Preserve Capital for Retirement: A Complete Guide for High Net Worth Individuals
For people who own more than $10 million in investable liquid assets,one of the biggest concerns is about devising an effective strategy to preserve capital for a peaceful retirement. As an affluent individual, you’ll naturally want to enjoy your life’s successes and thrive in the golden years.The idea is to minimize your costs and financial risks to feel more secure down the line.Working with a financial advisor makes the entire process easier.Discover the best tips for choosing the right expert in our exclusive guide here.
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.
Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
You can also schedule a free consultationwith one of the financial specialists at Pillar Wealth Management. Our team has thirty years of experience working with affluent individuals with $5 to $500 million in investable wealth. We will help you create a solid action plan to preserve capital for retirement based on your unique financial situation, needs, and goals.
Let’s dive in to find out how you can protect your retirement savings.
Table of Contents
How Do You Preserve Capital in Retirement?
Whether you’re already there or still have a few years to go to reach your retirement, you need to find a way to protect your savings and ensure that you’ll have enough capital throughout the golden years.
Capital preservation also serves as a buffer, helping you deal with market downturns when you don’t have enough time to overcome losses. Ideally, you should plan for a 30-year retirement period.
Below are a few tips that will help you preserve capital in retirement.
Stay on Top of Healthcare Costs
Long-term healthcare costs should be a core focus of your retirement planning.You must have a dedicated pool of money for these expenses.You can also opt for long-term healthcare insurance. Make sure that you start early to lower the annual premiums.
Apart from this, if your employer offers a health savings account, you must take advantage of it and enjoy triple tax benefits.
Be Wary of Inflation
Inflation affects your retirement capital by eating away your purchasing power. Social security and some annuities and pensions help adjust the annual cost of living and market performance. You should choose investments that help you keep pace with inflation. Growth-oriented investments, real estate securities, and commodities help diversify the portfolio and reflect your risk tolerance.
Create a Well-Balanced Investment Strategy
You must avoid overly conservative investment strategies as much as overly aggressive ones.If you take the conservative route, you may expose your portfolio to unnecessary risks. On the other hand, aggressive strategies increase the chances of losing your money in volatile or down markets.
To preserve capital, you must look for portfolio diversification. Invest in stocks, bonds, and short-term investments based on your financial situation and comfort level with market volatility.The key is to create an investment strategy that balances growth potential and financial risk.Apart from this, there are five essential shifts every high net worth or ultra high net worth individual should make to preserve maximum capital for retirement. Read all about these shifts in our helpful guide here.
Devise a Sustainable Withdrawal Plan
If you want to preserve capital for a peaceful retirement, you must avoid withdrawing too much from savings.It is best to use conservative withdrawal rates, especially if you want to cover essential expenses.
The best way to go about this is by working with a financial advisor to develop a retirement income plan.Expert assistance and support will ensure that you don’t run out of money in retirement, regardless of market conditions.
Are Capital Preservation Funds Safe?
Yes, they are. Capital preservation funds come in handy in unstable markets, as they aim to minimize your losses. However, they don’t guarantee to grow your wealth. High net worth and ultra high net worth individuals who possess $5 to $500 million in liquid assets usually fear market downturns. Hence, they invest some of their wealth in these funds.
That being said, it is crucial that you devise an effective investment plan and find ways to minimize market losses when investing in capital preservation funds. While all of these funds aim to preserve capital for your retirement, their investments remits are very different. You must choose the ideal type of fund for your individual needs based on the kind of market that lies ahead.
A professional financial advisor can help you understand your financial situation, evaluate your risks, and make a smart decision regarding capital preservation funds.
To find out if investing in capital preservation funds is the right decision for you,contact our expert team at Pillar Wealth Management today.
How Do You Protect Capital?
Capital protection is a top concern for affluent individuals. When you invest your money, you obviously wish not to lose it. This doesn’t mean you should sell your investments as soon as you see that things aren’t going in your favor. The key is to stay on top of your investment movements, risk tolerance, and the losses you can endure.
As much as you want your wealth to grow, you should focus on preserving capital for successful long-term investing. Give our book,The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies For Families Worth $25 Million To $500 Million, a quick read to learn about all the secrets of wealth preservation for affluent people.
With the following strategies, you can protect your portfolio and lay a strong foundation for a financially secure retirement.
