10 Vital Parts Of Successfully Investing For Retirement

May 6, 2022

While many default and almost automated means of investing for retirement have emerged for business professionals, following the standard advice, there’s a lot more to being successful than many may consider. 

Just religiously dumping money into a standard 401k or IRA, or building up savings in a bank account probably isn’t going to deliver the end results you really want. After all, average in America these days pretty much means being broke, and woefully underprepared for surviving retirement.

This is even true for physicians, tech CEOs, bankers, and other high earning professionals who think they are doing the right things. Just like our body has a lot of organs and working parts that need to work together, the same applies here. You can’t just survive with lungs, and no heart or liver. Or just a pair of kidneys and nothing else. 

Be sure you’ve considered these ten elements before resting easy, and being confident in your retirement.

  1. Passive Income

Income should never retire. In fact, the need for additional income is only going to grow as you age. We need multiple streams of income to ensure there is always sufficient and steady income coming in. 

Many otherwise very intelligent professionals put off prioritizing this part of their investing. Yet, the truth is that we never know when we are going to need passive income. Medical professionals should be extra cognizant of this. 

Tomorrow is not promised. Whether that just means the workplace and business has changed, or we are injured and can’t work. It doesn’t take much for a surgeon to have their career ended. While most people say they plan to keep on working beyond standard retirement age, most end up being forced to retire early. That can wreak havoc with your finances.

Building up enough passive income to replace earned income should be one of the top objectives on the list. If you don’t need the surplus income, you can compound it by reinvesting it. This will also empower you to work on what you are passionate about because you can, not because you have to. 

  1. Access To Capital For Large Expenses

You can’t live on a large nest egg alone. No matter how big it is. Between a variety of scam and fraud risks, devaluation of currency, and just burning through it, it will be depleted far faster than you expect. Within just a handful of years into retirement you may find half of your retirement savings are gone. 

Instead, if you live off of the investment income it can ensure the capital will last. 

Still, you will have large expenses in retirement. Some may be expected, others will catch you by surprise if you haven’t planned for in thorough detail. 

These may include items like significant medical procedures, new vehicles, a new roof or AC unit for your home, special assessments on a condo, or even getting divorced.

This means that while your money should be actively working for you in investments, a good portion of it should be accessible in a reasonable amount of time. Such as having a 90 day call feature on the funds you invest in. 

  1. Reliability

One of the most important things in retirement investing is ensuring your money is there when you need it most. It is completely useless if you hit your goals two years before retirement, only for it to be slashed in half right when you are about to retire. Then you may find you have to find a new way to work for another 10 or 20 years. This is not uncommon. 

While you may optimize for growth early on, and want to continue to grow through retirement, you need to understand your asset allocation, and when you need to have more collateral and tangible assets supporting your investments. Think hard real estate, versus stocks which may be completely vaporized. 

  1. A Realistic Plan & Budget For Retirement

This is such a big part of your life that it is worth taking the time to really develop a detailed financial plan and budget. 

We seem to continue living longer. With ongoing advances in medicine and technology life expectancy may grow more over the next few decades. You may spend 50 years in retirement. So, be extremely wary of outdated rules of thumb for retirement savings. 

Make sure you have the basic expenses covered. Do not forget inflation. There have been years when real inflation has probably topped 30%. That means for every $1M you have saved, it will only afford $700k of living. The next year it would be just $490k. That just crushed your retirement fund by over 50% in just two years. 

Beyond the basics, be sure you budget for comfort and fun too. That’s what most want to retire for. You don’t want to spend the last few decades of your life miserable. 

Budget for that bucket list. Whether it is golf, travel, a cruise, buying a boat, or spoiling the grandkids, make sure you have planned for it. 

  1. Diversification

Most diversification that is done out there is horribly ineffective, and counterproductive. Investors end up missing the best of the upside, and suffering the worst of the downside. They fail to protect themselves. Often they don’t really understand what their money is in, and what dictates its performance. It is often the result of blind abdication of financial choices to advisors and brokers who only really care about their fees and commissions – which they then take and invest in something completely different than what they are selling. 

You do need diversification, and informed asset allocation. It will protect you from deep losses you can’t bounce back from. This while boosting overall gains, which ensures you can count on your money when you need it most. 

  1. Strong Returns

Growth is important, but swinging for the fences all the time is going to lead to a lot of losses as well. It often isn’t any better than gambling. At the other end of the scale many are too conservative. They are so conservative they end up losing, and net negative after fees, taxes and inflation. Be very cautious about locking into low yield investments.

The key to success is high risk adjusted returns

  1. Tax Smart Investments

Taxes will make or break your finances. They will either be a large double digit drain on any gains you make. Or can be a double digit boost to returns. Which can be compounded each year. 

Some types of investments have many more potential tax perks than others. Like real estate.

Taking advantage of tax deferment and tax free returns through self-directed retirement accounts is also a very important and game changing move. These aren’t the only tax protected accounts either. There are also ESAs and HSAs. 

  1. Succession Plan

For many, financial planning is far more about their legacy, impact, and taking care of or empowering those they love, and the causes they care about. 

This is not something to be left until you are in retirement and are on your deathbed. There are a variety of vehicles to use here. These range from companies to trusts, wills to inheritable retirement investment accounts. Planned giving is also another vehicle. 

It is vital to speed up the transfer of assets at the time of your passing and to minimize costs and taxes. Or there may not be much left. 

Consider your who, what and when of your estate. Including who you will delegate as your trusted executor. 

  1. Where Will You Live?

The home you live in is not a true investment. Yet, where you choose to live in retirement will make a significant difference in your finances. 

This will directly impact the taxes you pay, the level of protection for your assets, and the potential stripping of tax breaks in the future. As well as potential for changing laws which may impact your planning and investments. Such as death taxes, taxes on unrealized gains, and vacant property taxes.

Your decision may also be influenced on where the best healthcare is to be found also.

  1. Revisit Your Plan Regularly

It is essential to tweak and update regularly your retirement plan and investment allocation. Things change. Investments mature, industries change, inflation fluctuates, and your personal needs and family situation change. 

Investment Opportunities

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