Whether you’re 21 or 51, you should actively plan and prepare for retirement.

For high-net-worth individuals (HNWIs), retirement planning is critical to ensuring a comfortable and secure future. Significant wealth requires meticulous planning to maintain a desired lifestyle, cover healthcare expenses, and live a comfortable retirement.

Setting and reaching financial milestones provides essential checkpoints to measure progress and adjust strategies as needed. This blog discusses the importance of early retirement preparation and outlines the key milestones HNWIs should aim for at each stage of life.

Retirement Readiness: Building Your Legacy

Retirement readiness refers to how ready you are for retirement, both financially and mentally. It’s about having a plan to maintain financial security, support your health needs, and carry out a legacy you're proud of.

Achieving retirement readiness isn’t an overnight process—it involves breaking down significant financial goals into manageable steps over decades. For HNWIs, leveraging resources through advanced strategies like tax-efficient investments and estate planning is crucial to secure a comfortable retirement.

Let’s see if you’re on the right track.

Milestones by Decade

In Your 20s and 30s: Laying the Foundation

Saving for retirement? In your 20s? You bet.

In your 20s and 30s, retirement can seem like it can just ‘wait for later,’ but it sneaks up on you sooner than you’d think. However, early in your career, it can be hard to set aside money for retirement when you have lower salaries and student debt to deal with. Start with the basics:

• Establish retirement accounts: Open an IRA and contribute to employer-sponsored retirement accounts such as a 401(k). If your employer offers a match up to a certain amount, contribute at least that much to your 401k. An employer match is free money that goes towards your retirement savings.

• Build an emergency fund: Aim to save 6-12 months of total living expenses to protect against unexpected financial setbacks. 

• Invest in higher education: If you love what you do, keep striving to invest in your education—it pays to get a master's degree. In 2022, the median earnings for individuals with a master’s were 20% higher than those with a bachelor’s degree.

• Create a diversified investment portfolio: Your investment portfolio should be a mix of stocks, bonds, and real estate investments. Don’t put all of your eggs in one basket.

• Early planning for HNWIs: Significant wealth involves careful planning. Financial tasks like estate planning, minimizing taxes, and establishing trusts are critical to safeguarding one's assets as an HNWI.

Time is your best friend when it comes to your retirement nest egg. If you wait too long to start saving for retirement, you’ll lose out on returns and compound interest that can grow your savings. Set aside what you can, even if only $100 a month.

In Your 40s: Accelerating Savings

In the middle of your career, it’s time to put your retirement savings strategy into another gear.

In your 40s, while you have significantly more incoming cash flow, you also have more priorities like family, childcare, and a mortgage. Nevertheless, now is the time to start increasing contributions to your retirement accounts. For an IRA and 401k, the annual contribution limits are:

• 401k: In 2024, the annual 401k contribution is $23,000.

• IRA: For the 2024 tax year, the combined annual contribution limit for traditional and Roth IRAs is $7,000 for those under 50

Along with maximizing retirement contributions, you’ll also need to start focusing on:

• Paying off high-interest debts: Focus on eliminating debts that hinder cash flow and financial flexibility. Credit card debt is usually the biggest offender, but personal and private student loans can hinder your retirement savings plan.

• Investing in real estate and other high-value assets: As a HNWI, allocating your assets to real estate is a great way to enhance your portfolio. How much you should invest depends on your goals, current market conditions, and risk tolerance.

• Updating your estate plan and creating a will: Have you recently married or divorced? Have you started a family? It’s time to update your estate planning documents to reflect these major life changes.

In Your 50s: Catch-Up and Secure

As you approach your 50s, you may be unsure about your retirement nest egg. Have you saved enough? What if you can’t retire when you want? The pressure to catch up can be crushing, but take a breath—you have options.

1. Utilize catch-up contributions for retirement accounts: IRAs and 401ks allow for additional catch-up contributions if you are 50 or older. For a 401k, individuals can contribute an additional $7,500, raising the annual limit to $30,500. For (Take advantage of higher contribution limits for those over 50.) For IRAs, individuals can contribution an additional $1,000, raising the annual limit to $8,000.

2. Adjust investment strategies: At this stage in life, most individuals shift towards more conservative investments to preserve capital as retirement nears. High risk doesn’t always mean high reward. Now is the time to safeguard your assets.

3. Plan for your health: A Health Savings Account (HSA) is a tax-efficient way to plan for your health in retirement and can help cover long-term care and other qualified medical expenses. For 2024, the HSA contribution limits are $4,150 for self-only coverage and $8,300 for family coverage.

In Your 60s: Transition to Retirement

At this stage in your life, retirement is within reach. Now is the time to evaluate your financial and mental readiness for retirement. Are you ready to take a step back from your career? Do you have a plan for how you will spend your days? Can you afford to live out your ideal retirement lifestyle? How you answer these questions will determine your ideal retirement age.

When you reach age 62, you can claim Social Security benefits. But just because you can, doesn’t mean it’s wise to do so since you’ll receive a heavily discounted benefit. If you wait to claim benefits until age 70, you’ll enjoy an 8% per year increase in your annual benefit over what you would’ve received at your full retirement age (66 or 67).

You will also want to connect with your financial advisor about a retirement withdrawal strategy, which is a plan for how you will access and spend your retirement funds. A withdrawal strategy can help you maximize your retirement savings and minimize your tax burden so you can enjoy your retirement years in bliss.

In Your 70s and Beyond: Sustaining Wealth

Once you’re living the good life, it’s crucial to focus on sustaining your wealth so you can continue to live your ideal retirement lifestyle without any bumps in the road. As a HWNI during retirement, there are several ways to ensure that you don’t outlive your retirement savings. You and your advisor will focus on:

• Managing RMDs effectively: The IRS requires all individuals to take required minimum distributions (RMDs) once they reach 73 or 75, depending on birth year. If you don’t need the money to sustain income, you can use those funds to donate to charity, put towards a 529 college savings plan, and more.

• Giving with QCDs: Once you reach age 70 ½, the IRS allows you to make a qualified charitable distribution (QCD) of up $100,000 per year directly from your IRA to charitable organizations of your choice. These gifts don’t count as income and bypass your tax return. If you’re RMD age, the QCD can count toward your RMD, lowering or eliminating the tax on your RMD. Note that the QCD must come out before the RMD for it to count.

• Ensuring consistent income streams: Keep an eye on your withdrawals and investment growth to ensure consistent income throughout retirement.

• Reviewing and adjusting retirement plan as needed: Life is known to throw some curveballs, so even in retirement it’s important to regularly review your retirement plan and adapt to changing circumstances.

• Legacy planning and wealth transfer: Ensure a smooth transition of wealth to your heirs and beneficiaries through trusts, philanthropy, and tax-efficient gifting strategies.

Working with a Financial Advisor

Reaching retirement milestones is essential for securing a comfortable and stable retirement, especially for high-net-worth individuals. Starting early and regularly reviewing your plan will help you achieve your financial goals and ensure a prosperous retirement.

Need some guidance as you navigate retirement? Let’s chat.

Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions and security positions, when sold, may be worth less or more than their original cost.