The Millionaire-Next-Door’s Guide to Safeguarding Wealth

After years of hard work, smart savings decisions, and a commitment to living below your means, you’ve finally reached that coveted “millionaire-next-door” status – but now what?

When your net worth crosses the million-dollar threshold, you’re in the top 3% of all retirees in the U.S. – but it doesn’t mean the work is done. Luckily, if you’ve reached this point, you’re probably not the type to just kick back and rest on your laurels.

Let’s explore nine ways to grow and protect your financial future, from reviewing your insurance to optimizing your taxes. 

Are You a Millionaire-Next-Door? Here are 9 Ways to Protect and Grow Your Wealth

1. Stay mindful of your money

If you’re like most millionaires next door (millionaire-next-door), you probably reached that goal post through years of focused discipline and hard work. However, with a seven-figure net worth, the temptation to splurge can be strong. 

Lifestyle creep is a challenge everyone faces. Spending everything from groceries to clothing to vacations can consume much of your income before you even realize it and you end up looking around and asking, “When did my life get so expensive?!”

Look at your budget from 10 or even 20 years ago. Could you still live off of that (adjusted for inflation)? What has changed since then? What could you cut?  

2. Put a plan in place

If you haven’t already, having a plan that protects your savings and ensures your money can support the retirement you want is crucial.

A comprehensive financial plan should include:

  • Your future income and expenses 
  • Risk tolerance 
  • What do your lifestyle goals look like?
  • Tax optimization tactics
  • Health insurance needs for now and later
  • Estate planning and more

If you’re just getting started or want to take your finances to the next level, connecting with a financial advisor is a great place to start – which brings us to tip number three!

3. Find an advisor

Finding a financial advisor you trust is paramount. After all, you’ll give this professional intimate knowledge of your finances, life goals, family structure, and more. Before you begin your Google search, there are a few things to keep in mind.

Advisors seem to come in every variety you can imagine these days – fee-based, fiduciary, active, passive, CFP®, CFA, etc. – but how do you know which is right for you? 

First and foremost, the most important criteria is whether the advisor aligns with your values and values you as a client. Prepare a list of questions to ask potential advisors, such as:

  • How often should I expect to hear from you?
  • How do you get paid?
  • What is your investment philosophy?

Related: The Clarity Difference: Learn What Sets Us Apart from Other Financial Advisors

4. Review your insurance

As your circumstances evolve, your insurance needs may change. Review your life, health, disability, and long-term care insurance policies to ensure adequate coverage throughout your retirement. Nearly 70% of all seniors need long-term care at some point! There are many ways to deal with this unknown cost. 

Additionally, it’s a good idea to consider what your Medicare benefits could look like, which you can do using Medicare’s nifty online calculator.

5. Optimize your taxes

Taxes can significantly impact your retirement income, and the decisions you make about tax strategies now can raise and lower your tax liabilities in retirement. 

For example, contributions to a Roth IRA are taxed when you make the contribution, but can be withdrawn tax-free in retirement. A 401(k), however, is taxed upon withdrawal. One savings vehicle might be more beneficial depending on your current and estimated future income. 

Related: Oregon Retirement Tax Tips: 7 Things Oregonians Need to Know About the Impact of Taxes on Your Retirement Income Plan

6. Prepare for the future 

As a millionaire-next-door, it’s essential to look beyond your own lifetime and consider where you want any “extra” funds to go after you pass. 

Estate planning does just that, ensuring your assets are distributed according to your wishes. If you were to pass away with an estate plan in place, state laws would dictate how your wealth is divided, which might not align with your intentions.

A well-crafted estate plan might include a:

  • Will
  • Designated Power of Attorney (POA) 
  • Trust, which can minimize probate costs and expedite the distribution process
  • And more

Related: 8 FAQs on Estate Planning in Oregon

7. Involve your kids and grandkids

Open communication with your children, grandchildren, or designated beneficiaries is a great way to teach money management skills and avoid potential conflicts after your passing. 

Consider inviting your adult children to meetings with your financial advisor, or facilitate discussions about your financial situation, estate plan details, and expectations.

8. Consider charitable giving opportunities

As a millionaire, you might feel inclined to philanthropy, which is a gratifying experience. Moreover, some charitable giving vehicles, like a donor-advised fund, come with tax benefits!

But before you start writing checks, think through which organizations best align with your values and goals and how you can give in a way that provides you and the recipient(s) the best tax advantages. 

9. Enjoy the journey

Although you shouldn’t suddenly increase your spending, it’s okay to take a moment and celebrate your “millionaire-next-door” status. Allow yourself to take pride in your accomplishment and enjoy the financial security it brings. Remember that your hard work will pay off during your retirement when you can thoroughly relish the fruits of your labor. 

Related: Isn’t Money Supposed to Be Fun?

With these nine steps in your financial planning arsenal, you’re well on your way to safeguarding your golden years. 

Schedule a Complimentary Meeting Today

We craft customized financial plans built around your needs. If you want to protect your savings, we encourage you to schedule a complimentary consultation with the Clarity Wealth team.

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