Investment planning for retirement is complicated because your spending needs may shift over time during your retirement years. Once you have accumulated sufficient assets, you may wish to retire. It is not enough to replace your pre-retirement income. You need to consider several aspects, including your potential lifestyle spending, healthcare spending, and inflation. You will likely spend more on healthcare later in retirement and more on leisure activities earlier in retirement.
Developing a careful strategy for withdrawing funds from various investment accounts is another aspect of investment planning for retirement in Minneapolis, MN. Withdrawal order from your accounts can make a substantial difference in your portfolio and tax liability. The exact order depends on your unique situation. For instance, whether you are in a higher or lower income tax bracket now than you anticipate in the future may influence the order from which you withdraw from taxable accounts or Roth IRAs.
Partial Roth conversions may also be part of your tax strategy. Moving funds from a traditional IRA to a Roth IRA during a time when your tax bracket is lower may help maximize your tax advantage. The goal is to create tax-free accounts and allow tax-preferenced accounts to grow for as much time as possible.
Asset allocation during the retirement years is another aspect to consider in investment planning for retirement. While young, you may have more risk tolerance and risk capacity. During the golden years, you may wish to increase fixed income and decrease your equity position, creating less aggressive asset allocation.
Ultimately, investment planning for retirement in Minneapolis, MN is a personal process. Consider consulting with a Certified Financial Planner or independent, fee only investment advisor to develop a plan to help you reach your retirement goals.
