According to recent reports, 20 percent of the income high net worth individuals earned in 2020 came from finance and investments.
If you are a high net worth individual in retirement—or looking to retire, it’s more than possible to preserve and grow your wealth into the future.
However, you have to adjust to the times and practice savvy wealth management. If you don’t pay attention to your portfolio of assets, changing economic conditions could erode some of its value.
Are you looking to optimize your portfolio and wealth management strategy in 2022? Read on for 6 wealth management tips.
One of the first wealth management tips for 2022 is to review your investment strategy. This is something you should do every year, but it is particularly important this year’s economic climate.
While global markets have somewhat recovered from the early disruption of the pandemic, things are still far from stable. Pandemic conditions have had some far-reaching impacts and markets are still in a process of stabilization.
What’s more, there are new events at play, such as the conflict between Russia and Ukraine. It is still too early to accurately predict what these will be, but one of the predictions that are already playing out is a rise in energy prices. Sanctions against Russia are also likely to accelerate inflation.
Although the Russian/Ukraine conflict is triggering volatility in the stock market, history tells us such events generally don’t have long-term effects. However, spinoff effects such as accelerated inflation could influence how you want to allocate your assets.
Another of the top wealth management tips for 2022 is to consider diversifying your portfolio. Diversification is a golden rule in savvy wealth management, and 2022 is offering increasing opportunities for diversification.
For instance, digital assets have started to solidify their place in the market. We don’t recommend you rush out and buy based on meme popularity. Rather, there are more secure ways you can invest in digital assets.
For instance, you could choose to buy shares in an index fund that tracks certain digital asset values. This will gain you some exposure to digital assets, without requiring you to personally open an account at an exchange.
You could also choose to invest in fintech stocks.
Another area to consider when diversifying your portfolio is sustainability. With the climate crisis already making its effects known, 2022 is likely to see a continued drive towards sustainable models. Rising energy costs are also likely to fuel demand for renewables.
Besides looking into ways you can diversify your portfolio, you might also want to adjust your risk profile. If you are in or approaching retirement, it’s especially important to evaluate your risk profile.
Wealth management during retirement should focus on preservation as well as growth.
If you decide that you need to adjust your asset allocation for reduced risk, make sure you consider any potential tax consequences. To avoid capital gains tax, you may want to consider shifting investments within an IRA or other qualified retirement account. If you move money around outside of a qualified retirement account this is likely to trigger capital gains tax.
No matter how financially stable you are, it’s always a wise idea to take control over your spending.
For the wealthy, wise spending doesn’t usually involve saving a few pennies here and there. Instead, it’s more about spending money on things that are meaningful to you and lowering expenses that bring little value.
For this reason, we’d recommend drawing up an intentional spending plan. Intentional spending plans are similar to regular budgets, but instead of focusing on cutting out “unnecessary” pleasures in your life, you can zero in on what brings the most value.
For instance, if you love fine dining experiences, what’s the point in removing this source of pleasure and enjoyment. Or maybe you are an avid golf player and spend a fair amount on club fees and golf-related travel? Reducing this spending is not going to make a big difference in your finances.
On the other hand, maybe you own a yacht that you seldom use? Selling an asset like this can free up capital and cut down on erroneous monthly costs like docking fees and maintenance.
Wealth management is about taking actions that move the needle, not small pointless deprivations.
If you are concerned with wealth management, you probably have enough resources at your disposal to deal with emergencies. However, if you have tied most of your capital up in long-term investments, having to quickly access funds can be stressful and disadvantageous.
If you are forced to cash out an investment at the wrong time this could cause you to sell at a loss. To guard against this, it is important to maintain an emergency fund with sufficient liquid assets to cover any unforeseen event.
Heightened inflation levels could mean that you need to boost your emergency fund to bring it up to speed with current costs of living.
One of our final wealth management tips for 2022 is to seek out tax advice from multiple sources. The US tax code is due for a few changes in the upcoming years, making comprehensive tax planning difficult.
For instance, the current estate tax threshold of $11.7 million is due to sunset in 2026 to approximately half this. If you are a retiree who wishes to pass on your wealth to the younger generation, this could have significant implications.
Another upcoming change to factor in is imminent rises in income tax. Recently there have been increased chances to defer income tax, but this might not be an advantageous strategy. Given that income tax is due to rise by 2026, it might be wiser to skip deferring income and instead pay the taxes on it now rather than in a few years when rates have risen.
The best way to create a comprehensive tax plan is by consulting with multiple professionals, including a financial advisor or financial planner, an estate lawyer, and your CPA.
As things stand so far, 2022 is playing out to be a fair year in terms of market growth. However, this doesn’t mean you can let your investments sit idle.
Do you want to maximize your wealth management efforts in 2022? If you need assistance in implementing the above wealth management tips, we are here to help.
Sara-Bay Financial Corporation deals with wealth management in Sarasota and specializes in helping high-net-worth individuals achieve maximum returns on their investments. If you feel like your money could be doing more, contact us to discuss your portfolio needs.