4 Critical Steps in Creating, Protecting, and Preserving Wealth


Most Americans spend their entire careers saving money for retirement. Unfortunately, those same people may spend up to 40% of their earnings on taxes, dramatically impacting retirement funding. There are many options available for retirement planning that minimize the impact of taxes, helping you to build wealth faster and easier than ever. It is also extremely important to protect the assets you’ve worked so hard for. Finally, in order to live a comfortable life after retirement, it is essential that one maximizes retirement savings over the course of a lifetime. There are four critical steps when developing a long-term wealth strategy, which we will discuss below.

Mitigating Taxes

As you build your retirement nest egg, you’ll want to shelter your money from excessive taxes. Taxes can cut deeply into your retirement plans, particularly once you actually retire.

A Roth IRA is a great place to start. Roth IRAs differ from traditional retirement accounts in that these plans are generally not taxed, provided you meet certain conditions. Money contributed to a Roth IRA is taxed on the front end; in other words, you use your employment earnings to fund the plan. Once you reach a certain age, distributions from a Roth are tax-free. Direct contributions to a Roth plan are also tax-free if you choose to withdraw them at any time. Traditional IRAs, on the other hand, treat distributions and withdrawals as ordinary income, which is taxed at current IRS rates. Assets held in a Roth IRA account may also be passed on to heirs without a tax penalty. A benefit of traditional IRA plans is that contributions may be tax-deductible. The choice between these plans depends on your income and whether or not you have other retirement plan coverages, such as those provided by employers.

401(k) savings plans are another option for tax-sheltered retirement plans. Every dollar you contribute to one of these plans reduces your taxable wages, lowering yearly taxes. Employers often match contributions made to a 401(k) plan.

Finally, those looking to retire may exclude significant capital gains and interest from taxation. If you sell your primary residence prior to retirement, you may exclude as much as $500,000 in capital gains. For those people invested in municipal bonds, interest earned from those bonds is also exempt from taxes.

Protecting Your Assets

Once you’ve begun to develop a retirement savings plan, it is absolutely critical to protect the assets you’ve worked so hard for. One of the best ways financial planners help investors protect their retirement savings is by helping them to avoid investing in the stock market. Market fluctuations and crashes can eliminate gains you’ve made investing in stocks. A better way to protect your investments is by using the power of compounding interest plans like IRAs or mutual funds to build wealth safely.

Money market accounts are another good way to protect assets. Returns aren’t spectacular with these accounts, but they are ideal for those investors who are risk-averse. Money market accounts usually outperform other “safe” products like CDs or bank savings plans, too.

Fixed insurance annuities represent a safe move for guaranteed returns on investments. An annuity provides fixed payments for a specified period of time or even the rest of your life, depending on the plan you choose.

The very best way that you can protect your hard-earned retirement assets is by diversifying your portfolio. By spreading your wealth across different plans, such as IRAs, mutual funds, annuities, and even stocks, you minimize the risk of a stock market crash wiping out everything you’ve done to fund your retirement.

Estate Planning Dynamics

As you plan for your retirement, it is useful to keep in mind what will happen to your finances if you should die. Passing money to heirs through a simple will may do in some cases, but family dynamics play an important role in estate planning. Trusts are an ideal way to protect assets while allowing you to control the future of your wealth. Setting up a trust is a fairly straightforward procedure and can be done by many tax-planning attorneys. By protecting your assets with a trust, you may also reduce costs associated with probate and death taxes.

There are many types of trusts available; speak to a trust attorney for details on which one is right for your needs.

Maximizing Retirement

If your employer offers a 401(k) plan, maximize the contributions you make to these plans before contributing to other retirement plans. Since your employer may match your contributions on a one-to-one basis, this is a great way to get the most from your money. Maxing out your 401(k) also helps your retirement savings grow more quickly.

If you meet certain income and age requirements, you may also qualify for the “saver’s credit”, which can be worth several thousand dollars. This tax credit can also be claimed in addition to any other tax deductions you are eligible for regarding contributions to traditional retirement accounts.

It is important to take advantage of traditional and Roth IRA plans as well. By continuing to contribute annually to these plans while you are still working, you can maximize the returns when it is time to retire. The bigger the total amount invested in IRAs, the more they will earn interest.

Finally, it is critical that one avoids investing in volatile stocks and bonds. While these financial moves may seem like a smart idea with the potential for huge monetary gains, those approaching retirement need to play it safe. Dips in the stock market can erase any gains you’ve made.

Stay tuned for part 2 of Geoffrey Thompson’s retirement plan tips, where he will share his proprietary strategies with you.

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