Mitch Silberman, Founder & CEO of Silberman Wealth Strategies, Inc. provides wealth management services in and near Nashville, TN. Here is his insight:
I’ve provided wealth management services to successful executives, professionals, entrepreneurs, and business owners who have accumulated substantial wealth for over 30 years. The number one concern I hear most often is about retiring and living comfortably for the rest of your life. Would you be surprised if I told you a frequent concern is: “Can I retire and live comfortably on $5 million?”
This concern makes sense when considering today’s uncertain economic environment: Inflation, recession, interest rates, taxes, and stock market volatility. Affluent individuals with savings and investments of $5 million or more are understandably concerned about having financial security throughout their life. The economic environment and other concerns should be factored into a personalized financial plan that can outlive you and your spouse.
Even though $5 million seems like a lot of money, many challenges can impact your financial well-being later in life.
Are you looking to create an amazing life of significance for you and your family? Be sure to read our latest Quick Guide.
Longevity Risk
This refers to the uncertainty of an individual’s lifespan, posing a significant challenge in retirement planning. It concerns the possibility of outliving one’s retirement savings due to the longer-than-expected lifespans of one or both spouses.
With advancements in healthcare and healthier lifestyles, average life expectancies are increasing, possibly creating a hidden financial risk. In particular, when you consider the rapidly rising costs of assisted living, skilled nursing, and memory care.
This will require careful planning and well-thought-out strategies, which could include annuities, diversified investments, and long-term care insurance, to produce a more stable source of income and healthcare coverage later in life. Understanding and managing longevity risk is vital for preventing financial stress late in life when you may have fewer options.
Inflation Risk
Inflation is all about your purchasing power; therefore, the risk of inflation is a critical consideration in retirement planning. This risk arises from the potential decrease in purchasing power over time due to rising prices on essential items, including and especially healthcare. As costs of goods and services rise, fixed income streams like pension benefits may fall farther and farther behind. This will erode the purchasing power and quality of life for individuals living on fixed incomes with no practical way to increase their incomes.
To combat this risk, investment portfolios should be diversified to include assets with growth potential, such as stocks or real estate, that can outpace the inflation rate.
In addition, certain investment products such as inflation-protected securities (TIPS) may provide some defense. Regular reviews and adjustments of retirement strategies are also necessary to manage this risk effectively. The cost of living tends to rise over time due to inflation. What $5 million can buy today will almost certainly be much less in 20 or 30 years. Therefore, the $5 million purchasing power could be greatly reduced in later retirement years.
Investment Risk
Investment risk in retirement planning refers to the uncertainty surrounding the potential returns of your retirement investments. As you age, your risk capacity and tolerance typically decrease, requiring a shift from riskier investments (like growth stocks) to safer options (intermediate bonds). Therefore, a balance must be developed to ensure your portfolio is able to withstand market volatility and inflation. Diversifying investments across different asset classes may help manage this risk, but the ideal strategies still depend on your circumstances and lifestyle.
Healthcare Costs
I’ve often said that you have three distinct stages in your retirement: The Go-Go Years; the Slow-Go Years and the No-Go Years. Therefore, healthcare costs, frequently taken for granted, should be crucial in retirement planning strategies. Even with $5 million of available assets, without proper planning, escalating healthcare expenses could badly damage your retirement nest egg. And as you age, healthcare expenses rise, possibly outpacing the inflation rate. Chronic illnesses or long-term care needs can cost thousands of dollars per month.
There are certain strategies that can help you build a protective moat around your financial castle: Private health insurance, Medicare supplements, and long-term care insurance can help you manage these expenses and protect your retirement lifestyle. Therefore, it’s critical to incorporate projected healthcare costs into your retirement plan to ensure your hard-earned assets will provide the secure, comfortable retirement you envision.
Tax Liabilities
Many people don’t realize that taxes are typically their largest annual expense, so understanding and managing your tax liabilities should be at the forefront of your retirement planning efforts, especially when drawing income from various types of retirement accounts. For instance, withdrawals from traditional IRA and 401(k) accounts are taxed as ordinary income, regardless of your age. Roth IRA withdrawals, however, are typically tax-free. Consulting with a financial advisor who can help you navigate complex tax codes will help you protect your financial future.
Legacy Goals
Since you’ve worked hard to build substantial wealth, having an estate and legacy plan that addresses how your assets will be distributed may be a high priority for you and your family. I have found many clients enjoy having what I term ‘control from heaven’.
A comprehensive estate and legacy plan ensures your wealth is distributed per your wishes, possibly reducing potential family conflicts. It can also be designed to minimize estate taxes, maximizing the amount that goes to your heirs.
A legacy plan can also go beyond the generational transfer of money. It can also provide for philanthropic interests by supporting charitable organizations you believe in.
Why Work with a Personal CFO?
At Silberman Wealth, our clients often seek a financial professional as their Personal Chief Financial Officer. They are looking for a wealth management team that offers highly personalized guidance and advice to help them preserve and grow their wealth and formulate a plan based on living a life of substance that aligns with their goals, values, and beliefs.
As your Personal CFO, we focus on understanding your unique goals, needs, and aspirations. We work closely with you to craft a comprehensive wealth management strategy that aligns with your vision for an amazing life of significance.
We also develop comprehensive estate and legacy plans to secure the future of the people who matter most to you. This can include ensuring your spouse, children, or other dependents are financially secure. Our Personal CFO services can help you structure your estate, build education savings plans for your children and grandchildren, and create trusts and other financial strategies that support your loved ones after you are gone.
Another way we help our clients is by creating ways to utilize their wealth to support causes they deeply care about. As a personal CFO in Nashville, TN, we can guide you in maximizing the impact of your philanthropic efforts. We can advise on magnifying your impact as well as the most tax-efficient ways to donate while helping organizations you believe in.
We don’t view our role as just about managing your wealth. As your Personal CFO, we serve as your financial advocate. Whether looking for ways to protect your loved ones, give generously to causes you care about, or make a difference in the world, our Personal CFO services can be instrumental in your pursuit of these goals.
If you are looking for a financial advisory team that enables you to pursue a life of significance, financial security, and impactful giving, consider connecting with Silberman Wealth Strategies, Inc. today!
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
Registered Representative offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Adviser. Advisory services also offered through SILBERMAN WEALTH STRATEGIES, INC. Cetera is under separate ownership from any other named entity. Located at 320 SEVEN SPRINGS WAY STE 250, BRENTWOOD, TN 37027
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.
