Strategies to Protect Your Wealth at Every Stage of Your Life

“How do I protect what I already have?”

It’s a wealth management question we hear every day.

After all, you’ve worked hard to gain what you have. You’d hate to see it frittered away.

Finalizing your wealth protection strategy is best accomplished when you and your financial advisor build a plan that reflects your risk tolerance and long-term financial goals. At the same time, there are things you can do to put yourself on the best possible path before that meeting. That’s where this article comes in.

Today I want to discuss the strategies you can use, loosely based on your age. We see folks every day that have addressed these issues at all ages; some are proactive twenty-somethings, others are later to the game, and some are addressing them at retirement.

ESTABLISH A FOUNDATION IN YOUR TWENTIES AND THIRTIES

Time is your friend during these decades, so don’t waste it. Good habits created earlier in life are easier to adhere to over the long haul.

Protect your wealth by focusing on budgeting now and saving for retirement. This is a great time to get in the habit of maximizing Roth contributions via an IRA or your employer’s 401(k) plan, if available. You’ll thank yourself later.

If your income level prevents you from a traditional Roth contribution, contribute to a non-deductible IRA instead and make sure your tax preparer is tracking these contributions. Try and get used to maxing out your eligible retirement savings every year. Experience says it will be much harder to make lifestyle adjustments in your fifties and sixties, if you are underfunded for retirement.

If you have children or other dependents, get a will and guardianship document in place and strongly consider getting financial and healthcare powers of attorney as well.

Get ahead of the curve if you have children by opening a 529 immediately to fund their future education expenses. If you can, you should superfund or “front load” it—a tax provision allows you to contribute up to five times the annual gift exemption (currently $15,000 per person) all at once.

The single biggest factor in retirement success is developing a budget and savings plan now to support your long-term financial goals. Many people make the mistake of falling into lifestyle creep in these early years—meaning they increase their discretionary spending as their income increases. Instead of spending more as you make more, save more as you make more to take advantage of the compounding power of time.

To repeat: developing and keeping a budget (and saving as planned) is one of the most important factors in being prepared for retirement.

BRING STRATEGY TO YOUR FORTIES AND FIFTIES

Now is a good time to become more strategic with your investing and develop a formal investment policy that prevents you from making emotional decisions around your portfolio. Your financial advisor can help you through the important decisions here, but start by limiting individual stocks to no more than 5 percent of your portfolio. The same concept is even more recommended for speculative investments (such as investing in your college friends’ kid’s startup!).

Keep riskier ventures to no more than 5 percent of your portfolio and be sure you can afford to lose ALL of this money if the speculative investment or individual stock fails.

Everybody thinks they’ve identified the next unicorn. But don’t bet your retirement on it. Learn what your risk tolerance is and build a portfolio that aligns with it and your long term needs.

And while you’re finalizing your investment plans, try to maximize your portfolio’s tax efficiency by ensuring the right types of investments are in the right accounts. Tax inefficient assets like bonds and bond funds should be in tax deferred accounts. High growth, tax inefficient assets are perfect for your Roths, etc. Your financial or tax advisor can help you with this task.

Shore up your risk management by reviewing insurance with your broker. Address the worst-case-scenarios by getting an umbrella policy to cover your net worth in the event of a major claim or lawsuit against you. Inventory high-value items in your home and make your insurer aware of them. Review your long term disability policy carefully.

Many folks can’t imagine they will not be able to work until the day they retire. Unfortunately, the reality is that some will be disabled—often during their highest income earning years. Without coverage, your retirement will be negatively impacted.

Finally, consider long-term care options for the services that Medicare won’t cover. If premiums are too high, plan for the alternative (which is paying out of pocket).

MAKE THE MOST OF YOUR PLANS IN YOUR SIXTIES, SEVENTIES AND BEYOND

You may think the work is done once as you near retirement, but the truth is, there’s still plenty to do. For starters, weigh your options on the timing of Social Security, as starting too early may not be in your best interests. Consider your family longevity, personal health and other income sources.

If you are charitably-minded, consider making charitable gifts directly from your IRA to satisfy your required minimum distributions and also reduce your total income, which has other tax-related benefits (such as reducing potential Medicare income-related surcharges).

Finally, if you’ve been delaying it, this is the time you must think about your legacy and the future of your loved ones. Develop an estate plan with a professional to not only protect your wealth but the transfer of assets to your survivors or charities of choice.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future  performance of any specific investment, investment strategy, or product (including  the  investments  and/or  investment  strategies  recommended  or  undertaken by Private Ocean,  LLC [“Private  Ocean”]),  or any  non-investment  related  content,  made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated  historical  performance  level(s),  be  suitable  for  your  portfolio  or  individual situation,  or  prove  successful.  Due  to various  factors,  including  changing  market conditions  and/or  applicable  laws,  the  content  may  no  longer  be  reflective  of  current opinions  or  positions.   Moreover,  you  should  not  assume  that  any  discussion  or information  contained  in  this  blog  serves  as  the  receipt  of,  or  as  a  substitute  for, personalized investment advice from Private Ocean.  Please remember that if you are a Private Ocean client, it remains your responsibility to advise Private Ocean, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/ evaluating/ revising our previous recommendations and/or services, or  if  you  would  like  to  impose,  add,  or  to  modify  any  reasonable  restrictions  to  our investment advisory services. To the extent that a reader has any questions regarding the applicability of any  specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Private Ocean is  neither  a  law  firm  nor  a  certified  public  accounting  firm  and  no  portion  of  the  blog content should be construed as legal or accounting advice. A copy of the Private Ocean’s current written disclosure Brochure discussing our advisory services and fees is available for  review  upon  requestor  at www.privateocean.com. Please note: Private  Ocean does not  make  any representations  or  warranties  as  to  the  accuracy,  timeliness,  suitability, completeness,  or  relevance  of  any  information  prepared  by  any  unaffiliated  third  party, whether  linked  to Private  Ocean’s web  site  or blog  or  incorporated  herein,  and  takes  no responsibility  for any  such  content. All  such  information  is provided  solely  for convenience  purposes  only  and  all  users  thereof  should  be  guided  accordingly. Please also note: If  you  are  a Private  Ocean client, please  advise  us if  you  have  not  been receiving account statements (at least quarterly) from the account custodian.