You’ve Worked a Lifetime to Build Your Wealth. Here’s How to Keep It

By Michael Torney, CFP, J.D., LL.M.

As someone approaches retirement, sells a business or inherits money, they need to develop a new skill: staying wealthy. Just as you had a goal to build your wealth, now you need one to maintain it.

To accomplish this goal, everyone needs a plan to address the following:

  • Their goals for wealth in retirement.
  • A spending and investment plan.
  • Executing the plan and adapting to any changes.

The Why of Your Wealth

This first step is the most important one.  An individual or couple needs to determine their priorities, including how they will enjoy the wealth they have built.  Most people not only want to maintain their current living standard, but also, spend money on new activities and exciting adventures while continuing to support their adult children and grandchildren.

Here are some of the common ways people choose to spend their wealth, which will allow us to develop a financial plan to meet them:

  • Additional travel and vacations.
  • Contributing to a grandchild’s 529 college education plan.
  • Donating more money to local charities.
  • Purchasing a second home.
  • Leaving a sizable inheritance for adult children and other family members.

Making a Budget, Developing an Investment Plan

With your goals laid out, the second step is developing a plan to pay for these items while also protecting your portfolio. Unfortunately, the trap some wealthy retirees fall into is thinking their assets – even if they have millions of dollars — will sustain them no matter what.

Begin with developing a budget to determine how much it will take to accomplish one or more of your goals.  Here’s a good example:

A couple receives $200,000 annually from Social Security benefits and investment income. With no mortgage or car payment, they have annual living expenses of $120,000 (including fixed and variable expenses). They’ve also set aside $40,000 annually for emergencies, including any home improvements.

The remaining amount can easily cover their desire for travel, 529 plan contributions to a grandchild’s education and some charitable donations. However, if they want to purchase a second home, this amount will likely need to come from their investments – thereby cutting into the amount of money in their investments.

Less money in the couple’s investment account would likely reduce the amount of money they could withdraw each month from their portfolio. Plus, once they purchase the home, they will have the additional expenses of maintaining and caring for it – everything from utilities and a home security system to lawn maintenance and any needed repairs.

If you desire a second home, work with a financial advisor to make certain you can afford to pay for it without having a dramatic impact on living expenses and other needs. This is generally accomplished by running a financial analysis to show the impact of the extra expense on the portfolio over the next 20-30 years.

Executing and Revisiting Your Plan

When it comes to actually putting your plan into action, the first few years of retirement are crucial for establishing good habits. If you aren’t used to living on a budget, it can be easy to spend more money than have you coming in. After settling into retirement for a few months, you may decide it’s time for an unplanned exotic vacation – fun stuff, but it could impact other plans for your money.

In addition, one or more major life events could disrupt your plan. If either or both spouses become quite ill, some money may be needed for additional care and medical expenses. Even if you remain healthy, you may need to care for a relative or provide financial assistance to an adult child going through a difficult period.

The final step to maintaining wealth is to ensure your plan is on track by re-evaluating it every six months. You may find you are spending more money than anticipated, or even have some savings that can be used for new activities. After some years of success, you can evaluate less often. Either way, most retirees find their plans change over the years to accommodate their vision.

Once you’ve established the purpose of your wealth and set up a plan to execute your goals, you’ll be less likely to suffer a setback and enjoy your money for a long time. That’s a goal all of us can agree on.

If you have questions about your retirement plan, our team can be reached at duffteam@monetagroup.com. We offer a free consultation to help discuss how we may be able to help you get on track to meet your retirement goals.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. Examples contained herein are for illustrative purposes only based on generic assumptions.  These materials do not take into consideration your personal circumstances, financial or otherwise. Past performance is not indicative of future returns. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision.

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