What hidden obstacles can block your retirement? 5 key points to consider

Whether your retirement is more than a decade away or approaching, careful planning is recommended because without it you could face significant challenges that may not be a priority right now. And those issues down the road can affect the lifestyle you desire.

You might encounter hidden obstacles on your way to retirement, so it’s important to learn more about potential obstacles and take appropriate action now to reduce their impact. You could say there’s a “TRICK” to this – an acronym that spells out five crucial things to consider in your retirement plan:

‘TRICK’… ‘T’ is for taxes

Most people don’t consider retirement taxes as much as they should. If they have large sums in pre-tax accounts, as many do with traditional 401(k), that money will be taxed when withdrawn. The required minimum distributions (RMD) at age 72 can lead to tax problems if the problem is not resolved in advance.

Converting some of that pre-tax money into Roth IRAs or Roth 401(k)s can be an effective way to reduce the tax burden in retirement. The “trick” is to convert strategically over several years and know how much to convert each time. The converted amount is taxable each year, but Roth IRAs and Roth 401(k)s are tax-exempt when withdrawn from age 59.5, although accounts must also be held for at least five years . There is no requirement to start taking RMDs from a Roth IRA, unlike a Roth 401(k), but account holders can transfer them into a Roth IRA.

Qualified Charitable Distributions (QCDs) are another way to potentially reduce the tax burden of an RMD. You can make a QCD by having your IRA custodian pay some or all of your RMD to a 501(c)(3) qualified charity. The total annual maximum contribution for QCD is $100,000, and to do a QCD you must be at least 70.5 years old.

‘R’ is for risk tolerance

Ask yourself: do you think we could survive another financial crisis like the one in 2008? A big downturn could happen at some point, and if it did, how much would you lose? More specifically, how much could you afford to lose? Whatever that number is, you need to be comfortable with it.

When working with a financial planner, consider your risk tolerance and try to find a balance between being too risky and being too conservative. You’ll probably want growth in your investments, but you’ll also want to have a protective mindset for some of your assets.

‘I’ is for combination of investments

Investments are like different kinds of tools suitable for certain kinds of jobs. For example: if you are cutting a shrub, you do not use a rake. A common problem in the financial industry is that you have people basically trying to sell you a product, and you end up trying to rake the leaves with a shovel. They are trying to sell you something, whereas an independent advisor focuses on investments based on your specific financial goals.

Yet, different products can serve you depending on what you want. Bank-like products, including savings accounts, money market accounts, and certificates of deposit (CDs), won’t lose money, but they probably won’t grow very well. Another type of tool is stock accounts. They can grow very well and are used for long-term growth. But they probably won’t be safe; you can’t be sure you won’t lose money at some point, and being successful in stocks often means holding onto them for the long haul.

A third tool includes insurance solutions: indexed annuities or indexed life insurance. There can be reasonable growth in these vehicles and they are safe, and they are contractually guaranteed not to lose money. (Warranties are backed by the financial strength of the issuing company. Products are not bank or FDIC insured.) But there is usually a time commitment.

‘It’ is for the costs

Clients should be fully informed of how compensation, commissions and fees for their advisors and account managers work. What’s in it for those watching your money? Some of these fees are clearly displayed, such as with a mutual fund account. But others are hidden or not revealed so openly. Some finance professionals receive a percentage, others a deposit. As a consumer, knowing how Advisors and Account Managers get paid is rewarding.

‘K’ is for knowledge gaps

We live in a time when many consumers like to try to do things themselves, but financial planning isn’t like a home improvement video where you can learn how to add a room to your house for half the cost of doing it. ‘an entrepreneur. Your financial future and retirement planning require special care that an experienced professional can handle. Consumers are planning for their retirement for the first time, but seasoned planners are doing it for a living and should be aware of the hidden obstacles and how to work around them. Clients can greatly benefit from the advisor’s experience.

Working on your retirement portfolio now can help you see hidden obstacles well in advance. To get where you want to go, you need to know what might be stopping you and the right moves that will help make your retirement as smooth and enjoyable as possible.

Dan Dunkin contributed to this article.

Investment advisory services made available by AE Wealth Management LLC (AEWM). AEWM and NuVenture Financial Group LLC are not affiliated companies.1405765 – 7/22
Investing involves risk, including the potential loss of principal. Any reference to [protection benefits, safety, security, lifetime income, etc] generally refer to fixed insurance products, never to securities or investment products. Guarantees for insurance and annuity products are backed by the financial strength and claims-paying ability of the issuing insurance company.
Our company is not affiliated with or endorsed by the US government or any government agency. Neither the firm nor its agents or representatives can give tax or legal advice. Individuals should consult a qualified professional for advice before making any purchasing decision.
Remember that converting an employer plan account to a Roth IRA is a taxable event. The increase in taxable income from the Roth IRA conversion can have several consequences, including (but not limited to) a need for additional tax withholding or estimated tax payments, loss of certain tax deductions and credits, tax, and higher taxes on Social Security benefits and an increase in Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.

CEO, President, NuVenture Financial Group

Bob Horne is CEO/Chairman of NuVenture Financial Group. A 20-year veteran in the financial services industry, including seven years as an investment advisor representative, Horne served as assistant vice president and branch manager for HSBC Bank before focusing on retirement planning. He has passed his Series 6, 63 and 65 Securities Examinations and is licensed in Florida Life, Health and Annuity Insurance. Horne has also earned the Retirement Income Certified Professional® (RICP®) certification.

The appearances in Kiplinger were obtained through a public relations program. The columnist received help from a public relations firm to prepare this article for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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