The skills required to build wealth differ from those needed to keep wealth. Just as you had a goal initially to develop your wealth, you now need a goal and skill set to maintain it for the future.
To accomplish this, we need to address three main things:
- Your 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.
Whether that goal is traveling more, purchasing a second home, or leaving an inheritance for your next generation, your financial plan needs to account for your personal choices and where you choose to spend your wealth.
Making a Budget, with Room to Spare
With your goals laid out, the second step is developing a plan to pay for these items while 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.
Determining how much it will take to accomplish one or more of your goals is essential.
For example, If you desire a second home, your financial plan and budget would account for this goal and make sure you can afford it without dramatically impacting living expenses and other needs. This is generally accomplished by running a financial analysis to show the impact of the extra expensive on your portfolio over the next 20-30 years.
Executing Your Spending Plan
When it comes to putting your plan into action, the first few years of retirement are crucial for establishing good habits. Suppose you aren’t used to living on a budget. In that case, 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.
Revisiting Your Plan Regularly
The final step to maintaining wealth is by continuing to re-evaluate your financial plan to ensure it continues to reflect your life changes and goals. You may find you are spending more money than anticipated or even have some savings that can be used for new activities. Many retirees find their plans change over the years to accommodate their vision and account for unique needs.
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 hard-earned wealth for many years to come. That’s a goal all of us can agree on.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. CMAX #1-05321001.