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5 Retirement Challenges High-Net-Worth Individuals May Face

07 Aug

By: Colleen Weber

News and Updates

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By Colleen Weber, CFP®, CPA

You experience all types of emotions when you retire—pride for the hard work you’ve accomplished over the years, sadness and relief that it’s coming to an end, and uncertainty and joy as you move into the next chapter of your life.

And while anyone should have a solid financial plan in place for retirement, it becomes even more paramount when you’re someone with a high net worth. So let’s look at 5 financial challenges you may face as a high-net-worth individual in retirement.  

1. You Owe More Taxes

The income tax bracket for 2019 ranges from 10 to 37% depending on income and marital status. (1) If you have a high net worth, there’s a good chance you’ll fall somewhere toward the top of the range. 

Because you’ll likely owe more taxes in retirement than the average person, withdrawing money involves careful tax planning. You have to worry about marginal tax rates, capital gains taxes, estate taxes, and more. Thankfully there are tax savings strategies out there that can help you keep more money in your pocket for retirement. 

2. Harder-To-Replace Income

As of 2019, $2,861 is the maximum Social Security benefit for someone retiring at full retirement age. (2) While this may be a large payout for some, it’s just a drop in the bucket for individuals who have consistently made six figures over the course of their life. This means high-net-worth individuals must save more aggressively than their lower and middle-class counterparts to fill in the gap between their benefits and monthly income needs in retirement. 

3. Pressure To Leave An Inheritance

If you’re a high-net-worth individual, there may be an internal pressure (from yourself) or an external pressure (from family or society) to create multi-generational wealth. And while this is an inspirational goal for anyone to have, it can add a lot of stress in retirement years. 

What if something happens—such as a health scare—that suddenly eats up a portion of your wealth? Or what if you simply end up needing more money in retirement than you originally planned? The pressure to leave an inheritance can be too much when one of these common scenarios hits. In moments like these, it’s best to rethink your expectations in order to stretch your wealth as much as possible. 

4. Underestimating Long-Term Care Insurance

If couples want to be 50% sure they’ll have enough money to cover healthcare premiums in retirement, they need to save at least $183,000. (3) This number jumps to $301,000 for couples who want to be 90% sure they’ll have enough money to cover healthcare expenses. (4) This amount of money can seem astronomical—even for those who consistently earn six figures. Foregoing or ignoring long-term care insurance as a high-net-worth individual can impose major financial challenges in retirement. 

5. Not Having A Professional You Can Trust

You’ve spent decades building your wealth. You deserve the opportunity to fully trust the advisor you choose to help protect and build it. But as a high-net-worth individual, you have a complicated mix of assets made up of homes, stock options, and more. This level of complexity requires the careful planning and guidance of a qualified financial advisor.    

As a CPA financial planner at Colleen Weber CPA, CFP, I’m in a unique position to help my high-net-worth clients save on taxes while creating a plan to replace their income and leave a legacy. To learn more about how I can help you secure your retirement and face these challenges head-on, call (952) 470-0750 or book a free introductory meeting online!

About Colleen

Colleen Weber is a fee-only financial advisor, CERTIFIED FINANCIAL PLANNER™ professional, and CPA with more than 15 years of financial planning experience. Providing comprehensive financial planning and wealth management, she specializes in serving clients nearing retirement, retirees, busy professionals, and women. She is passionate about developing financial plans that save clients on taxes, and investment strategies that help them pursue their goals. Learn more about Colleen by connecting with her on LinkedIn or booking a complimentary phone call meeting.

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(1) https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2019

(2) https://money.usnews.com/money/retirement/social-security/articles/2018-08-20/how-much-you-will-get-from-social-security

(3) https://www.ebri.org/docs/default-source/ebri-issue-brief/ebri_ib_481_savingstargets-16may19.pdf?sfvrsn=56b83f2f_6

(4) https://www.ebri.org/docs/default-source/ebri-issue-brief/ebri_ib_481_savingstargets-16may19.pdf?sfvrsn=56b83f2f_6