After working for most of your life, retirement is supposed to be that period when you can live out your golden years in happiness and do the things that you want to do. And for people who plan right, retirement is just that. It’s lake houses and vacations, spoiling grandkids and exploring hobbies.
Still, it can be scary to retire and walk away from a known paycheck. Whether you’ll have a fruitful retirement largely comes down to the planning work you’re putting in now. And while a high net worth individual may be in a better position than most to hang up the briefcase when the time comes, proper planning for retirement is just as important.
In this post, we’ll cover some retirement planning strategies for high net worth individuals to empower you with the knowledge to properly plan for retirement.
High Net Worth Individuals Defined
High net worth individuals, or HNWIs, are considered those with at least $1 million in cash assets or assets that can be converted into cash, stocks or other assets. By some definitions, HNWIs are also those with $750,000 in investable assets or $1.5 million in net worth. Investable assets include cash, stocks, bonds and mutual funds.
Retirement Planning Strategies for High Net Worth Individuals
Regardless of your age, if you’re a HNWI, there are various strategies that you’ll want to implement for a cozy retirement. The first thing you’ll want to do is estimate how much you’ll need to comfortably live out your retirement years – and there are various calculators to help you do this, factoring in your assets and any other government benefits (i.e., social security benefits) that you may be privy to. Once you know what you’ll need, it’s time to chart your course.
Here’s a closer look at some of these strategies:
Max Out Your Retirement Contributions
This strategy seems simple enough – max out your retirement contributions. Whether you’re investing in a 401(k), IRA or something else, max out your contributions annually. In 2024, individuals can contribute up to $23,000 per year to their 401(k) accounts and the Internal Revenue Service has increased that maximum to $23,500 for 2025. If you’re over 50 years of age, you can contribute up to $6,000 more toward your 401(k) per year.
The annual maximum IRA contribution is $6,000 per year or $7,000 if you’re over the age of 50. However, you’re only allowed to contribute a maximum of $583 per month for a standard IRA or $625 per month for a Roth IRA, so you can’t front load or back load your account each year, you’ll have to spread it out.
Plan for Medical Costs
Beyond all of the expenses that you’re likely to incur in retirement, one of the most significant costs that cannot be overlooked is medical expenses. This includes long-term care that may be associated with illness or elongated recovery as you age. According to various studies, it’s estimated that most HNWIs need to save more than $350,000 for their best chance at covering medical bills at retirement age. Noting this, it’s crucial to account for these costs when planning for your retirement. Failure to do so is only likely to strain your retirement finances.
Saving with a Health Savings Account (HSA) represents a way to contribute to healthcare costs in a tax-friendly manner. Unlike Flexible Savings Accounts, the money that’s placed into HSAs will carry over from year to year, ensuring you can build up a large balance that you can use throughout retirement. Consider making the maximum contribution to your HSA as soon as you’re comfortable able to.
Take Steps to Reduce Your Tax Liability
It seems like a simple concept, but the more you can save in taxes, the more you can use to build your wealth or plan for retirement. We’ve already discussed a few key ways to reduce your tax liability in this post. Albeit minor, divesting funds to your 401(k) and HSA comes with tax benefits.
If you want to think a little bit more boldly about your tax liability, you might even consider moving to an area or U.S. state with either a low income tax or no income tax. For instance, in the United States, Alaska, Georgia, Mississippi, Nevada, South Dakota and Wyoming either have no state income tax, offer significant deductions on retirement income or don’t tax retirement income.
Also, it should go without saying that you should keep your investments in their respective accounts until you’re able to take them out without penalty. Making premature withdrawals or withdrawals that don’t meet certain qualifications can lead to major tax penalties.
Diversify Your Assets
There’s strength in diversity – and your retirement planning strategy should also reflect this. This way, if one market sector takes a dip, you have other assets to fall back on in the meantime. Essentially, when you diversify your assets, you’re not putting all of your eggs in one basket, which can be problematic if that proverbial basket crashes. That’s where asset diversification can significantly help. Doing so reduces your chances of experiencing large losses without sacrificing much in the way of your investment returns. For instance, stocks tend to be negatively correlated with bonds. So if stocks are strong, bonds may not be – and vice versa. Or, ideally, they’re both strong at the same time, which can significantly benefit your portfolio.
Work with a Qualified Investment Management Partner
As a HNWI, you shouldn’t be making any retirement planning decisions in a bubble. That’s where it can help to work with a financial advisor or family wealth management specialist. These professionals can assess your current assets and weigh your current strategy to help determine if you’re on the right track. And if you’re not, they have the experience and expertise to put you on the right track with your retirement strategies. That’s the value of working with a qualified investment management partner, and it’s where it can pay dividends in optimizing your retirement strategies for a more comfortable financial retirement.
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