Leaving a job after years of hard work is an emotional time, so having something to look forward to, like a luxurious retirement, can make the transition easier.
There’s nothing better than sipping cocktails in Hawaii while you bid farewell to your working years to move on. And a good financial plan can help you do just that.
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GOBankingRates spoke with Dennis Shirshikov, financial planner and growth director at GoSummer, and John F. Pace, CPA and tax partner at Pace & Associates CPAs, to discuss the steps you should take to build wealth for a luxurious retirement.
According to Shirshikov, a luxurious retirement goes beyond financial security and comfort. It encompasses a lifestyle filled with world-class experiences, travel, leisure activities and the freedom to pursue passions without financial constraints.
“This includes, for example, owning several properties in desirable locations, enjoying gourmet food, traveling in first class or on private jets, and attending exclusive social and cultural events.”
Read on to learn how to prepare for this post-work lifestyle.
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Strategic investments
To ensure a luxurious retirement, it is crucial to go beyond traditional savings methods and invest strategically.
“Diversifying your investment portfolio with a mix of stocks, bonds, real estate and alternative investments such as private equity or hedge funds can significantly increase wealth creation,” Shirshikov said.
For example, investing in high-growth stocks and real estate that increase in value over time can generate significant returns.
Additionally, he said using tax-advantaged accounts such as Roth IRAs and 401(k) plans can maximize growth while minimizing tax liability.
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Entrepreneurship and passive income
Starting a business or investing in income-generating ventures can be an effective way to build wealth.
Entrepreneurship offers the potential for exponential growth, while passive income streams such as rental income, dividends or royalties provide a steady cash flow without constant active management.
“Developing multiple income streams can ensure financial security and growth, even during market fluctuations,” Shirshikov said.
Maximize your income and career advancement
According to Shirshikov, it is essential to strategically advance one’s career and maximize income during one’s working years.
Higher education, specialized certifications and networking can lead to better-paying positions and higher bonuses.
He added that negotiating salaries and benefits over the years can add up and significantly increase retirement savings.
Estate planning and tax optimization
Effective estate planning and tax strategies are critical to preserving and growing wealth.
“By using trusts, gifting strategies and charitable donations, the size of the taxable estate can be reduced, allowing more wealth to be passed on to heirs or charity,” Shirshikov said.
By working with a tax advisor to optimize tax liabilities during both the savings and payout phases of retirement planning, significant amounts can also be saved.
Additional advice from a tax expert
“As a CPA with over 40 years of experience, I have helped many clients build wealth for a luxurious retirement,” said Pace.
The key, he explained, is to maximize tax-advantaged accounts such as 401(k) plans, IRAs and HSAs, which offer tax advantages and allow your money to grow tax-deferred or tax-free.
“For example, I helped a client maximize contributions to her 401(k) and Roth IRA accounts for 25 years. When she retired, she had over $3 million in those accounts, which now provide her with tax-free income.”
He pointed out that a luxurious retirement also comes with additional sources of taxable income.
“I have encouraged clients to invest in the stock market through brokerage accounts and real estate. One client purchased a multi-family property that now generates over $100,000 in annual income. Thanks to his tax-advantaged accounts and real estate income, he will have a six-figure annual income in retirement.”
In conclusion, Pace said that a luxurious retirement requires proper financial planning to generate income, minimize taxes and ensure wealth preservation.
“I recently helped a couple create a comprehensive retirement plan that included pensions, Social Security, investment accounts, and an annuity.
“Their plan will give them $150,000 a year in retirement. They have the freedom to travel and pursue their hobbies without having to worry about money.”
He emphasized that good planning is the key to a worry-free, luxurious retirement.
With discipline, time and sound financial strategies, it is possible to build wealth for a luxurious retirement. The key, Pace said, is to save and invest consistently, make the most of tax-advantaged accounts and develop additional income streams.
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This article originally appeared on GOBankingRates.com: I’m a Financial Planner: 4 Ways to Build Wealth for a Luxurious Retirement
