“Inflation” is a word that makes many people uneasy. Yet it’s a normal aspect of the economy that affects our purchasing power—and the impact of inflation can be felt beyond the monthly grocery bill or at the gas pump. Inflation can also have an effect on a person’s long-term wealth.
Sometimes inflation increases at a greater-than-normal rate. Over the last century, there have been numerous periods of high inflation caused by various factors, some of which were unforeseeable. Everything from a major military conflict to a booming economy that grows too fast can lead to inflation.
These are just a few examples of how our hard-earned dollars can lose their buying power and why wealth preservation is so important. Employing wealth protection strategies can help safeguard your wealth no matter what the market conditions are like or what life throws your way.
What is wealth protection?
Wealth protection is the use of financial management strategies aimed at protecting personal wealth and providing asset protection. Comprehensive wealth protection plans ensure that assets and wealth are protected even during market downturns and other unforeseeable circumstances.
Why is wealth protection important?
Wealth protection is an important part of financial management in both the short term and the long term. In the short term, it can help provide more stability and ease financial anxiety, and in the long term, it can help protect your wealth so that you can pass it on to the next generation.
What are wealth protection plans?
A wealth protection plan is a personalized strategy for safeguarding assets and reaching financial goals, not just making sure monthly expenses are covered. Wealth protection plans differ from general financial plans in that they go beyond simple banking aspects to include strategies like diversification of assets, establishing insurance accounts, and setting up trusts.
How to protect your wealth
You have many ways to protect your wealth so that your family may be more likely to remain financially stable even if the unexpected happens. Below are six popular wealth protection strategies that may help you better protect your assets.
Consider setting up a financial plan that includes wealth protection strategies over the long term.
Preserving wealth that can be passed on to children and grandchildren is a priority for many Americans. Part of comprehensive financial planning is ensuring that the wealth you build continues to grow so that your needs are met in retirement—and your family’s financial future is secure.
When you create a financial plan, insurance can be a key aspect of wealth management. Types of insurance that protect assets include:
- Homeowners insurance
- Medical insurance
- Life insurance
- Disability insurance
- Wealth insurance in the form of physical precious metals
Essentially, anything that could cause a major wealth-reducing expense could be a liability you may be able to cover with an insurance policy.
Proper estate planning is another critical part of family wealth protection. There are different ways estates and trusts can be set up to protect your wealth before and after death. For example, establishing an irrevocable trust can provide creditor protection since assets in this type of trust aren’t considered personal property.
A financial advisor might be able to help you better understand how to protect your family’s wealth, both now and in the future.
You can create a wealth protection plan on your own or with the guidance of a financial advisor. Financial advisors are wealth management experts who can be helpful resources.
One advantage of speaking with a financial advisor is that they have knowledge of the laws and regulations for passing on assets after your death. An advisor can explain what to watch out for and how to navigate financial rules to help protect your generational wealth. Chief among these rules are regulations regarding capital gains taxes, gift taxes, and estate taxes. You may also wish to speak with an estate planning attorney who can ensure complete legal compliance and even act as the executor of your will.
Asset selection is something else a financial advisor can help with. An advisor can provide guidance on which assets protection generational wealth and which assets are the riskiest depending on different circumstances.
A financial planner can also assist with selecting a life insurance policy, wealth insurance, and other forms of coverage designed to help provide wealth protection.
Saving for emergencies or large purchases may help your wealth preservation efforts.
Unexpected, large expenses can leave you scrambling and potentially pulling from retirement or other accounts that were originally meant for maintaining your wealth. Consider this: An accident or illness can happen to anyone at any time. And medical issues are the top reason people file for personal bankruptcy in the U.S.
Building up your savings is like having a safety net to catch you if there’s an unexpected expense that causes a financial hardship. Savings help protect your other assets that are in place to build your wealth. Savings also help cover your living expenses if you are unable to work or suffer a job loss.
Life is full of the unexpected. Saving money is one of the few proven strategies for protecting your wealth if the unexpected comes with expenses. Saving is considered essential, no matter which wealth protection strategies you utilize to help your savings grow and create an even larger cushion.
One way to help reduce your risk exposure and enhance family wealth protection is to select assets that respond to market factors in different ways.
We all have our own unique level of tolerance when it comes to risk, but it may still be helpful to take action when we believe it’s necessary for wealth protection. If you’re worried about the purchasing power of your cash fading away, one way you can protect that wealth is by turning it into something other than cash: specifically, something that doesn’t respond to market volatility in the same way as cash. When you hear someone talk about a “hedge” against inflation, this is what they mean—and it's what diversification is all about.
Gold, for example, has a history of upward potential during times of economic uncertainty. And as a commodity priced in U.S. dollars, gold typically sees a rise in price when there is a rise in inflation. For these reasons, gold is often considered a hedge against inflation.
Of course, gold is far from the only alternative asset you may wish to consider to help you reduce your portfolio’s overall risk exposure—but few assets have gold’s history of retaining purchasing power over the long term.
How diversified are your assets?
Find out how well diversified your portfolio is and how you can improve your wealth protection no matter what market factors are at play. All you have to do is answer a few questions to receive the results, plus get our exclusive FREE Gold Information Kit.
Take the portfolio diversification quiz to discover more!
Protecting your wealth can mean more than just working to maintain purchasing power—it can also mean seeking new opportunities for growth.
Individual Retirement Accounts (IRAs) provide one such opportunity many Americans can utilize for more than just wealth preservation. These accounts come with tax advantages that may help grow your wealth over the long term.
In an article published December 30, 2021, by CNBC, Clark Kendall, certified financial planner and CEO of Kendall Capital, called an IRA “a seed or planting that turns into a huge tree that can make a difference and will give you great shade and comfort in the years to come.”
Essentially, an IRA allows your wealth to grow tax-free, with taxes paid either upon distribution (traditional IRAs) or paid when you move funds into the IRA (Roth IRAs). Either of these may be a good option for those who don’t want to lose their purchasing power and have wealth they won’t need access to until they retire. However, there are contribution limits for IRAs. In 2023, for example, those under age 50 are allowed to contribute $6,500 to a traditional IRA, Roth IRA, or both. Anyone age 50 or older is able to contribute $7,000 annually.
A self-directed precious metals IRA combines the wealth protection of alternative assets with the tax benefits of an IRA.
Having control of your finances is an important part of protecting your wealth. Whatever your level of risk tolerance, you want to be the one making decisions for your personal portfolios.
There is a type of individual retirement account that allows you to experience the benefits of an IRA, owning physical precious metals like gold, and being able to make decisions for your own portfolio. This individual retirement account is known as a self-directed precious metals IRA. With this type of account, you get to personally select the assets included in your IRA. Unlike with a standard IRA, your choice of assets isn’t limited to traditional options like stocks, bonds, or exchange-traded funds. With a self-directed IRA, you can utilize a variety of alternative assets for your IRA, including cryptocurrencies, real estate, LLCs, and precious metals like gold.
A self-directed precious metals IRA may not be the right choice for everyone. But as inflation increases and decreases the dollar’s spending power, now may be the right time to begin exploring your options. There’s no better day to start protecting your wealth than today!
How U.S. Money Reserve Can Help You Protect Your Wealth
U.S. Money Reserve is an industry leader in providing consumers with wealth protection in the form of physical gold, silver, platinum, and palladium. We can help you build or expand a unique portfolio of precious metals to diversify your assets, including self-directed precious metals IRAs.
Discover why purchasing gold may be a smart move as your work toward retirement—request your FREE copy of our Gold IRA Information Kit.
