Wealth Formation: Changes Throughout the Years

By LouAnn Schulfer, AWMA®, AIF® Accredited Wealth Management AdvisorSM, Accredited Investment Fiduciary® , Published Author |

A discussion that I often have with my clients is that the things they did to be financially successful for the last 30 years will look different than the next 20 to 30 years.  It’s a foundational principle for building wealth of any size.


For example, when you are young and getting started, maximizing contributions to a Roth account and investing in stocks with high growth potential is likely your best strategy.  Dollar cost averaging, like monthly contributions to investments in a retirement account, is beneficial because during market declines, you are buying low.  Tax advantages outside of retirement accounts may not be a high priority if you are not in a high tax bracket.


Years go by and as your nest egg grows to six, seven or even eight figures, your investment strategy will likely change.  You no longer have as much time on your side to make up for large downturns in investment valuations.  You may seek investments with less volatility.  As your career or business has grown, your income likely has as well, and tax-advantaged investing with your discretionary income becomes important.  Afterall, it’s not how much you make, it’s how much you keep. 


As your assets grow, your efforts to protect them should as well.  Liability insurance, trusts or the creation of entities may become important.  How your assets are titled eventually becomes an issue, either favorably or not.  Life insurance and disability insurance become important when your greatest financial asset is your own ability to make money.


Investments often change when it comes time to begin taking distributions from your accounts rather than making contributions to them.  Income producing investments often become more attractive.  Some people like to put certain guarantees in place for an additional cost.  Planning for future distributions including your Required Minimum Distributions (RMDs) from retirement accounts can save money on taxes and possibly even health insurance premiums. 


A foundational principle of wealth formation is that it changes throughout the years.


LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.comSchulferAndAssociates.com , louannschulfer.com or louann.biz


Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC. 


A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.


Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.


No strategy assures success or protects against loss.