Most wealthy people have a way of making their money last. And financial planner Patrick Rusch, who has been advising wealthy individuals for years, says many of his clients have a few things in common.
“The majority of our customers are the billionaire next door,” he says. “They didn't have huge incomes, but they were just very disciplined savers, putting money into 401(k)s and brokerage accounts, and by the time they retired, they had more than $1 million. ”
Based on his years of experience working with such people, he says there are five general approaches that help wealthy people keep their money growing over time.
1. Wealthy people have a financial plan and stick to it.
Wealthy people who maintain and even build their wealth over time always have a big-picture financial plan, Rush says.
For many of his millionaire clients, financial planning is about more than just how to spend and save.
“About your family's budget and expenses, what type of insurance you have, what your estate plan is in terms of legal documents, and your goals for your family and the possibility of leaving a legacy for them. , you need to know all the basics. It's a charity,” he says. Financial planning often also considers taxes, employer benefits, and investment plans.
Wealthy people have the right support in making this plan and know what steps they need to take today to implement it.
2. I don't worry about my investments or manage them often.
Most of the wealthy people Rush works with have no intention of trading stocks. They aren't trying to time the market or make a fortune on the next hot stock. Instead, Rush says he encourages his clients to take a long-term view of their investments.
“We're not trying to outperform the market. We just want to harness the power of the market to give investors the best odds of success,” he told Insider. Simply buying stocks and holding them for the long term often creates the best chance of success.
For many of Rush's wealthy clients, investing is not an active process and requires patience. “We know that we won't get the right results every year, every three years, or even every five years. But over time, we know that we can offer our clients the best odds of success.” I know.”
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3. You're over-planning for your retirement.
For many people, retiring from full-time work means living on less income and making sacrifices. But with careful planning, wealthy people can remain wealthy even after retirement.
Rush says his clients often over-plan for retirement. “We give our clients a life expectancy of 96 years because we know that a healthy 65-year-old couple has about a 25% chance that at least one of them will live to 96.”
By over-planning, wealthy people are able to maintain the same standard of living for long periods of time in retirement. “At the end of the day, the last thing we want is for you to run out of money.”
4. They find ways to reduce taxes
Wealthy people have learned to use careful planning to reduce the amount of taxes they pay.
They know how to take advantage of certain tax breaks and benefits to reduce the taxes you owe now and in retirement. Taxes can be difficult to understand, but tax relief is part of your overall financial planning and is considered every step of the way, from where you invest to how you make gifts.
Paying less tax means you keep more of it in the long run. And for people who have increased their assets and gradually moved into higher tax brackets, reducing their total tax bill is an important way to preserve their wealth.
5. I incorporate philanthropy into my financial plan.
Wealthy people often incorporate philanthropy into their financial plans alongside tax savings. Not only do most wealthy people feel obligated to pay it back, but there are also numerous tax benefits.
These gifts can come in a variety of forms, Rush says. They can be monetary contributions, but they can also be gifts of stock or distributions from an IRA after a certain age.
Charitable donations can help lower your total taxable income, which can reduce your income taxes and even your Medicare premiums in retirement. Donations serve two purposes and have more benefits than just one.
This article was originally published in January 2021.
