How to protect your wealth as you get older

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As you get older and closer to retirement, your financial practices need to shift slightly as you transition from working and saving to relying on your nest egg. As you approach this stage of your life, you need to take steps to protect your wealth. Keep these tips in mind.

1. Shift toward more conservative investments

As a general rule of thumb, you can tolerate a higher level of risk when you are younger than when you are older. As you get older, you should shift from high-risk toward more conservative investments.

High risk investments have the potential to net you a lot of profits, but they also have a heightened chance of losing you money. In contrast, low-risk investments offer smaller but more consistent gains. When you're young, you have time to weather the ups and downs of high risk investments, but as you get older, you need a safer, more predictable portfolio.

2. Invest in long term care insurance

Unfortunately, aging can also usher in health problems, and nursing homes can easily cost $100,000 or more per year. If you want to ensure that you won't lose your assets if you need to move into a nursing home, you may want to invest in long-term care insurance. Keep in mind that Medicare does not cover staying in a nursing home.

Please keep in mind that insurance companies alone determine insurability and some people may be deemed uninsurable because of health reasons, occupation, and lifestyle choices. Guarantees are based on the claims paying ability of the issuing company.

3. Consider delaying Social Security payments

Whether you need to live on Social Security payments or plan to invest the funds, you may want to delay your payments. You can start taking Social Security payments as young as age 62, but at this age, you receive a reduced payment.

Depending on the year you were born, you become eligible for full benefits between age 66 and 67. However, if you delay receiving benefits until age 70, you receive 132% of your regular payment. Even if you only delay your benefits for a few months, you can receive slightly more than your regular payment.

4. Take advantage of the gift exemption

As of 2020, if your estate is worth more than $11.58 million, you will face a 40% estate tax on assets over that threshold when you die. Note that the limit doubles for married couples.

One possible way to protect your assets from this tax is to give away some of your assets while you are still alive. Under the gift exemption, you can give up to $15,000 to a limitless number of individuals every year, and those funds are not considered to be part of your estate when you die. By gifting money to your heirs now, you may be able to minimize your exposure to the estate tax in the future.

5. Think about passive income streams for retirement

Ideally, you should start thinking about protecting your wealth long before you start aging. In particular, you may want to work on setting up passive income streams. Look for investments you can make now that will continue to pay you money after you retire.


Important disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.


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General Disclosures

The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult professional advisors with regard to your individual situation.


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