The first step to seizing your wealth’s full potential is identifying where it’s concentrated and assessing its vulnerability to risk. Often, wealth is built through concentrated positions—whether in a business, real estate, or single stock positions. However, concentrated wealth can be risky. Diversification and strategic planning are essential for both protecting and growing your wealth.

Diversifying Business Ownership

If you’re a business owner, much of your net worth may be tied up in your company, which limits liquidity. To protect against economic and business downturns, it’s important to diversify with liquid assets like:

• Personal retirement accounts
• Savings
• Investment portfolios

These liquid assets provide flexibility and financial security outside of your business.

Real Estate: Diversify and Maximize Tax Strategies

Real estate is another area where many affluent individuals concentrate wealth. While real estate can be lucrative, it’s vulnerable to market fluctuations. To mitigate risk:

• Diversify into liquid investments like stocks or bonds.
• Take advantage of tax-saving strategies such as 1031 exchanges, which allow you to defer capital gains taxes when selling and reinvesting in property.

Hedging and Diversifying Concentrated Stock Positions

If you have concentrated stock positions, whether through executive compensation or long-term investments, hedging and diversifying are critical. Consider strategies like:

• Gradually selling stock over time
• Using options to hedge against market downturns

By spreading your risk across multiple assets, you protect your wealth and reduce exposure to any single investment. Heritage Capital is a Connecticut financial planning firm with decades of experience helping high-net-worth individuals with solutions and strategies to diversify, protect, and grow their wealth.

Healthcare planning becomes increasingly important as you age, even for high-net-worth individuals. The cost of medical care can be significant. If not managed carefully, it can diminish the wealth you’ve worked hard to build. While you may have the resources to cover out-of-pocket costs, unexpected medical events or long-term care can quickly add up and become a financial burden.

Healthcare planning solutions to consider include:

• Medicare: This government program helps cover basic healthcare needs but may not cover everything.
• Medigap: Medicare supplemental insurance helps cover out-of-pocket costs like deductibles and copays that Medicare doesn’t pay.
• Long-term care insurance: This type of insurance helps cover costly services like nursing homes, assisted living, or in-home care, protecting your assets from being drained by care needs.
• Health Savings Accounts (HSAs): If eligible, HSAs offer triple tax benefits: contributions are pre-tax, growth is tax-free, and withdrawals for qualified healthcare expenses are tax-free, helping you save for future medical costs.

For business owners and professionals, other solutions include:

• Disability insurance: Provides income protection if you’re unable to work due to a health issue, helping support your family and financial obligations.
• Key person insurance: For business owners, this coverage can protect the company from financial loss if a key team member cannot work.
• Health insurance for retirees: Private health insurance plans can help bridge the gap if you’re not yet eligible for Medicare or need additional coverage.

By implementing these strategies in your retirement and healthcare planning, you can manage expenses and help protect your wealth as you age.

In a turbulent market, relying solely on passive investing strategies, like placing all your savings into an index fund, can leave you vulnerable. While index funds offer broad market exposure, they may not provide the protection or income you need in retirement—especially during market corrections. If you depend on consistent income from your investments, a passive strategy can put you at risk if your portfolio lacks flexibility.

The benefits of active management in a volatile market include the ability to make real-time portfolio adjustments that can help mitigate risk and capture opportunities.

Here are some key strategies you can benefit from during market volatility with active management:

• Shifting to defensive positions: Moving into more stable investments like bonds or cash to reduce exposure to riskier assets.
• Sector rotation: Allocating funds to historically resilient sectors like healthcare or utilities, which tend to perform better in downturns.
• Hedging strategies: Using options or alternative investments to protect against market declines.
• Rebalancing portfolios: Adjust your asset allocations to align with current market conditions and financial goals.

How to protect your investments during market volatility involves a proactive approach. Unlike passive investing, active management allows you to make ongoing adjustments that help protect your wealth while still pursuing growth opportunities. This active approach seeks to offer a level of investment protection that passive strategies alone cannot provide.

At Heritage Capital, we focus on active management tailored to your needs. By adjusting your portfolio based on market conditions, we strive to reduce risk while positioning your wealth for long-term growth, offering you a more secure path to retirement.

Determining when to take Social Security is an important decision that requires careful consideration of various financial factors. Timing your benefits not only affects how much you receive monthly but also plays a vital role in your overall tax strategy and income flow in retirement.

Here are some important questions to consider when deciding when to claim Social Security.

What are your other income sources? If you have significant income from pensions, investments, or business ownership, Social Security might not be as crucial in your early retirement years. Delaying your benefits could increase the amount you receive later and potentially reduce the tax burden.

How will Required Minimum Distributions (RMDs) impact your tax bracket? After age 73, you’ll be required to start taking RMDs from tax-deferred accounts like IRAs and 401(k)s. Combined with Social Security, these distributions could push you into a higher tax bracket.

