Finance
Can you guess what percentage of a wealthy person’s portfolio is typically in retirement accounts?
HNWIs (HNWIs) are those who have at least $1 million in easily convertible assets such as cash, stocks and bonds. They often manage significant assets in various portfolios.
According to Empower’s financial dashboard, retirement accounts such as 401(k) plans and IRAs represent 55% of the total assets for many wealthy individuals. This is in stark contrast to the average household. Pew Research Center reports that these accounts typically represent only 27% of the net worth of households where at least one person owns a retirement account.
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The large percentage of wealth owned retirement accounts is especially notable considering the tax benefits these vehicles offer. Contributions to plans such as 401(k)s and IRAs can grow tax-deferred or even tax-free in the event of Roth IRAs.
For high-net-worth individuals, the ability to reinvest profits in these accounts means that compound interest can significantly increase the value of their initial investments over time. This compounding effect is critical not only to the maintenance of wealth, but also to its flourishing.
Michelle Brownstein, vice president of Empower Private Client Group, emphasizes that successful wealth-building strategies differ from the strategies needed to preserve and grow wealth. “High net worth investors have discovered that you need a proactive approach to both grow and preserve wealthBrownstein reportedly said in conversation with CNBC Select. This insight is critical because it reflects the shift from active wealth creation to wealth preservation, allowing affluent individuals to maintain their lifestyle in retirement without a decline in their standard of living.
Trending: If the United States had access to the current interest rate on savings accounts with a high return in 2015, not a cent would have to be saved.
However, the data shows that while most recognize the importance of a diversified investment portfolio, fewer people prioritize maximizing their retirement contributions. This discrepancy can hinder their ability to optimize long-term capital growth.
Retirement planning for wealthy individuals goes further than just saving. These are strategic contributions that take into account future expenditures, such as healthcare, which becomes increasingly important with age. The costs associated with healthcare, especially long-term care, can be significant and require careful planning and significant resources. This planning is not just about covering basic living expenses, but also about managing potential costs and ensuring that any financial strategy can be adapted to changing economic conditions.
For high-net-worth individuals, retirement accounts are not just a means to an end, but a crucial part of a broader financial strategy that includes tax planning, risk management, and intergenerational wealth transfer. By using these accounts effectively, high net worth individuals can not only secure their financial future but also support broader family goals and philanthropic efforts, expanding their impact and legacy.
Building wealth takes time and a personal approach. Consult with a financial advisor can help you develop a comprehensive strategy that maximizes your retirement savings potential and meets your specific goals and risk tolerance.
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This article Can you guess what percentage of a wealthy person’s portfolio is typically in retirement accounts? originally appeared on Benzinga.com
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