The Role of Luck in Preserving Wealth in Retirement

Happy St. Patrick’s Day! Wishing your pot of gold stays afloat for your golden years? It’s going to take more than the luck o’ the Irish to build and preserve your nest egg. Here’s why.

As you enter retirement, one of the most critical aspects you’ll encounter is how to preserve the wealth you have accumulated over the course of your life. Many factors come into play when it comes to preserving wealth in retirement, including investment decisions, tax planning, and lifestyle choices. 

Skill or Luck?

People who are extremely successful in business or investing tend to think of themselves as more skilled. But while we look up to all-time legends like Warren Buffett - as well as the most successful people in the world like Jeff Bezos and Bill Gates - one may wonder, are they extremely successful, or just extremely lucky?

Looking back, successful company owners can identify how everything seemed to come together “just right.” If a few factors had gone down a bit differently, their company wouldn’t have been as successful. On the flip side, bad luck kills off many otherwise promising businesses.

It's useful to take a step back to consider why betting on continued success doesn't work in investing. While luck plays a role in determining results in investing, especially in the short term, investing results are persistent from one period to the next only if performance relies mostly on skill. 

What About Preserving Wealth? 

The strategies for preserving wealth are the opposite of those for generating it.

Good fortune helps, but lasting wealth and generational patrimonies are built through instinct, timing, experience and patience. Armed with the right guidance, retirees can take proactive steps to manage their finances and make informed decisions to achieve their long-term financial goals. 

Developing a sound retirement plan is a crucial step towards preserving your wealth. The process involves a comprehensive analysis of expenses, expected income sources, and potential risks that could affect finances, such as inflation or market volatility. A well-crafted retirement plan also helps determine the necessary savings and investments to support the desired lifestyle during retirement. 

Having an Investment Strategy

A robust investment strategy is crucial for wealth preservation in retirement, and having a diversified portfolio can help retirees keep more of their wealth. 

A diversified portfolio includes allocating investments to multiple sources, including bonds and cash, and reducing leverage to build a margin of safety, which will ultimately help mitigate risk and preserve wealth.

As you transition to retirement, investment involvement should shift from active to passive, allowing the money to work, reducing the impact of luck, and achieving long-term success by following a disciplined investment process. 

Moreover, retirees must be mindful of taxes and take steps to minimize their tax liability, such as maximizing contributions to tax-advantaged retirement accounts, taking advantage of tax-efficient investment vehicles, and seeking out other tax-efficient strategies. Achieving the right balance in investment decisions is crucial for financial stability and reaching long-term financial goals.

Lifestyle Choices

Preserving wealth requires a mindset and discipline that avoids potential huge losses. In addition to financial planning and investment strategies, lifestyle choices are also essential in preserving wealth during your golden years. 

Even if your investments outperform the overall market, your spending can make or break how much money you transfer to future generations. 

Lifestyle management strategies include:

  • Include lifestyle needs into your retirement plan to look at how to balance work and leisure and how to make smart choices for the future.
  • Maintaining good health and staying active to avoid costly medical expenses, which can be a significant financial burden. 
  • Consider long-term care insurance to protect against the high costs of medical care that may arise in the latter stages of life.
  • Include an estate plan to ensure your assets and finances are properly taken care of after your death.

To really preserve your wealth, it's essential to have a comprehensive retirement plan that addresses both financial and lifestyle aspects to ensure a comfortable and secure retirement.

Getting Help from a Professional 

It can change the entire trajectory of your future to discuss financial goals, estate planning objectives, family requirements, limitations, personal preferences and more with an experienced wealth preservation manager. 

The right advisor (preferably a Fiduciary) can offer you professional services on maximizing wealth preservation. Fiduciary advisors like Nic J. McLeod of NJM Wealth Preservation Strategies can suggest different strategies to retain the value of your estate as it is passed on to your future generations.

Remember that your retirement plan is not a one-and-done task. Revisiting your allocation regularly helps keep your financial plan aligned with your goals, interests and time horizon.

To Summarize

  • Luck can play a role in short-term success, but to preserve your wealth long-term, you need the right strategy in place with a true professional on your side.
  • This involves setting a portfolio strategy and regularly rebalancing to preserve wealth and avoid significant losses.
  • Learn how your lifestyle can affect your retirement spending needs.
  • Seeking comprehensive professional advice will help you make sound financial decisions on your road to retirement. 

Final Thoughts

This St. Patrick's Day, don't leave your wealth preservation to chance. 

While luck may impact short-term financial outcomes, retirees cannot rely on it to preserve their wealth. 

Are you looking for new ways to help preserve your wealth in retirement? Working with NJM Wealth Preservation Strategies can provide confidence, security, and peace of mind knowing that your investments are being monitored and managed actively and effectively. 

You’ve worked hard to build your net worth, so protecting your wealth should always always be top of mind. To further understand strategies that you can implement to preserve your wealth, set up your complimentary consultation here.