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I’m a Financial Planning Expert: 8 Moves To Make If You Have a Large Retirement Savings

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If you feel like you have a lot saved for retirement, that is no small feat, as many Americans have been struggling to set aside money for their golden years lately.

Persistent, albeit cooling, inflation, rising rates and now, the resumption of student loan payments are continuing to make it difficult for many to plan and save.

In addition, what “large” savings mean can vary, but for instance, the Northwestern Mutual’s 2023 Planning & Progress Study-put Americans’ “magic number” to retire — the amount of money needed to retire comfortably — at $1.27 million, up from $1.25 million last year.

Meanwhile, the average amount that U.S. adults have saved for retirement modestly increased by 3% to $89,300 from $86,869 in 2022.

Yet, if you feel you are on track when the moment to retire comes, experts said there are still a few financial moves you should make and steps you should take to avoid any pitfalls.

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Review Asset Allocation with Your Advisor

If you don’t already have a relationship with a financial advisor, now would be an excellent time to meet with one to help you review the following planning areas.

“There are many ways to work with an advisor, and you should decide which options work best for you,” said Stephen Kates, Certified Financial Planner (CFP) and expert reviewer for Annuity.org.

In terms of your asset allocation, there are some questions you should consider, including whether you are taking the appropriate risk level for your goals and time frame.

“Aggressive investing may have helped get you here, but diversification and risk management will help make sure you stay there,” said Kates.

Create an Income Plan

According to Kates, another key question is how will your savings become income, and what amount can you expect to receive?

Are You Retirement Ready?

“A large amount of savings is aspirational, but if it cannot adequately replace your income in a sustainable way, it may not meet your needs,” he said. “Compare your potential income to your expenses.”

Then, you should consider how, or if, this changes your plans. For instance, do you want to continue building a larger nest egg, prioritize other financial goals, or begin to coast?

“Organizing a structure and plan for how you will direct your money in the future will give you clarity on what comes next,” he added.

Consider Roth Conversions

Some experts said that if you’ve accumulated significant savings in traditional IRAs or 401(k)s, think about converting a portion to a Roth IRA.

“While you’ll pay taxes on the amount converted, future withdrawals from the Roth IRA, including earnings, are tax-free,” said Jeff Rose, CFP and founder of GoodFinancialCents.com. “This move can be especially beneficial if you believe you’ll be in a higher tax bracket in retirement.”

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Plan for Required Minimum Distributions (RMDs)

Rose added that once you hit age 72, you’ll need to start taking RMDs from certain retirement accounts, whic can push you into a higher tax bracket.

“Work with a financial planner to strategize on minimizing the tax impact, possibly by starting withdrawals earlier or donating a portion to charity through a Qualified Charitable Distribution,” he added.

Review Your Beneficiaries

Another key component is to regularly review beneficiaries on all your financial assets, including 401(k)s, annuities, IRAs, and insurance policies and ensure that your assets are distributed according to your current wishes.

“It’s not just about money; it’s about ensuring your loved ones are taken care of,” said Rose. “So, while it might seem like a minor detail, keeping your beneficiaries updated can save your family from potential legal tussles and emotional distress down the road.”

Start by doing a quick re-evaluation of your balance sheet, cash flow projections and asset allocations to verify that you are in fact on track for retirement. It will also help you consider your overall goals and priorities. Ensure you’re taking advantage of any after-tax opportunities, too.

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Emergency savings

For those fortunate enough to have a large amount of retirement savings, the next best steps are dependent on where you are in life, said David Peterson, SVP head of wealth planning, Fidelity Investments.

He added that one of these steps is making sure you have emergency savings. According to the Federal Reserve, 35% of Americans would not be able to pay for an unexpected $400 expense, which means many people may have to turn to expensive credit card debt, he said.

“While the amount will be different for each household, we suggest always having three to six months of essential expenses on hand to cover,” he added.

Healthcare

An average retired couple aged 65+ in 2022 may need approximately $315,000 saved after-tax to cover health care costs in retirement, according to Fidelity’s Retiree Health Care Cost Estimate.

In turn, he suggests ensuring your HSA is fully funded, as these accounts are triple tax-free.

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“Additionally, this estimate does not cover long-term care, and someone turning 65 today has almost a 70% chance of needing some type of long-term care,” said Peterson.

“Anyone over the age of 50 should consider long-term care insurance to protect retirement savings. Similarly, if you’re still in your earning years, consider life insurance to protect family earnings from an unexpected early death.”

Consider Gifting

Peterson said that provided that you have taken care of debt and established protection for your savings, you may consider giving your children or grandchildren a leg up on savings.

“With 529 plans, it may make sense to front load several years’ worth of college education costs -up to five-,” he said. “Or, if they are early in their careers, there may be gifting opportunities that would allow them to fund their own 401(k)s, Roth IRAs and the like based on their own earned income.”

In 2023, everyone can give up to $17,000 to as many recipients as they’d like without gift or estate tax implications, said Peterson, adding that you may also consider Qualified Charitable Distributions (QCDs) to causes that are important to you.”

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