Regardless of your stage in life, saving and growing your wealth should be an ongoing priority. As you near retirement, there comes a time when you should shift your main focus to Wealth Preservation.
For most people, the accumulation phase is the longest stage in their financial life cycle. During this phase, you experiment, take risks, and concentrate all your resources on fewer entities. It comes with great risk but a greater reward if you succeed.
On the contrary, preserving your wealth requires a less aggressive approach where the focus is to let your wealth grow automatically and battle the ongoing threat of inflation. Keeping your money safe over your lifetime also means overcoming challenges like bear markets, rising prices, high taxes, and social or political instability.
Eventually, your hard-earned wealth should be passed down to your loved ones to use further to grow their wealth, which is called generational wealth transferring.
In what has been called the Great Wealth Transfer, approximately $84 trillion of wealth will shift from Baby Boomers to individuals in Gen X and Millennial generations in the next 25 years, according to Cerulli's research. This transition is expected to reshape the wealth management landscape completely.
Views on inheriting money from parents are changing, and some wealthy families are shifting how they plan to give money to the next generation. Some parents want their children to make their own money. So, they pay for their education and basic needs but don't plan to leave them a lot of much else. This aims to help them learn to make money on their own while still having some financial aid to fall back on.
Others who get a lot of inheritance give a big chunk of it to charity, sometimes because they feel guilty or embarrassed about having so much.
There are monumental risks in leaving loved ones with too much money. A GoBankingRates report explained that about 70% of wealthy families will lose their wealth by just the second generation. By the next generation, 90% will have lost their wealth.
In other words, leaving a large inheritance doesn't guarantee long-term financial well-being. Therefore, it's important to have a plan in place to help keep family wealth over time.
One unique quality of wealth creators is their determination and resilience, and they likely took advantage of uncertain and unfavorable economic climates to build their wealth in the first place.
2021 stood as a remarkable period for high-net-worth individuals. Their gains are attributed to low interest rates, healthy stock markets, and increased liquidity. However, when you think of 2022, you think of high interest rates, unreliable stock markets, and a looming recession. These factors shifted many investors' mindsets from investing their wealth to preserving it.
According to Capgemini’s World Wealth Report, High-net-worth individuals (HNWIs) saw their most significant 10-year drop at 3.6%, followed by a 3.3% decline in the HNWI population to 21.7 million from 22.5 million in 2021.
When surveyed, around 70% of HNWIs revealed that their foremost financial concern was "wealth preservation." Many investors emphasized their portfolio composition and cash holdings, aiming for sustained value rather than rapid gains.
As a high-net-worth investor, growing and preserving wealth should be a significant goal for protecting your money for future generations.
There were 24.5 million millionaires in the U.S. in 2022. And only 21% of them inherited money. Whether you've amassed wealth through inheritance, years of hard work, smart investments, or a combination of factors, the key to longevity lies in strategic planning.
A recent CNBC Millionaire Survey found that 34% of millionaire investors hold more assets in cash. In fact, studies indicate that millionaires may have, on average, as much as 25% of their money in cash. This is to offset market downturns and have cash available as insurance for their portfolios.
Cash equivalents are financial instruments that are almost as liquid as cash and are popular investments for millionaires. Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper, and Treasury bills.
Diversification is your friend when setting the stage for wealth preservation. High-net-worth individuals put money into different classifications of financial and real assets, including stocks, mutual funds, retirement accounts, and real estate.
This strategy allows you to create a balanced portfolio that can withstand fluctuations and preserve wealth over the long term. It helps grow your wealth while helping to eliminate exposure to your assets or investment sectors.
Affluent families use sophisticated investment, trust, and estate planning strategies to preserve their wealth for future generations, yet they are often ill-prepared for the possibility of a bigger financial setback in the long run than a bear-market decline in their portfolio.
By offering a protective barrier against potential losses, risk management emerges as a crucial factor in the endeavor to maintain and protect your wealth.
There are five basic techniques of risk management:
Through these techniques, investors like you can gain further protection of your wealth and foster continued growth.
Estate planning can be a challenging and emotional process as you assess how you want to shape your legacy. Overlooking some of the more technical aspects—like taxes, for instance—could prevent your plans from having their full intended impact. HNWIs often use estate planning to ensure their wealth lasts and benefits their family long-term.
Here are some common ways you can do the same:
As a high-net-worth investor, you often don’t have time to build and actively manage your investment, retirement, and estate plan.
A Wealth Preservation Manager like NJM’s Fiduciary, Nic J. McLeod, can help streamline all of these processes and help make sure you have the money you need now and in retirement.
At NJM Wealth Preservation Strategies, we understand the importance of investment strategies, planning for your retirement, and preserving your wealth for generations to come. Our trusted Fiduciaries can walk you through your investments, helping to ensure a thorough understanding of your current financial situation and structure a portfolio that aligns with your retirement lifestyle and longevity goals.
To grow and preserve your assets, we offer confidence, security, and peace of mind when developing a strategy that balances risk and return. These services include:
There is no get-rich-quick scheme in wealth management and preservation. It is just disciplined and diligent savings and investment throughout decades.
Diversifying your portfolio, maintaining cash assets, and working with a wealth preservation manager are all strategies that can help you minimize the impact of market fluctuations on your retirement savings, protecting your legacy for future generations.
Contact us today to learn how we can help you preserve and grow your wealth for a secure and enjoyable retirement.