Mistake # 1 – Negligent Investment Management

Wealthy individuals may have a lot of money, but they often lack control over where it is invested – and this can cost them in the long-term. A well-diversified portfolio is optimized to achieve the best possible return with the least amount of risk to weather the storms of both up and down markets.

Do you know the expected return of your assets?

Are you taking too little or too much risk?

Hiring a financial planner to manage your assets based on your goals and objectives enables you to create a plan designed to work towards your long-term goals. Please click here to book a financial planning meeting.

Mistake # 2 – Neglecting tax diversification

Tax now, tax later or tax never? Which one will help you reach your retirement goals? A lot of retirees are surprised when they turn 70½ and start taking their withdrawals, only to discover that their tax bill gets a whole lot higher. That’s because the money they take out of their retirement accounts for living expenses is treated as federal taxable income, and they are often taxed at their highest tax bracket. IRAs and 401(k)s might enable you to save on taxes during the contribution phase, but you end up paying a hefty sum in your retirement years when you withdraw.

A more tax-efficient solution is investing in vehicles like Roth IRAs, Roth 401(k)s, and Insurance products that allow you to enjoy a valuable stream of tax-free income when you’re retired. Please click here to book a financial planning meeting to create a tax-diversified portfolio that positions you best for retirement.

Mistake # 3 – Clinging to Traditional Strategies

When planning for retirement there are more options than just 401(k)s, IRAs, and Roths. Wealthy investors might want to include alternative investment products into the mix to take advantage of extra benefits, such as:

  • Stop Loss Guarantees. Through indexed products, for example, your portfolio will participate in up markets, but not go below zero. With a ceiling of 12% and a floor of 0%, your assets might deliver a better overall return than if you over expose yourself completely in the market without these limits. For example, the historical average of the S&P500 from 2000 to 2015 was only 4.06% for an investor who started with $100,000, because of the 37% drop in the S&P500 in 2008.*
  • Tax-Free Withdrawals. Alternative investments can offer tax-free growth and tax-free withdrawals. You could possibly earn several hundred thousands of dollars more, if you pay tax upfront and then enjoy life-long tax-free withdrawals.
  • Flexibility for Your Money. Alternative investments allow wealthy individuals more flexibility in terms of how much you can take out and when. Some products have no IRS penalty to access funds before age 59 ½, you have the option to use funds for college education, and there’s no IRS requirement to withdraw funds at age 70 ½.

Please click here to book a financial planning meeting to learn about alternative investment options that might suit your needs.

Mistake #4 – Underestimating Longevity

Statistics show that people are living longer, but most people are not financially preparing for it. If you’re planning to live to 85, but you make it to age 95, you’re going to come up short in your savings. But if you plan for 95 and live till 85, however, you will live comfortably and have something left to pass on. Please click here to book a meeting so we can create a retirement plan that incorporates a long-life scenario.

Mistake #5 – No Second Opinion

If you are not certain that your financial planner is adding value to your financial investments, or if you haven’t had a financial review in the last twelve months, then you should seriously consider a Portfolio Second Opinion. Regardless of whether you decide to switch advisors or not, getting a Second Portfolio Opinion enables you to find out if there are opportunities to position your investments and savings in an efficient way as opposed to just leaving things as they are. Being armed with more information and a greater understanding of your goals and potential outcome, increases your confidence that your financial plan is on target.

I hope this article has helped you to become aware of the common mistakes that wealthy people make. If you are looking for a fee-only financial planner, book a consultation meeting with me. I would be delighted to help you work towards your financial goals and find the best solutions for you.

*Sources: Yahoo! Finance GSPC Historical Prices and StandardAndPoors.com. This historical performance of the S&P 500® is not intended as an indication of its future performance and is not guaranteed.

Integrated Life and Financial Planning does not offer legal or tax advice. This material is not intended to replace the advice of a qualified tax advisor or attorney. Please consult legal or tax professionals for specific information regarding your individual situation.

“No theory, strategy or Asset Allocation assures success or protects against loss. This material is for general information only and is not intended to provide specific advice or recommendations for any individual.  To determine what appropriate for you, consult a qualified professional.”