An even more aggressive way to leverage this difference in the IRA rules is to consider delaying the start of your Social Security benefits initially when you retire. You'll have an extremely low taxable income as a result, which you can use to your advantage by converting chunks of your Traditional IRA into a Roth at rock-bottom tax rates. Having more Roth and less Traditional IRA assets will increase the flexibility of your future withdrawals, perhaps lower the overall tax rate paid on those IRA assets, and boost the amount of your monthly Social Security payments once they do begin. This sort of maneuver is complex enough that it's likely wise to enlist the help of a good CPA to evaluate its effectiveness in your specific situation.
5. Reconsider your asset allocation and risk threshold. Retirement is a time to reduce risk, taking only as much as is necessary to meet your financial needs. Even if you've been an "all stocks, all the time" investor throughout your life, it's foolish to take that added risk if you can live comfortably on the income provided from less aggressive investments. So look closely at what your specific income needs are, and throttle down your risk if you're able. The new SMI Managed Volatility Fund may be a useful tool for the stock allocation of those at this stage, since it attempts to offer some downside protection while still pursuing the Upgrading strategy.
Conclusion
I've merely touched on some of the most important aspects of creating your personal financial plan: identifying your season of life and risk temperament, determining your ideal asset allocation, applying our model portfolios, and so on. But all of this information is explained in detail in our bonus reports for new readers: the SMI New Reader Guide, and Jumpstart to Successful Investing.
While these lists aren't comprehensive, they do highlight key items to address in your personal financial plan at each stage of life. Ultimately, your financial priorities and plan of attack can only be decided by one person, and that's you. But having a step-by-step financial plan can help you stay on track when the inevitable financial temptations grab your eye.
Your goals are worth sacrificing to achieve, and taking the time to establish a comprehensive plan is the first step. This year, replace your good intentions with action by creating-and faithfully following-a personal financial plan. When it comes time to move into the financial home you've built for yourself, you'll be glad you did.
© Sound Mind Investing
Published since 1990, Sound Mind Investing is America's best-selling financial newsletter written from a biblical perspective. Visit the Sound Mind Investing website.
Click here to request a free information packet regarding the Sound Mind Investing newsletter.
Click here to investigate the widely-acclaimed "Sound Mind Investing" book, available at a 35 percent discount!
