10 Proven Wealth Preservation Strategies to Secure Your Financial Future

When it comes to building wealth, most people focus on the accumulation phase. They work hard, invest wisely, and watch their nest egg grow. But what we’ve learned over years of working with clients is that preserving wealth can be just as challenging as creating it.

Market volatility, inflation, taxes, and even family dynamics can all chip away at your hard-earned money if you’re not careful. That’s why having a solid wealth preservation strategy isn’t just nice to have – it’s essential.

In this article, we’ll walk you through ten proven strategies that can help safeguard your financial future.

1. Develop a Comprehensive Financial Plan

The cornerstone of any successful wealth preservation strategy is a well-thought-out financial plan.

Start by taking a hard look at your current financial situation. This means assessing your assets, liabilities, income, and expenses. Once you have a clear picture, it’s time to set some goals. Where do you want to be in 5, 10, or 20 years? These goals will guide your financial decisions moving forward.

Remember, a good financial plan isn’t static. It should evolve as your life circumstances change. That’s why working with a financial advisor can be invaluable. They can help you navigate complex financial waters and adjust your plan as needed.

2. Diversify Your Investment Portfolio

Diversification is key to preserving wealth over the long term. The idea is to spread your investments across various asset classes – stocks, bonds, real estate, and perhaps even alternative investments like precious metals or cryptocurrency. This way, if one area of your portfolio takes a hit, you’re not left high and dry.

But diversification isn’t just about buying a bunch of different stocks. It’s about finding the right balance based on your risk tolerance and financial goals. And don’t forget to rebalance regularly. As different assets perform differently over time, your portfolio can drift from your target allocation.

3. Implement Solid Estate Planning

Estate planning isn’t just for the ultra-wealthy. It’s for anyone who wants to protect their assets and ensure they’re distributed according to their wishes.

In Colorado, if you die without a will (known as dying “intestate”), your assets will be distributed according to state law, which may not align with your wishes. That’s why having a solid estate plan is so important.

At a minimum, your estate plan should include a will, power of attorney, and healthcare directive. But for many of our clients, we also recommend setting up trusts. Trusts can offer significant advantages, including minimizing estate taxes, protecting assets from creditors, and allowing for more control over how and when your assets are distributed.

4. Optimize Your Tax Planning

Effective tax planning is an ongoing process. It involves understanding the tax implications of your financial decisions and structuring your finances in a way that minimizes your tax liability.

Some strategies we often recommend include:

• Maximizing contributions to tax-advantaged accounts like 401(k)s and IRAs
• Considering Roth conversions in low-income years
• Using tax-loss harvesting to offset capital gains

Remember, tax laws change frequently. What works one year might not be the best strategy the next. That’s why you should review your tax planning regularly with a professional.

5. Use Insurance for Wealth Protection

Insurance is a powerful tool for wealth preservation. The right insurance policies can protect your assets from unexpected events and provide peace of mind.

Life insurance, for instance, can provide for your loved ones and help cover estate taxes after you’re gone. Long-term care insurance can protect your assets from being drained by healthcare costs in your later years.

Other types of insurance to consider include disability insurance, umbrella liability insurance, and, for business owners, key person insurance.

6. Create a Business Succession Plan (for Entrepreneurs)

If you’re a business owner, your business is likely one of your most valuable assets. But what happens to that value when you’re ready to retire or if something unexpected happens to you?

That’s where a business succession plan comes in. It’s a roadmap for transitioning your business, whether that’s to family members, employees, or an outside buyer.

A good succession plan should address:

• Who will take over the business
• How the transition will be funded
• How to minimize tax implications of the transfer

At Hammond Law Group, we’ve guided Colorado business owners through this process for years.

7. Build Resilience Against Market Volatility

Market volatility is a fact of life for investors. But that doesn’t mean you have to be at its mercy.

8. Plan for Generational Wealth Transfer

Over the next few decades, an estimated $30 trillion in wealth is expected to pass from Baby Boomers to younger generations.

9. Regularly Review and Adapt Your Strategies

The only constant in life is change. Your wealth preservation strategies should evolve as your goals and circumstances change.

Protect Your Wealth: Let’s Create Your Legacy Plan

At Hammond Law Group, we pride ourselves on providing comprehensive estate planning services tailored to each client’s needs.