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How High-net-worth Households are Faring

The investment markets rebounded and have proven resilient despite the economic decline resulting from the pandemic. The Federal Reserve continues to boost monetary policy with trillions in market support. Congress and President Trump support the need for further economic stimulus, even though they hadn’t settled on a number as of this writing.1

And yet, according to recent polls, Americans’ confidence in their ability to retire with sufficient income continues to weaken. A recent survey revealed that 72% of Americans say they now plan to work in retirement, which is up from 67% just last May. Only 58% of U.S. workers say they are currently earning the same amount as before the pandemic hit. And nearly one out of every four American adults (24%) say they are planning to tap their 401(k) assets this year, including 41% of people who have recently been laid off due to COVID-19.2

Retirement preparedness numbers were not particularly strong before COVID-19 settled on these shores, and recent economic events have further impacted those numbers. If you’re concerned about the future, it helps to have a plan. Not just one plan, but also contingency plans based on your employment prospects for the future and the potential direction of the markets. We suggest that the best way to plan for retirement is to seek out quality advice from a licensed financial professional and appropriate financial products for your situation. Please give us a call to discuss.

Today’s pervasive sense of financial insecurity is not relegated among only low-income workers. High-net-worth (HNW) investors are generally described as those with a net wealth in the six to seven figures.3 In a new report from Morgan Stanley and Oliver Wyman, it was found that HNW individuals’ wealth will probably fall 4% by the end of the year — a stark contrast to the previous decade of consistent annual growth.4

According to Cerulli Associates, more than three-quarters of the 33 million U.S. households that hold between $100,000 and $1 million in invested assets say they work with a financial advisor to manage their money. The traits they most appreciate from this relationship are trustworthiness, honesty and dependability, as well as knowledge and quality of service.5

HNW investors also are not shying away from their interest in buying real estate in the luxury market. In fact, interest has increased in buying second homes outside of their big-city residences as a result of the pandemic’s shelter-in-place demands. Due to travel restrictions, many are looking for extra accommodations domestically rather than overseas.6

On the downside of ample wealth, the IRS announced in July its intention to audit hundreds of high-net-worth individuals and their related entities. The campaign is expected to review returns up through Sept. 30, 2020, with audit letters to be mailed out this fall. Specifically, assets targeted for scrutiny include foreign bank accounts, trusts, business interests and overseas inheritances; associated business entities such as partnerships, trusts, S corporations, C corporations; gifting practices and private foundations.7

Content prepared by Kara Stefan Communications.

1 Jeanna Smialek. Aug. 19, 2020. The New York Times. “Fed Officials Said the Economy Needed More Help From Congress.” https://www.nytimes.com/2020/08/19/business/economy/fed-meeting-minutes-coronavirus.html. Accessed Aug. 20, 2020.

2 SimplyWise, Inc. July 13, 2020. “SimplyWise Retirement Confidence Index.” https://www.simplywise.com/blog/retirement-confidence-index/. Accessed Aug. 20, 2020.

3 Adam Hayes. Investopedia. April 19, 2020. “High-Net-Worth Individual (HNWI).” https://www.investopedia.com/terms/h/hnwi.asp. Accessed Aug. 5, 2020.

4 James Phillipps. Forbes. June 11, 2020.Coronavirus To Wipe $3.1 Trillion Off High Net Worth Wealth In 2020, Report Says.” https://www.forbes.com/sites/jamesphillipps/2020/06/11/coronavirus-to-wipe-31-trillion-off-high-net-worth-wealth-in-2020/#419ff8c833e7. Accessed Aug. 20, 2020.

5 Cerulli Associates. June 12, 2020. “SIFMA-Cerulli Individual Investor Project.” https://info.cerulli.com/rs/960-BBE-213/images/Cerulli-SIFMA%20Final%20061820.pdf. Accessed Aug. 20, 2020.

6 Miao Li. Mansion Global. July 27, 2020. “When it Comes to Property, Covid-19 Has Been ‘A Time to Reflect.’” https://www.mansionglobal.com/articles/when-it-comes-to-property-covid-19-has-been-a-time-to-reflect-217822. Accessed Aug. 5, 2020.

7 Perkins Coie. JD Supra. July 15, 2020. “IRS to Target High Net Worth Individuals, Private Foundations, and Associated Entities Beginning in July 2020.” https://www.jdsupra.com/legalnews/irs-to-target-high-net-worth-32702/. Accessed Aug. 5, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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