Retirement (choosing to no longer work) is a goal that many people aspire to, but not everyone is sure how much money they need to save up to comfortably live out their golden years. One common figure that gets thrown around is the $2 million mark. However, given today’s economic uncertainty and increased life expectancies, many are questioning whether this figure is still enough.
Fortunately, the short answer is, By strategically planning out your business and personal finances, a $2 million-dollar nest egg can be used to prepare an enjoyable exit from the workforce. That’s why I’m delving into the various factors that come into play below.
This article examines these topics:
- Inflation, market volatility & a possible recession on the horizon;
- Even savings & portfolios for the affluent need defensive measures;
- With a strategic focus, you can still plan on retiring comfortably;
- Leverage Mitch Silberman as your Personal CFO in Brentwood.
Inflation, Market Volatility, & a Possible Recession in 2023
Inflation is a hot topic for many people right now. Prices for goods and services have been rising steadily, with no clear end in sight. The Federal Reserve has taken some steps to address inflation, such as raising interest rates and tapering its bond purchases. However, many believe these actions may not be enough to bring inflation under control.
One factor contributing to inflation is the ongoing supply chain disruptions that began during the pandemic. As businesses continue struggling to obtain the materials they need to produce their goods, prices continue rising. Simultaneously, while the purchasing power of the dollar declines, the price of raw production materials climbs.
Meanwhile, 2022 was marked by significant swings in stock market prices, leading some to believe volatility will continue for the foreseeable future. Despite a few positive economic indicators, there are still many reasons to be concerned about a potential recession later this year, as well.
While it’s impossible to predict exactly what will happen in the coming months, even the affluent should be cautious. Inflation, market volatility, and the potential for a recession are all major risks that could impact portfolios and lifestyles. As always, it’s important to plan proactively, diversify your investments, and keep your long-term goals in focus.
Even Savings & Portfolios For the Affluent Need Defensive Measures
It’s easy to assume that those with significant wealth and assets are immune to the effects of economic downturns. The truth, however, is that most unprotected nest eggs are vulnerable. One of the primary reasons for this is the negative impact of inflation on currency’s value, thus increasing the price of goods and services over time.
In other words, the same amount of money will buy you less and less over time. Inflation’s dollar-sinking effects mean that everyone’s money is worth less, regardless of how much you have in their accounts. So, even significant assets’ value can be eroded by inflation over time.
Many of us are used to living in a certain way, with a certain level of income and spending. This makes it tempting to assume that we’ll be able to maintain that lifestyle in retirement. However, keeping an up-to-date financial roadmap toward that objective is necessary for that assumption to prove true.
Another factor that can leave even the millionaire next door vulnerable to economic downturns is an economic recession. Especially when this happens during an inflationary period, even those with significant assets can be highly concerned. Asset prices can plummet, leaving the unprepared with substantial losses.
Fortunately, that outcome isn’t unavoidable. In the section below, I discuss some of the tactics we have to apply proactively.
With a Strategic Focus, You Can Still Plan on Retiring Comfortably
By getting strategically proactive, it’s possible to mitigate these potential drains on your nest egg. For example, to combat inflation, you might consider investing in assets that traditionally do well during periods of high inflation, such as real estate owning shares of the great companies of America and the world. These tend to hold their value, even as the purchasing power of paper money declines.
You should rather consider fortifying your portfolio against market volatility, wherever possible. To protect against sudden drops, you need to have true diversification, consider non-traded assets as well as building in risk mitigants into your overall portfolio. This way, you own assets that “zig” when the others “zag”. For example, if you have a concentrated position in a company that is facing challenges, your other assets should remain unaffected. Ownership in an apartment building held as part of your retirement isn’t likely to lose value, at all (particularly since real estate is often inflation-resistant).
In fact, in time, if another unrelated investment vehicle sees gains, you might recoup your losses and, possibly, end the year ahead of where you were. Pair these possible gains with an ongoing series of tax-reduction measures and you’ll make the most of your deductions and credits over a decade or more. This scenario can clearly lead to a comfortable retirement derived from your hard-earned investments accumulated over decades.
Leverage Mitch Silberman As Your Personal CFO in Brentwood
When it comes to managing your finances, having a trusted advisor provide leadership can make all the difference. That’s why I have become a go-to choice for individuals and families in Brentwood seeking a personal CFO. Put another way, Silberman Wealth Strategies, my firm, specializes in providing concierge financial advising and asset management.
One of the most common services we provide is endowment investing. This takes discipline, but it can be ideal for economic times like these because it involves creating a diversified portfolio of assets, many of which are not in the volatile traded markets. Your portfolio is tailored toward predictability and a reliable stream of income over time, as well.
It requires a long-term outlook and a willingness to weather short-term fluctuations in order to seek long-term gains. Nevertheless, this approach can help toward smoothing out market volatility and reducing the risk of large losses. Helping our clients make use of advanced strategies is our honor and privilege as a high-net-worth financial advisor.
Overall, asset protection tends to work best as a comprehensive financial planning process. However, I’m never content to stop there. While I can’t give out guarantees (any more than I can predict what you’ll have for lunch on this day next year), I always prefer to see clients receive gains; not simply survive downturns intact.
I believe that what sets me apart, as a personal CFO, is my ability to tailor a multifaceted financial plan; a long-term road map to each client’s unique needs and goals. This means taking the time to get to know you on a personal level; understanding your values, priorities, and aspirations, even before we agree to work together.
Silberman Wealth Strategies is ready to help you live an amazing life of significance by protecting your assets, seeking returns through long-term discipline, strategizing to fortify your retirement, and more. Contact us to schedule a meeting.
The views stated in this piece are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities. Due to volatility within the markets, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Cetera does not offer direct investments in commodities. Converting from a traditional retirement account to a Roth retirement account is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes. Re-balancing may be a taxable event. Before you take any specific action be sure to consult with your tax professional. The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value
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For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Some IRA’s have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. A diversified portfolio does not assure a profit or protect against loss in a declining market.