How is your health? If you’re in good health and have a family history of longevity, delaying Social Security might make sense, as you’ll receive higher payments for the rest of your life. However, taking Social Security earlier might be more beneficial if health concerns exist.

Are you married, and what is your spouse’s health and income situation? Spousal benefits can significantly impact your financial plan, so coordinating with your spouse’s benefits can maximize household income. Consider your spouse’s health and finances in your strategy.

How will taxes on Social Security impact you? Up to 85% of your Social Security benefits may be taxable if your combined income exceeds certain thresholds. It’s important to consider how this fits into your overall tax strategy.

You don’t have to figure this out on your own. The experienced team at Heritage Capital specializes in retirement planning and Social Security in Connecticut and can help you develop a strategy that fits with your financial goals.

Not all financial advisors are the same; unfortunately, many firms prioritize their success over yours. However, finding the right advisor for your financial future is worth the effort. If you’re dissatisfied with your current advisor due to a lack of communication, poor performance, or high fees, it’s time for a change.

When searching for a new advisor, ask these key questions:

• Does this advisor have experience working with affluent clients like me?
• Is their investment approach centered on passive or active management, particularly during times of market volatility?
• Are they a fee-only advisor with a fiduciary duty, always acting in my best interest?
• Do they communicate clearly and provide regular updates on my retirement plan as well as the portfolio’s performance?

A trusted financial advisor should work alongside you, not just manage your money. They should provide personalized advice and ongoing communication to keep you informed. Making the switch to a new advisor can be a smooth process, with most advisors assisting with transferring assets and setting up regular meetings to keep you updated.

If you’re wondering how to find a financial advisor for active investing, look no further—that’s Heritage Capital’s specialty. With Heritage, your money is managed directly by Paul Schatz, an experienced portfolio manager with the AIF® designation. Our team of fee-only financial advisors in Connecticut is committed to managing your investments with care and transparency.

One of the key “secrets” to a successful retirement for affluent individuals is focusing on what you can control rather than being overwhelmed by uncertainties like tax law changes, geopolitical issues, or economic downturns. While no one can predict the future, take action by leveraging all available strategies to protect and grow your wealth.

Focus on What You Can Control: Tax Strategies

While future tax laws may change, you can start using tax-saving strategies now to lower your liabilities. With a comprehensive wealth management plan, your advisor should regularly review and adjust for tax efficiency. Here are some effective strategies.

Roth strategies: Roth accounts let you withdraw money tax-free in retirement, offering significant tax advantages. Consider options like Roth Conversions, Backdoor Roth IRAs, and Roth 401(k)s if available to you.

Asset placement: Reduce taxes by putting interest-earning assets like taxable bonds and REITs in tax-deferred accounts, high-growth stocks in tax-free accounts like Roth IRAs, and using taxable accounts for qualified dividend stocks and long-term capital gains.

Tax-free investments: If you’re in a high tax bracket, consider investing in municipal bonds and municipal money market funds to earn tax-free interest.

Tax-loss harvesting: Take advantage of market downturns by selling underperforming assets to offset capital gains and lower your taxable income.

Donor-Advised Funds (DAFs): Make charitable donations while getting an immediate tax deduction and maintain control over when and how the funds are distributed to charities, giving you tax benefits and flexibility in your giving.

Estate Planning Tools To Protect Your Legacy

While future estate tax laws may also change, proactive planning helps ensure that your loved ones or the causes you support benefit as much as possible. Key estate planning tools include:

• Irrevocable trusts: Transfer assets out of your taxable estate and protect wealth from future taxes.
• Generation-skipping trusts: Allows wealth to pass directly to grandchildren, reducing estate taxes.
• Charitable remainder trusts (CRTs): Provide income during retirement while ultimately benefiting your chosen charities.

Diversification and Investment Opportunities

To hedge against market volatility and seize growth opportunities, affluent investors diversify portfolios into asset classes beyond traditional stocks and bonds, such as:

• Global investments: Investing internationally can reduce country-specific risk.
• Commodities: Investing in commodities like oil, natural gas, or agricultural products can diversify your portfolio and hedge against inflation.
• Real estate: Invest in REITs or other options which provide exposure to real estate markets while maintaining liquidity.
• Ethical investing: Align investments with personal values through ESG (Environmental, Social, and Governance) funds, providing financial returns and social impact.

Business Succession Planning

For business owners, a well-thought-out succession plan helps create a smooth transition. Tools like buy-sell agreements or executive bonus plans can protect your business’s value and your family’s future.

The Final Secret: Picking the Right Advisor

Ultimately, the most important factor in a successful high-net-worth retirement is partnering with the right advisor. An experienced, proactive advisor like those with Heritage can guide you through tax-saving strategies, estate planning, and diversified investments, helping you focus on what you can control while maximizing available opportunities.