9 Things You Must Do When Your Retirement Savings Reaches $250,000

You’ve worked hard, put money aside for retirement, and have a nest egg of $250,000 in your portfolio. Now it’s time to protect and grow your savings so you can achieve financial freedom during retirement — but how?

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GOBankingRates spoke with financial experts who shared solid strategies for increasing your wealth and mapping out the best ways to have enough saved for your golden years.

Use the Proper Accounts

“One of the first things people should do once their retirement savings reach $250,000 is to start thinking about the types of accounts they’re using to accumulate their wealth,” retirement income specialist Antwone Harris, CFP, MBA and chief planning strategist at Platinum Bridge Wealth Strategies, told GOBankingRates.

“Many tend to focus on retirement savings programs through their respective jobs, such as a 401(k) or 403(b),” he said. “While these are excellent vehicles, it’s imperative to build up assets outside of these areas because assets accumulated in them become what we call a ‘tax time bomb’ in retirement.”

Harris added: “If an account like this compounds at normal historical market rates, it should double roughly every 8 to 10 years. With regular contributions, that means that many people will end up with over a million dollars in their 401(k) account by the time they retire. If these accounts are allowed to continue to compound until the required minimum distribution, which is currently age 73, some people will have rather large 401(k) accounts.”

“Every dollar that comes out of this account is taxable as ordinary income,” he said.

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Be Mindful of Taxes

Another thing Harris noted is to consider taxes when deciding where to put your money.

“For people who have other assets that are being used for retirement, such as Social Security, these distributions can put them in a rather high tax bracket in retirement, and they are forced to continue to take money from these accounts for the rest of their lives.”

He continued, “This becomes a situation where we can no longer control the tax liability, so it’s very important to build up money outside of these accounts that are typically taxed at rates lower than ordinary income tax rates for tax diversification purposes.”

Meet With a Financial Advisor

Having a finance expert help guide you through retirement is vital, according to Brian Kent, vice president, program manager, wealth management with FAIRWINDS Credit Union. “Meet with a financial advisor annually,” he said. “If you haven’t already, connect with a financial advisor to ensure your portfolio is diversified appropriately and to explore potential investment strategies to continue growing your savings while minimizing risk.”

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He added, “In this meeting, review the entirety of your retirement budget, factoring in the future cost of living, potential healthcare costs, any large purchases you envision for you and your family, and inflation.”

Diversify Whenever Possible

“With a substantial amount of retirement savings, you want to diversify your investments,” Betterment‘s director of investing, Mindy Yu, told GOBankingRates.

“This can include a mix of stocks, bonds, and other asset classes such as real estate. Diversification helps manage risk so you’re not ‘putting all your eggs in one basket.’ It mitigates the risk of experiencing severe losses during a market downturn and increases the potential for long-term growth in your investments.”

Know Where To Allocate Funds

Harris additionally pointed out the importance of distributing funds to different accounts. “It’s important to start thinking about allocating a portion of your 401(k) contributions to a Roth 401(k) if it is available,” he said.

“This also allows us to diversify from a tax perspective. While you are forgoing some immediate tax breaks, it allows you to pull assets from the Roth accounts later in life tax-free.”

Study Proper Investment Placement

Investing is also crucial to consider for retirement. “It makes sense to start thinking about where you’re placing certain types of investments,” Harris said. “For example, if you have Investments that pay qualified dividends that are typically taxed at 15% and you place them in a 401(k) account or an IRA account, you’re converting the tax rate from the qualified dividend rate to an income tax rate because every dollar that you pull out is taxed at your ordinary income tax rate,” he explained.

“Thus, you potentially have converted a lower tax liability to a higher tax liability unnecessarily,” Harris added. “So, as you start to accumulate assets, thinking about asset placement investment placement is critical.”

Protect Yourself Against Inflation

Preparing for retirement is complicated. Not only do you have to save enough to cover yourself throughout, but you also have to plan for things like inflation.

“We look at investments like Treasury Inflation-Protected Securities and sectors like healthcare that typically keep up with or outpace inflation,” Rhett Stubbendeck, CEO at Leverage Planning, explained. “This strategy has helped clients like one who shifted part of her investment to healthcare stocks, which are generally robust against inflation pressures.”

Incorporate Steady Income Sources

Stubbendeck also suggested including regular income streams in your retirement plan. “I recommend including bonds or fixed annuities in your portfolio,” he said. “These can provide reliable income and help reduce your exposure to market dips.”

Gareth Boyd, a finance expert and head of growth at CreditCardCompare.com.au, agreed. “One of the smartest moves you could do is to gradually shift more of your portfolio into bonds and other fixed income investments, think of property or other physical assets. These provide stability and generate reliable cash flow. I generally recommend aiming for a 60/40 split between stocks and bonds at this stage.”

Invest in Precious Metals Like Silver and Gold

“One of the best things you can do to protect your retirement savings is to invest in precious metals,” said Tamara Genwright, owner of Wealth Advisory Solutions, LLC. “For centuries, gold and silver have maintained their value (performing well even during inflation, pandemics, and economic instability). Gold and silver allow you to ‘be your own bank’ and build wealth ‘off the grid’ without paying interest, fees, and penalties that eat away at your retirement nest egg.”

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This article originally appeared on GOBankingRates.com: 9 Things You Must Do When Your Retirement Savings Reaches $250,000