Focus on Portfolio Diversification
The only way to protect your portfolio and optimize its performance is by embracing diversification. In difficult market conditions, a well-diversified portfolio is likely to outperform a concentrated one. You can eliminate unsystematic risk from the equation by investing in multiple asset classes.
Partner with an experienced financial advisor to find reliable ways to diversify your portfolio and protect your assets. Moreover, to gain valuable insights into portfolio optimization for the wealthy, don’t forget to read our guide here.
Add Non-Correlating Assets to Your Portfolio
No matter how diversified your portfolio is, you can’t eliminate systematic risk completely. One way to reduce it is by adding non-correlating assets to the equities in your portfolio. These include bonds, currencies, commodities, and real estate.
These assets have different, often opposite, reactions to market conditions as compared to stocks. Oftentimes, when stocks are down, these assets are up, and vice versa. Hence, you can smooth out your portfolio’s volatility by investing in non-correlational assets.
You must also know that these assets offer more balanced returns by eliminating performance highs and lows.
Invest in Dividends
To get above-average returns on investments, you should consider investing in dividend-paying stocks. Look for stable companies that offer reliable dividends. They will serve as a cushion for your portfolio performance when stock prices are going down.
If you’re more of a risk-averse investor looking for lower volatility, this may be the best strategy for you. For more information on the benefits of investing in dividends, feel free to get in touch with a financial advisor at Pillar Wealth Management.
Additional Options for Capital Preservation in the Long Run
If your retirement is well into the future and you don’t need money in the next few years, you can add fixed income securities to your asset mix.This creates a wide range of options for you.
Treasury bills and savings accounts also qualify for this longer-term category. This means that you can get FDIC-insured deposit certificates with a five-year maturity period to maintain the safety guarantee with a high interest rate.
You can also consider the following options to preserve capital for retirement.
• Municipal bonds that will mature at the earliest date before your retirement
• Corporate bonds that will mature at the earliest date before your retirement
• S. savings bonds
• S. agency bonds that will mature at the earliest date before you may need money
The risks that come with these options include the credit risk based on the financial status of the person issuing the bond, interest rate sensitivity, and unforeseen changes in the timeline of when you will need the money. If you prefer going long-term,you may lose potential profits in case there’s an increase in the interest rates. On the other hand, with a short term, you may get less interest than longer-term choices.
The best way to go about this is by staying on top of your expenses and taxes.Help from an expert financial advisor is essential here. These professionals know the nuances of high net worth investing and market changes.They can guide you based on your unique needs and goals.
Keep Your Emotions Out of the Game
Impulsiveness and retirement planning don’t make a good combination.If you want to preserve capital for your golden years in the most efficient and reliable way possible, you must avoid your emotions taking over your financial decisions.
As an affluent individual, the risks, obstacles, and challenges you encounter on the path to retirement planning are more complicated than an average American.Your emotions shouldn’t get in the way of making smart, well-informed choices.
When you see the value of stocks going down, you may be tempted to sell your shares to prevent losses.However, successful investors prefer staying the course and waiting to act until the market downturn is well underway.To keep their asset allocation in check, they often end up purchasing more stocks when the value is down. This allows them to enjoy greater profits when the market rebounds.
You must understand that market ups and downs are inevitable. You must think straight and have a steady hand to handle the fall outs. Instead of associating risks with unfortunate events, see them as unexpected events that may or may not be good for you.
The best way to ensure that your emotions don’t overpower important financial decisions is by hiring a financial advisor.They will act on your behalf to help you preserve capital for the golden years.
Create Smart Strategies to Preserve Capital With Pillar Wealth Management
Capital preservation is one of the top priorities of high net worth and ultra high net worth individuals.
With Pillar Wealth Management, you can expect to receive personalized advice and assistance for retirement planning. Our financial advisors boast three decades’ worth of experience in wealth management, working with affluent individuals who possess $5 to $500 million in investable wealth.
Our team will assess your financial situation, determine your long-term goals, and discuss your expectations before creating a plan to diversify your portfolio and enhance its performance.We will stand by you at every step of the way, helping you maximize your gains while minimizing your costs and risks.
If you’re looking for expert advice to preserve capital for retirement, please schedule a no-obligation consultation with our team today.
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