Personal Finance

8 Retirement Strategies That Really Start to Matter Once You Have $1 Million

John Seetoo

Published: January 30, 2025 1:25 pm

The Risk of “The Bigger They Come, The Harder They Fall”

Retirement nest eggs vary widely in size among the public. A Pew survey found out several months ago that roughly 10% of all retirement accounts have a valuation of $1 million or more. However, larger size brings a larger catalog of market volatility risk, higher taxes, and other considerations that, if not addressed properly, can viscerally illustrate boxer Robert Fitzsimmons’ quote: “The Bigger They Come, The Harder They Fall.”  The following three categories concern direct retirement account actionable tips:

Diversification – With smaller portfolios, putting all of the assets into an S&P 500 Index ETF for solid growth is a popular strategy. However, a 5% market downturn for a $100,000 portfolio equates to a – $5,000 decrease. For a $1 million portfolio, that equates to $50,000.  Therefore, diversification, i.e., “not keeping all of the eggs in one basket”, is a prudent approach to take, and can be accomplished in several ways, including:

• Domestic – A partial shift from 100% growth-oriented ETFs to include a percentage of income-producing assets, such as investment grade rated REIT stocks, midstream stocks, or bond ETFs, which are less volatile, but are more reliable for income.
• International – A number of emerging market nations are experiencing strong growth that offers opportunities unavailable in the US. For example, Vietnam was a sizable manufacturing alternate choice when trade conflicts with China triggered tariffs and certain restrictions, such as Nvidia’s prohibition against shipping their fastest GPUs to China. Other international announcements of new commodity finds, policy changes, and other events unrelated to the US market can result in ETFs invested in those markets getting a boost. This can be an effective hedge against US market volatility.

• Alternative Investments – Tangible assets, such as real estate and precious metals, may lack the digital convenience of securities liquidity but will maintain their value during any kind of panic situation. Money’s value is tied to its representative value for hard commodities and assets, something often forgotten in times of economic growth. However, when there is a collapse of government protections and services, food, shelter, fuel, and other tangible assets become the only products of worth, as witnessed in such dystopian TV shows as The Walking Dead, The Last of Us, or The Mad Max movies. 

Risk Tolerance & Allocation Reassessment – In a similar vein to diversification, a reassessment of one’s risk tolerance needs to factor into any portfolio reallocation decisions. Some who are on the more risk-averse side run the risk of inflation eroding their smaller gains into negative return territory. If someone is seeking solid income with minimal volatility, then investment-grade-rated REITs, midstream stocks, or utilities with solid dividend growth histories might be an acceptable consideration. Conversely, those who had a gambling mentality in their younger days may need to rein in their reckless streaks in their later years in favor of less volatile holdings that can reliably provide for their later retirement years. 

Tax Management  – One of the most popular policies that helped President Trump’s election victory was his policy towards tax reduction. Minimizing one’s legal tax burden through innovative strategies within the tax code has become a big industry. Failure to familiarize oneself with them and to use some of the applicable ones is the equivalent of overpaying taxes for which there will be no rebate.  Some basic ones that larger portfolios should deploy include:

• Roth IRA or Roth 401-K conversions: if one anticipates their post-retirement tax bracket will still be fairly high, it makes sense to pay income tax early on and convert to a Roth account, which can continually grow tax free until retirement age.
• Tax Harvesting – tax loss carry forwards and other losses that can be offset against capital gains of a specified tax filing year. 
• RMD – Required Minimum Distributions, which the IRS requires from retirement accounts depending on the age above 70 of the account owner, can trigger a larger tax burden. Withdrawals from RMD accounts should precede any Roth accounts, since the additional growth from Roth accounts is tax-free. 

Estate Planning

For wealthier retirees, their finances can become considerably more complex than just a retirement portfolio. For example,. about 50% of the marriages in the US end in divorce. That figure increases to 65% for second marriages, and 75% of third marriages end in divorce. Family law studies have shown that wealthier couples have a higher incidence of divorce and that remarriage trends increase during the silver and golden years: 

• 18 to 24 years – 29% will remarry  
• 25 to 34 years – 43% will remarry
• 35 to 44 years – 57% will remarry
• 45 to 54 years – 63% will remarry
• 55 to 64 years – 67% will remarry
• 65 years and older – 50% will remarry

As a result, blended families, which may include half-siblings and step-siblings, may all vie for stakes in any retirement assets that remain for beneficiaries after a retiree’s demise. Establishing a trust might be a more efficient solution that offers numerous benefits, such as:

• A trust can protect a surviving spouse from being deprived of an estate’s decision-making powers.
• A properly structured trust provides legal shielding for a home, securities accounts, retirement accounts, and other assets from unwarranted shakedown lawsuits and contestable tax assessments. 
• A trustee can serve as an impartial, third-party referee in the case of internal family squabbling over the terms of a will. 

Rebalancing & Monitoring

The economic landscape is presently in a state of flux. Retirees or those approaching retirement do themselves a disservice if they leave their retirement finances on autopilot without following current events. Some considerations warranting regular attention include:

• President Trump’s repeated proposals to end Federal Income Tax and the IRS and replace it with a consumption tax and tariffs.
• New medical and healthcare breakthroughs and discoveries may result in curing some currently diagnosed terminal illnesses and furthering lifespan extension.
• Recent weather and crime hazards in previously safe resort-based nations and other locales might necessitate drastic recalibration of retirement relocation and travel plans. 

Therefore, review and reassessment of one’s retirement plans, budgets, and portfolio on a monthly basis might be a prudent step to take. A previously assumed 4% withdrawal rate might need to be modified to 3.7% if needed to stretch over an increased duration, or perhaps an unexpected growth surge can afford a larger rate, provided the gains aren’t lost due to other circumstances. 

This article is intended purely for informational content. A financial professional’s counsel should be sought for more comprehensive and customized advice.