Key takeaways
High interest rates, persistent inflation and economic uncertainty mean it’s more important than ever to have a family wealth-preservation strategy.
Wealth preservation strategies include having a financial plan, an emergency fund, investment diversification and insurance.
It’s wise to engage a financial professional to help you build a financial plan, and you should review your plan annually or as your circumstances change.
You’ve worked hard to build your net worth, so wealth preservation is always top of mind. In today’s economy, however, it may feel especially challenging. With continued high interest rates, persistent inflation and economic uncertainty, it’s important to have a comprehensive financial strategy in place.
Protecting your wealth requires a combination of strategies. Working together, these six strategies – including a well-funded savings account, diversified investment portfolio and insurance – may help preserve your wealth and build a family legacy for the future during a challenging economic environment.
“Having a financial plan is step number one,” says Robb Clasen, Wealth Management Advisor with U.S. Bancorp Investments. “You need to seek clarity in what you want to see happen with your wealth. For example, are you saving for retirement or future healthcare expenses? Do you want to leave a financial legacy for your children and grandchildren?”
An experienced financial professional can work with you to identify your financial goals and recommend actions to help you reach them.
If you already have a financial plan in place, take time to review it annually. “Life happens and things change, so you need to make sure your financial plans are still on track,” says Clasen. Make sure your plan evolves as your life changes and as you age.
Having money that’s earmarked for emergencies or future spending can help you better manage both unplanned events and your day-to-day cash flow. Clasen recommends having at least three to six months of living expenses on hand in a liquid savings account.
“When you understand your monthly cash flow, you can better understand your financial ability to save for emergencies,” he says.
Clasen recommends having money automatically transferred into a savings or money market account so you don’t miss it. This way, you have funds immediately available to cover unexpected large expenses, like major home or car repairs or medical bills, without being forced to prematurely withdraw money from a retirement account or certificate of deposit (CD).
Having tools in your portfolio that “zig” while others “zag” can help minimize the impact of market volatility. Diversification means not putting all your money into investments that are in the same risk class, and it can work on several different levels.
With bonds, for example, you can diversify across types of bonds or industries. You might buy some from the financial industry, some in technology and some industrial. Then, if one sector of the economy weakens, not all your investments will be subject to that particular weakness.
“Portfolio diversification should be reviewed on a regular basis,” says Clasen. “This goes beyond just your investment portfolio and includes all your assets, such as your home, automobiles and collectibles.”
“Most people hire a mechanic to work on their cars, so why wouldn’t you hire a trained professional to help preserve your wealth?”
Robb Clasen, Wealth Management Advisor for U.S. Bancorp Investments
Annuities, as well as life, disability and long-term care insurance, can help protect your assets from unexpected changes to your family, career or health. These changes could include premature death, long-term disability that prevents one or both spouses from working and earning income, or serious illness later in life that can wipe out a retirement nest egg.
“Insurance is part of a holistic financial plan,” says Clasen. “I advise clients to buy as much term insurance as they can when they’re young, because it’s inexpensive.” At age 40 or 50 and over, however, term insurance can become cost prohibitive.
Permanent life insurance can be a good diversification play, offering protection along with cash value and an investment component. And some life insurance products can be used for long-term care. This way, if you end up needing long-term care support, your family doesn't have to worry about paying for it, because you've got a plan.
Thoughtful financial planning, from a tax diversified investment portfolio to a charitable giving strategy, may help reduce your tax liability. This requires working with your tax and legal professionals to make sure that everything ties together.
“It’s important to understand the impact of taxes on wealth,” says Clasen, who works with clients to design investment portfolios with tax sensitivity in mind. For example, annuities can be a good tool, as they can grow tax deferred.
Other opportunities for tax savings include Roth IRA conversions, which allow you to convert a traditional tax-deferred IRA into a Roth IRA. Roth IRA funds are taxed now, so you won’t pay taxes on the money when you withdraw it in retirement or be subject to required minimum distributions.
A will, a trust and other estate planning documents can help safeguard your wealth for your family and the causes you care about. For families who have a small number of assets, a will might be enough. But if your family has more complex needs, or you have a business or investment property, it's important to work with an estate planning attorney.
Without a clearly defined estate plan, assets could end up in probate, and the courts might decide how they’re distributed. This makes estate planning essential for everyone, regardless of the size of the estate.
It’s critical for affluent individuals and families to work with a financial professional who can help protect their wealth both now and in the future.
“Most people hire a mechanic to work on their cars, so why wouldn’t you hire a trained professional to help preserve your wealth?” says Clasen. “A financial professional understands all the ramifications involved in long-term wealth preservation and legacy building.”
He recommends setting up an introductory meeting as a first step. “Look for someone who aligns with your personality and values,” he says. “This will be a long-term partnership, so use care in choosing the right individual for you and your family.”
Wealth preservation strategies are best handled with an experienced team of wealth specialists. Learn how we can help you protect the money you’ve worked hard to earn.
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