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4 Financial Strategies to Make for a Smooth-sailing Retirement

Every day we make choices that impact our financial autonomy down the road. A common myth is that once you retire there are no additional decisions to be made, and you just sail off into the sunset. The reality is that there are some critical tax and estate planning matters that often get overlooked. The term “Gap Years” refers to the time between your retirement and age 70.5, the year in which you begin to take required minimum distributions (RMDs) from your retirement accounts. Here are four key financial planning strategies you should consider during your Gap Years.

#1 Maximize the amount of assets in your Roth IRAs
At this point, you may not have any Roth IRA assets, and that’s ok! There’s still plenty of opportunities to shift dollars into this tax-free investment vehicle, but first, why a Roth IRA? Assets in a Roth IRA grow tax-free and can be distributed tax-free after age 59.5. There are no RMD rules for the account owner or the surviving spouse, and unlike traditional IRAs, heirs of Roth IRAs also take distributions tax-free. I like to describe the Roth IRA as the “golden goose” of retirement accounts, and for good reason.

Ways to shift assets or contribute to a Roth IRA:

  • Partial Roth Conversions: Chances are you have assets in qualified accounts: either traditional IRAs or a 401k plan. Distributions from these accounts are fully taxable at your ordinary income tax rate. One planning strategy we regularly implement for our clients involves shifting traditional IRA assets to a Roth IRA while staying within their tax bracket on a yearly basis. Doing the whole conversion in a single year would likely bump a client into a higher tax bracket, lowering the after-tax value of their assets. However, by making periodic partial Roth conversions, future RMDs from qualified accounts will be lowered — saving taxes in the long-run.
  • Part-time Employment Income Contributions: In order to contribute to a Roth IRA, you must have earned income. As long as you meet the income requirements, you can contribute up to $7,000 (including the catch-up bonus) to a Roth IRA and an additional $7,000 for spousal contributions.

#2 Delay Social Security
The natural tendency once you retire is to automatically file for social security benefits. Many who are fortunate enough to retire before their full retirement age may elect to do so as early as 62. Most of the time, that’s a bad financial decision. Why? Every year you delay filing for Social Security, your annual retirement benefits increase 8%. However, because every client situation is unique, it’s best to have your financial situation reviewed with a financial advisor before making that decision.

#3 Maximize Gifts to Family or Fund Education of Grandchildren
Many of our clients in their “Gap Years” have sons and daughters that are saving for a first home purchase or for their own child’s education. Proactively gifting to children or putting money in your grandchild’s 529 savings plan could greatly impact the financial success of your family down the road. If this is important to you, you can be taking steps right now.

#4 Consider Charitable Giving
Most clients don’t harness the power of tax-efficient charitable giving. Fortunately, there are options, such as “bunching” (grouping charitable donations in certain years to itemize deductions, while taking the standard deduction in others), establishing Donor-Advised Funds and gifting appreciated stock, or making Qualified Charitable Distributions (charitable donations made directly from IRA accounts to qualify as RMDs) that make better use of your charitable giving, regardless of donation size.


The opportunities to further improve your financial well-being and live a comfortable retirement are ever-present during your “Gap Years”. The key is learning to recognize the opportunities that exist and having an action plan. We help our clients work though these opportunities on an on-going basis, and if you are heading into your retirement years now or are already retired, there’s a good chance one of these strategies is important to you and your family.

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