The Stages of Wealth - Wealth Accumulation

This article was originally published in Wedgewood Life magazine and is reprinted with their permission. 

Over the last series of articles, we have highlighted a couple of core long-term wealth tenants such as spending less than you make and the importance of focusing on what you save, not on what you earn. This month we progress forward from wealth creation to wealth accumulation.

Wealth accumulators are established in their career, nearing peak earnings potential, and begin to contemplate when, how, and what retirement might look like. As an individual accumulates wealth, the concept of retirement typically transitions from “at some point in the future”, to “getting close”, to finally “retirement reality”. When working with and advising clients with a goal of retirement and financial independence, our financial planning focuses on:

• Create Confidence in Your Plan – As your wealth accumulation increases and your long-term goal of retirement nears, this is the perfect time to analyze and evaluate your key financial inputs under various scenarios. This includes projecting how your retirement may proceed under different investment rates of return, higher or lower spending levels, and other variables such as the purchase of a second home. This exercise instills a higher level of confidence that retirement is not only achievable, but also allows you to proactively evaluate critical financial decisions such as retirement age, spending levels in retirement, and other inputs associated with your upcoming retirement.

• Retirement Cash Flow Key Not Income – During working years, we typically focus on income levels (i.e. wages), but during retirement our focus is on how and where will we fund retirement cash flow.
  • How much and at what age should we distribute cash flow from a taxable account (such as a joint or trust account) versus an individual retirement account (IRA)?
  • What is the plan for claiming social security benefits?
  • Do we have access to other sources of retirement cash flow such as pension income, deferred compensation plan, real estate income, etc.?
  • What is the most tax efficient way to fund my retirement cash flow needs?

• Healthcare Insurance Planning - According to industry analysis of U.S. Census Bureau data, the average retirement age in the United States is 63 years old (in-line with Ohio’s average age) and typically ranges from 62 to 65 years old nationwide. Assuming the goal is to retire before age 65 and prior to Medicare eligibility, your options may include purchasing a healthcare policy on the exchange (assume $500 to $1,000 a month per person as a high-level rule of thumb), or taking a part-time, low-stress, low-pay job with benefits. Once an individual is on Medicare, while they will still be paying premiums, they are likely to be more affordable and often less than half of what you might pay for a private healthcare policy.

As your wealth accumulates and your financial goals come into view, a keen focus on these important planning topics will increase your financial confidence in making your retirement a reality.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Individual situations can vary, therefore, this information should be relied upon when coordinated with individual professional advice.