Estate Planning

7 Wealth Protection Tactics

By Chris Duderstadt

November 17, 2023

7 Wealth Protection Tactics

Key Points – 7 Wealth Protection Tactics

  • Market Risk Is Far from the Only Type of Risk That You Need to Factor into Your Plan
  • Having a Fluid Financial Plan
  • Are You Financially Prepared for a Market Crash or Health Emergency?
  • The Two Biggest Wealth-Eroding Factors: Taxes and Health Care
  • 9 Minutes to Read | 24 Minutes to Watch

What Tactics Do You Use to Protect Your Wealth?

When thinking about protecting your wealth, it’s easy to start thinking about wealth erosion due to market/investment risk. Well, that’s just one form of risk. There’s estate planning risk, wealth erosion from excess taxation, not being properly insured on several fronts—we could go on and on. We obviously want you to protect as much of your wealth as possible. So, here are seven wealth protection tactics that can hopefully be beneficial to you.

  1. Know Your Goals for Retirement
  2. Avoid Unnecessary Risk
  3. Plan for Inflation
  4. Have an Emergency Fund
  5. Understand Your Insurance Coverages
  6. Build a Forward-Looking Tax Planning Strategy
  7. Have a Current Estate Plan

Schedule a Meeting Get the Retirement Plan Checklist

The Most Important Wealth Protection Tactic

Before we thoroughly discuss these wealth protection tactics, there’s a preliminary bonus tactic that relates to each one that’s critical to utilize. That’s having a comprehensive financial plan. Without a financial plan, it’s very difficult to measure the many types of risk that can erode your wealth.

The most common risk that our advisors hear from people is the risk of running out of money in retirement. A wide variety of risk factors can all feed into that. Everyone is going to feel differently about those different types of risk. That’s part of why everyone’s plan will be unique. No two individuals/couples are going to have the same feelings about risk, goals, earnings, health, etc.

As you’re building your plan that gets takes you to and through retirement, keep these other seven wealth protection tactics in mind. If you read through our Retirement Plan Checklist, you’ll notice that these seven wealth protection tactics are all mentioned in it. Our Retirement Plan Checklist consists of 30 yes-or-no questions and an age-based timeline that cover several key retirement considerations. After downloading your copy below, make sure to review it with your spouse.

Wealth Protection Tactics

Retirement Plan Checklist

1. Know Your Goals for Retirement

Since the biggest fear for a lot of people is outliving their money, what do you think is the most-asked question we hear from people? It’s how much do I need to retire. Again, that’s going to depend on several different factors. The first factor that we address as we’re building someone’s plan are their goals for retirement. Your plan isn’t going to fulfill its purpose of getting you to and through retirement if you’re not incorporating your retirement goals.

“In order to know your goals for retirement, you need to take a trip into the future. Imagine yourself in retirement and have deep conversations with the people that you’re going to spend time with in retirement about what you want your retirement to look like?” – Dean Barber

So, what do you want your life to look like in retirement? Once you and your spouse have determined your goals for retirement, what are those goals and your expenses in retirement going to cost? After your plan is built, then our team can determine your optimal asset allocation to achieve your goals while taking on the least possible amount of risk.

2. Avoiding Unnecessary Risk

Some people may have enough money to where they can be 100% in cash or fixed investment and still never have to worry about running out of money. But in most cases, if someone has so much money in fixed assets and nothing in assets that are going to give them potential for better long-term returns, it diminishes their probability of success.

On the flip side of that, if they get too much into equities or risky strategies, that can also diminish their probability of success. So, to determine risk that you don’t need to take—unnecessary risk—you need to have the plan in place. Hence why avoiding unnecessary risk is No. 2 on our list of wealth protection tactics. Most people take on unnecessary risk within their plan because they don’t understand what risk is necessary.

It’s our team’s job to identify what level of risk is necessary for each person to take on within their plan. Your asset allocation isn’t going to remain the same throughout retirement because market conditions will constantly change.

What’s Going on with Bonds?

Avoiding unnecessary risk has been more of a challenge due to bond yields being negative for a third consecutive year. That goes against the old adage of bonds being a stay-rich investment and stocks being a get-rich investment.

But on the face of it, an individual bond is still a stay-rich asset. Every bond is issued and matures at par value. Par value is typically $100 per bond. A bond will fluctuate in value from that $100 depending upon the interest rate of that bond compared to the current interest rates.

