A retirement plan for high net worth individuals can help accumulate assets that will be used during their retirement years.
These plans can also reduce the tax burden on workers with large incomes and significant assets.
In this article we cover the importance of retirement plan and things you should consider for your retirement plan.
Why plan for retirement?
Everyone wants to enjoy a comfortable retired life. But not everyone is financially prepared for it when the time comes. It is never too late to start planning for retirement as long as you have some savings to invest.
Those who have accumulated wealth need to think about how they can maintain their current lifestyle in old age without being dependent on others or exhausting their savings.
There are many reasons why it is important to begin planning for retirement now:
Retirement planning will allow you to set goals and work toward achieving them by saving more and investing effectively.
You can protect yourself against unexpected events such as job loss or early death.
Planning ahead will help you make better financial decisions throughout your life.
What to consider when planning for retirement?
When planning for retirement, high net worth individuals face distinct challenges. For example, they may have a greater need to diversify their assets and a more intricate estate plan compared to someone with a more modest net worth.
In addition, they may face higher taxes on retirement savings and income, along with the potential of estate taxes that can further impact the legacy they leave behind.
For those with significant wealth, developing a plan that meets all these needs and helps achieve their financial goals is vital. Here are some things to consider as you prepare for retirement:
How do you want to spend your retirement?
What kind of lifestyle do you want?
Do you plan on traveling?
Do you want to spend more time with family and friends?
Are there hobbies you want to pursue?
Will you need to pay for healthcare for yourself or a loved one?
Will you have any income from Social Security, annuities, or pensions in retirement?
Array of Investment Options
High net worth individuals have a wide array of investment options for retirement. As a result, it can be difficult to determine the best mix of investments for your retirement. Your age, income and financial goals should be considered when determining the best investment plan for you.
Tax-Advantaged Plans
Retirement plans for high net worth individuals may include tax-advantaged plans, such as 401(k)s or IRAs. The money that you contribute to these accounts is not taxed until you withdraw it, at which point you will likely be in a lower tax bracket.
Many retirement investors use these plans because they provide a tax deduction and allow the investor to grow their money faster due to tax deferral. However, you are limited by the amount that you can contribute annually to these plans. Additionally, if you withdraw funds from these accounts before age 59 1/2, you will incur an early withdrawal penalty of 10 percent.
Brokerage Accounts
An investment option that offers no limits on contributions is a brokerage account, whether it’s an individual or joint account. These accounts are easy to open and offer many different types of investments including stocks, bonds and mutual funds.
Flexibility for Unanticipated Life Events
A high net worth individual faces unique challenges when preparing for retirement. In addition to the expected expenses, such as travel and charitable donations, there are other concerns to address.
At this stage of life, unanticipated health care costs can be a major factor in retirement planning. Between co-payments, deductibles and uncovered medical procedures, it is possible to deplete a lifetime of savings in a short period of time. A high net worth individual needs to plan for that possibility through insurance coverage.
Capital preservation – An unexpected market downturn can have a devastating impact on an underdiversified portfolio. A holistic approach to wealth management helps reduce the likelihood of such an event.*
Estate planning – A sophisticated estate plan will prepare for any scenario involving death or incapacity.
Tax planning – The tax implications of wealth accumulation are often overlooked. A high net worth individual needs to consider tax impact at every stage of retirement planning.
Legal counsel – Estate planning and tax planning require expert advice from legal counsel and accountants.
Tax Preparation and Planning
Wealthy individuals have unique needs and require customized planning. At Creative Financial Design, we work with high net worth individuals to develop a custom retirement strategy that fits their needs. Our customized plan for high net worth individuals may include:
Tax Preparation and Planning should be first step in your retirement plan. If you are not paying the correct amount of taxes, or paying them too late, you can be missing out on valuable tax savings opportunities
Wealth Preservation – This is an important part of retirement planning for high net worth individuals. Your wealth has taken so long to accumulate and needs a strong strategy to preserve it
Conclusion
High net worth individuals typically use retirement plans to create a steady stream of income during retirement. The plans are also often used to transfer wealth to future generations.
But how do you know if a high net worth retirement plan is right for you? A financial advisor can help you determine if the advantages of these types of plans outweigh the disadvantages, and which type will be most advantageous for your situation.
High net worth individuals typically use retirement plans to create a steady stream of income during retirement. The plans are also often used to transfer wealth to future generations.
But how do you know if a high net worth retirement plan is right for you? A financial advisor can help you determine if the advantages of these types of plans outweigh the disadvantages, and which type will be most advantageous for your situation.