.’”
That leads to the next tip.
2. Income planning
The key to income planning is having various streams of income so that essentials are covered despite how the stock market is performing.
“Many people, their income certainty is just social security. And the rest of it relies on market dependence, market success,” Dages said. “So what we want to do is we really want to know that your core expenses are covered without relying on the market. We want to give you that income certainty.”
Social security is a significant component of retirement planning, but having additional income sources, like pensions, annuities and other guaranteed income solutions, diversifies your portfolio so you don’t get tense every time the market fluctuates.
It creates balance, dependable income sources and creates confidence in your retirement.
Another important aspect is planning for a longer lifespan. This requires careful consideration of how income will be sustained over decades, and avoiding retiring during a market downturn.
If individuals separate their assets into different horizons and strategically manage withdrawals, the income will be protected and have stability over time.
3. Navigating hidden costs
One of the most substantial hidden or “stealth” costs for individuals is healthcare expenses. People often overestimate what is covered by Medicare, and those expenses that aren’t covered can add up quickly, depleting savings.
Family-related responsibilities are another major expense people don’t often account for, such as supporting adult children, contributing to grandchildren’s education or managing end-of-life costs.
These expenses can add up unexpectedly and fast, making it very important to build flexibility and contingency reserves.
While those expenses are more unexpected, inflation is easier to predict. But it still hits people as an underestimated challenge. Rising costs decrease purchasing power, and that can bring financial stress to individuals relying on pensions with fixed income.
One way to combat inflation is by utilizing growth-oriented investments and adjusting projections to account for it. This strategy can ensure long-term financial security despite economic changes.