Think of the relationship between bond prices and interest rates like a teeter-totter. If you put bond values on one end of the teeter-totter and interest rates on the other end, they do just the opposite. When interest rates were rising for much of 2022 and into 2023, bond values were falling.

A Big Opportunity Potentially Awaits in the Bond Market

Up until early 2023, you had to pay 15%-20% premiums for municipal bonds. That means that over time, you were going to lose that 15%-20% as that bond matures. But now, you can get high-quality AA municipal bonds and getting yields around 4.6%-4.7% tax-free. And they’re trading right around par value.

It’s the best environment that we’ve seen in a while. So, you might ask if you should build a portfolio of bonds that has like a seven-year duration. When you’re buying them at par, it’s hard to say no even though rates may go higher and you have a temporary loss. You’re not going to see the erosion like we saw during 2021 and 2022.

“When you’re making that decision, ask yourself what that money needs to do for you. If rates go higher, who cares? You’re locking in at tax-free 4.5% and getting some appreciation on those bonds over time. ” – Logan DeGraeve, CFP®, AIF®

So, while bonds have been down for an unprecedented three consecutive years, there appears to be a huge opportunity in the bond market. Once interest rates do eventually fall, AllianceBernstien’s David Mitchell told Dean Barber that he believes that double digit returns in bonds will soon follow. Keep that in mind as you’re thinking about future wealth protection tactics.

What About Stocks?

In case you missed our November Monthly Economic Update with Dean, he shared that Apple, Microsoft, Amazon, Nvidia, Google, Tesla, and Meta are making up more than 25% of the S&P 500. That’s been the case for much of 2023. As you’re assessing the S&P 500, make sure you’re looking at both the cap-weighted S&P 500 and equal-weighted S&P 500. The S&P 500 equal-weighted index year-to-date is -3.87%, while the cap-weighted index is 10.48%.

However, if you take out those Magnificent Seven stocks and cap weight the rest of the index, your return is going to be closer to 5%. So, make sure to keep that in mind as well when thinking about wealth protection tactics.

3. Plan for Inflation

One wealth protection tactic that many people hadn’t really considered until the past couple of years is properly planning for inflation. Remember a few years ago when a gallon of milk was $2 or less? Now, it’s more than double that, as is the case with several other goods at the grocery store.

From January 2012 through March 2021, month-over-month U.S. inflation was lower than 3%. During the time, we had so many people coming to use that had only been building in a 1% or 2% inflation factor to their plan. Some people weren’t factoring in inflation at all. Their plans might have been OK up to March 2021, but what about when month-over-month inflation was 9.1% in June 2022?

When we’re building financial plans, we use the 40-year running average inflation rate for most expenses within your plan. And for things that inflate substantially higher, such as health care costs, we’ll apply a higher inflation factor. We use a 6.5% inflation factor for health care expenses.

4. Have an Emergency Fund

Dean always says that inflation won’t cause someone to go broke, but it can make you live like you’re broke if you haven’t been planning for it. That’s why planning for inflation was an easy pick for our list of seven wealth protection tactics.

In the event of extreme high inflation, a prolonged market downturn, health-related emergencies, etc., it’s critical to have an emergency fund that consists of very safe money. It’s advisable to have three to six months’ worth of spending in this safe bucket so that you’re prepared if there is an emergency.

If you’re in your 20s or 30s, that might not be realistic to do. But it’s still important that you’re taking care of bad debt, such as credit card debt, and getting your 401(k) match.

“That needs to be a top priority in your life.” – Logan DeGraeve, CFP®, AIF®

5. Understanding Your Insurance Coverages

Speaking of preparing for unexpected events, when is the last time you reviewed your insurance coverages? Are your various needs being adequately covered?

Health insurance as obviously a huge factor in the retirement planning process. So many people don’t even think about retiring before 65 because they want to wait until they’re eligible for Medicare. But if you can afford to go to the marketplace or elsewhere for health insurance and retire before 65, what else is stopping you? It’s crucial to consider all these wealth protection tactics so that you can better position yourself for that to happen if you want to retire early.

Of course, health insurance is one of many wealth protection tactics as far as insurances go. There’s life insurance, car insurance, homeowner’s insurance, property and casualty insurance, long-term care insurance, etc. The level of coverage you need on different insurances isn’t going to be identical to your best friend or family member.

“Nobody ever buys insurance and says that they can’t wait to file a claim. They buy insurance hoping that they never need to file a claim, especially with long-term care insurance. Long-term care is a very real risk. Do you need to insure you and your spouse for that potential expense.” – Dean Barber

Your current and long-term health care are going to be unique to you. So, make sure your insurance coverages meet your specific needs. It’s a crucial wealth protection tactic.

