We all dream of retiring and enjoying the freedom we’ve worked so hard for. But as retirement approaches, so does a flood of questions: Will my savings last? Have I saved enough? How much will I pay in taxes? The uncertainty can feel overwhelming.
In this blog, we’ll address some of the most pressing retirement questions so you can plan with confidence and peace of mind.
How Long Will Your Savings Last?
One of retirees’ most significant concerns is ensuring they don’t outlive their savings. The answer depends on factors like your spending habits, investment returns, healthcare costs, and unexpected expenses.
A common rule of thumb is the 4% rule—if you withdraw 4% of your retirement savings annually, your money should last at least 30 years. However, this doesn’t account for market downturns or rising healthcare costs. That’s why proper planning is essential.
At Wilson Hand, we offer retirement solutions that guarantee no loss of principal and long-term care benefits that won’t drain your savings. Putting these protections in place before retirement gives you peace of mind, ensuring you won’t run out of money when you need it most.
How Much Should You Have Saved?
A good benchmark for retirement savings is having 10 to 12 times your annual salary saved by the time you retire.
For example:
- If you earn $100,000 per year, you should aim for $1 million to $1.2 million in retirement savings.
- If you earn $75,000 per year, you should aim for $750,000 to $900,000.
Of course, this number varies based on your lifestyle, planned expenses, and other sources of income like Social Security or rental properties.
How Much of Your Hard-Earned Money Will Go to Taxes?
Many retirees forget to account for taxes when planning their withdrawals. Unfortunately, there’s no separate tax bracket for retirees—your retirement income is taxed just like your salary.
For example, let’s say you have $1 million in a 401(k) and withdraw $100,000 per year:
- Federal tax (22%) = $22,000
- Arizona state tax (2.5%) = $2,500
- Total tax paid per year: $24,500
- Over time, you’d pay $245,000 in taxes before depleting your savings.
This is why tax-efficient retirement planning is crucial. The right withdrawal strategy and account selection can reduce your lifetime tax burden and help you keep more of your money.
Where Should You Keep Your Retirement Funds?
Your choice of retirement accounts affects your taxes, investment growth, and withdrawal flexibility. Here’s a breakdown of common options:
- Traditional 401(k) & IRA – Contributions are pre-tax, reducing taxable income now. However, withdrawals are taxed in retirement.
- Roth 401(k) & Roth IRA – Contributions are made after tax, but withdrawals in retirement are completely tax-free.
- SEP IRA & Solo 401(k) – Ideal for self-employed individuals, offering high contribution limits and tax-deferred growth.
- Defined Benefit Plan (Pension Plan) – Provides a fixed monthly benefit based on salary and years of service.
- Self-Directed IRA – Allows investments in alternative assets like real estate and private equity.
- HSA (Health Savings Account) – A hidden retirement gem! Tax-free for medical expenses and can be used for additional savings.
- ARP (Accelerated Retirement Program) – A tax-efficient Wilson Hand strategy designed to maximize your retirement income and reduce tax burdens.
Which Retirement Account Is Best for You?
- For employees with employer benefits: A 401(k) (traditional or Roth) is a great starting point, especially if there’s an employer match.
- For self-employed individuals: A Solo 401(k) or SEP IRA offers higher contribution limits.
- For those expecting to be in a higher tax bracket later: A Roth IRA, Roth 401(k), or ARP makes sense for tax-free withdrawals.
- For high-income earners looking for tax deductions: A Traditional IRA, SEP IRA, Defined Benefit Plan, or ARP can help lower taxable income.
- For investment flexibility: A Self-Directed IRA allows for alternative investments.
- For medical expense planning & additional retirement savings: An HSA is a powerful tax-efficient tool.
Retirement planning is more than just saving money—it’s about making smart financial choices that protect and maximize your wealth. By ensuring your savings last, minimizing taxes, and choosing the right accounts, you can retire with confidence.
At Wilson Hand, we specialize in tax-efficient retirement strategies that help you keep more of your hard-earned money. If you’re ready to take the next step, schedule a consultation to secure your financial future.