How Safe is Your Wealth?

For the vast majority of people, amassing any amount of wealth isn’t easy. It takes patience, hard work, restraint, and commitment. You need to be responsible and make wise decisions. Once you’ve managed to make a little something for yourself, the last thing you want is for it to be taken away. 

But that’s exactly what can happen if you’re not careful. 

Wealth management isn’t just about growing wealth but keeping it protected as well. Before you can work on keeping it safe, you first need to know the things that might threaten it. 

Understanding the Threats to Your Wealth 

We don’t want you to think that once you’ve amassed some wealth, everyone is out to get you. We do want to remind you that you don’t suddenly become invulnerable to losing money or that you’re working with an unlimited supply. 

Having more assets can ultimately result in large loses from a single event. 

For example, strategic investing is a great way to earn returns that are higher than you’d ever get from a savings or retirement account. However, the market can be unpredictable even to the most skilled investor. A bad season or sudden crash could result in a notable loss. 

Bonds are often seen as a safer investment with a return that’s still respectable, but even they can suffer if your issuer experiences a drop in their credit rating or undergoes a merger/restructuring.  

The housing market crash showed us that even investments that are sold as a “sure thing” can come toppling down. 

On top of market shifts and investment problems, there are taxes to consider in most financial adventures. A wrong move, such as withdrawing retirement or improperly setting up a rollover IRA could result in a hefty tax penalty.  

You also need to consider personal problems including losing your job or serious medical needs. Both of these can quickly siphon money from your savings accounts. Medical expenses and other debts can start to draw from other assets such as retirement and even certain types of trusts. 

Even if nothing goes wrong, inflation slowly but surely decreases the value of your money. It’s important that you are earning enough interest across your savings, retirement, investments, etc. to outpace inflation. Additionally, your income should be increasing each year to at least outpace inflation. 

Keeping Your Wealth Safe 

You’ve probably heard it before, but one of the best ways to protect your wealth is through diversification. Chances are, everything you have money in won’t suddenly lose value all at once. For example, even if your stock investments completely crash, you can still have mutual funds, bonds, your retirement, your home, etc. 

Not only does diversification provide more protection, but it allows you to see where your money is having the most successful growth, allowing you to adjust investments accordingly. 

Another simple way of protecting against loss is by doing things properly. As we mentioned, incorrectly accessing or transferring retirement can result in hefty taxes and other penalties. By making educated decisions (preferably with professional guidance), you can spare yourself unnecessary costs. 

Of course, you also need to prepare for life’s unexpected moments. Good insurance will help with that. Make sure you have adequate home, health, and vehicle insurance. It’s also worth considering liability insurance. This can keep you protected in the case of lawsuits. If you’re still concerned about not being fully covered, there are blanket insurance policies that can cover items a standard policy might not cover, such as prized valuables. 

As for safeguarding retirement, an irrevocable trust is one way that you can keep your children’s inheritance protected from unexpected medical bills. It’s important to understand that once money is placed in an irrevocable trust, it is no longer yours. While this means that creditors can’t touch it, it also means you can’t utilize it either. 

With all the complexities involved in managing and protecting your wealth, it really helps to have a professional guiding you. At KB&P Partners, our team is highly experienced in providing wealth management to Springfield, Ohio and beyond. 

Contact us today. 

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