6. Build a Forward-Looking Tax Strategy

How have we made it this far into an article about wealth protection tactics and not mentioned taxes yet? It just goes to show that there are so many different wealth protection tactics that are pivotal for everyone.

Just like your insurance coverages, your tax strategy needs to be personalized. We mentioned earlier that so many people just want to know how much they need to retire. Well, that not only depends on how much you’ve saved so far, but where you’ve been saving to.

Oftentimes, we find that a traditional 401(k) is someone’s largest asset as they’re entering retirement. That’s great if you’ve prioritized saving to your 401(k), but if you’re saving everything to the traditional side of it, that money is all tax-deferred. In other words, you’ll need to pay the tax on it when you access that money.

This is why our advisors constantly talk about the decision to save to traditional or Roth and when it does and doesn’t make sense to do Roth conversions. When you’re contributing to the Roth side of your 401(k), you’re required to pay the tax up front. While there’s added pain to doing so at the time, all the growth from that point on is tax-free. Paying less in taxes can be a very appealing wealth protection tactic.

It’s important to have tax diversification, meaning that your assets are dispersed across tax-deferred, taxable, and tax-free accounts. As you’re approaching and going through retirement, it’s critical to be working with a CFP® Professional and CPA together to build a forward-looking tax plan. Let’s figure out what tax planning opportunities are available to you mitigate taxes over your lifetime.

“How do we get that money to your checking account every month for the rest of your life with the least amount of taxes possible?” – Dean Barber

7. Have a Current Estate Plan

That leads us right into our final wealth protection tactic, which is having a current estate plan. Do you know the key differences between a will and a trust? There are pros and cons to both. A trust will give you more control of your assets (even after you pass on), but it’s also costs more than a will. Keep in mind that if you just have a will, your assets are guaranteed to go through probate.

While we’re in the holiday season, estate planning should be top of mind. Of course, end of life scenarios aren’t an uplifting topic, especially during the holidays. But if your estate plan isn’t up to date when you do pass on, that could lead to many more unpleasant family conversations. Clarity on who’s getting what is key, so take some time to review the following estate planning documents and update them as necessary.

  • Last Will and Testament
  • Revocable Living Trust
  • Beneficiary Designations
  • Advance Healthcare Directive: Living Will and Medical Power of Attorney
  • Financial Power of Attorney

“Your estate plan shouldn’t just be about what happens if you die. It needs to be about what happens if you become incapable of making decisions.” – Dean Barber

Also, remember that if you want to leave a legacy, you’re not just trying to mitigate taxes over your lifetime. How do you plan to protect your wealth so that it transfers in the most tax efficient way possible to the next generation(s)? This is another instance where the tax-free Roth can be a tremendous asset for your heirs, especially if they’re receiving an inheritance during their peak-earning years.

Another Bonus Wealth Protection Tactic: Work with a Team of Professionals

Since we are in a giving mood this holiday season, we figured we share one more wealth protection tactic with you. It’s pivotal to work with a team of professionals rather than just one financial advisor. There are so many financial advisors who will strictly focus on your investments. As you can tell from this article, there’s a lot more to wealth protection than managing investments.

Your investments simply serve as the engine that makes your financial plan go. Part of our team’s job is to marry your investment plan with your financial plan. But we can’t forget about your estate plan, tax plan, and risk management either. That’s why we have a team of professionals that focuses on each of those key areas that works together for our clients.

If that sounds like a foreign concept to you, we’re more than happy to further explain how our financial planning process works. You can start a conversation with us below to find out more about our process and/or ask specific questions about these wealth protection tactics.

Schedule a Meeting

When it comes to wealth protection, don’t forget that your health is your wealth. We hope that you and your loved ones remain safe and healthy this holiday season. Have a happy Thanksgiving, and hope to talk with you more soon about wealth protection tactics that can benefit you.

7 Wealth Protection Tactics | Watch Guide

00:00 – Introduction
01:52 – #1 Know Your Goals for Retirement
06:02 – #2 Avoid Unnecessary Risk
10:42 – #3 Plan for Inflation
11:56 – #4 Have an Emergency Fund
12:39 – #5 Understand Your Insurance Coverages
16:25 – #6 Build a Forward-Looking Tax Strategy
19:53 – #7 Have a Current Estate Plan
22:13 – What We Learned Today


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Investment advisory services offered through Modern Wealth Management, LLC, an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.