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If you’ve already begun to build your personal wealth –– whether by increasing your income, savings, or investments –– you’ve taken an essential step towards securing your financial future and meeting your financial goals. That said, it’s important to understand that wealth accumulation is only the first step in the process. Once you have a measure of wealth, you must also work to protect and preserve it over time. This article will help you understand:

  • The difference between wealth preservation and wealth protection

  • Key steps for preserving wealth

  • Keys to protecting wealth

Wealth preservation is not the same as wealth protection

While the terms are often used interchangeably, wealth preservation and wealth protection are not the same thing. Understanding the difference is important because both will play an essential role in meeting your long-term financial goals.

Wealth preservation involves maintaining the value and purchasing power of your assets over time by insulating them from erosion due to inflation, market volatility, economic downturns, and taxes.

Wealth protection –– also known as asset protection –– involves shielding one’s assets from unexpected events such as accidents, illness, and property damage, as well as third parties, including creditors, litigators, and overzealous tax authorities.

Incorporating preservation and protection into your overall financial strategy is important. Why? Together, they can help you reach financial goals in your desired timeframe, avoid exposure to serious financial setbacks, and ensure that your net worth increases over time.

A part of your overall plan

Before we discuss specific ways to preserve and protect wealth, it’s important to understand that these should be components of your overall wealth-building strategy and plan, which should also include:

Setting goals and objectives

Establish clear, specific, measurable financial goals that are aligned with your values and vision for the future. Common goals include funding a child’s education, living comfortably in retirement, and leaving a legacy for loved ones and future generations.

Assessing current finances

Conduct a thorough analysis of your current financial situation: determine your net worth, catalog your assets and liabilities, review your income and expenses, and assess your tolerance for financial risk moving forward.

Basic retirement planning

Most of us hope to retire someday, and even if that day is decades away, some retirement planning should be a component of your overall financial strategy. The basics include: estimating retirement needs and expenses and considering various retirement income sources, including interest, dividends and capital gains on accumulated assets.

Developing a savings and investment plan

Once you’ve established your financial goals, calculate the annual savings and return on investments required to reach your goals on time. Think about potential changes in your life situation and financial circumstances and consider how they might affect your ability to stick to your plan and build wealth on an ongoing basis.

Once your savings and investment plan is in place – and you’ve begun to accumulate assets – it’s time to start nurturing the wealth you have with a few tested strategies:

Strategies to help protect wealth

1. Build an emergency fund

Among the most basic wealth preservation strategies is to have an emergency fund that you can use in the event of unexpected events and expenses. By keeping “cash on hand” in easily accessible accounts such as high-yield savings and money markets, you’ll avoid the expense of making costly withdrawals from retirement and investment accounts. Many experts recommend an emergency fund equaling 3-6 months of living expenses.

2. Diversify your investment portfolio

Use diversification and asset allocation ––spreading your investments across various asset classes such as stocks, bonds, real estate, and commodities –– to reduce risk and stabilize portfolio performance.1

3. Take full advantage of retirement accounts

Retirement accounts are powerful tools for wealth building and preservation due to their tax advantages, growth potential, and legal protections. Here’s how they can enhance your wealth management plan and help to maintain your wealth:

  • Tax-deferred growth: Contributions to traditional retirement accounts (e.g., 401(k)s and Traditional IRAs) grow without being taxed until withdrawal. This defers taxes and allows your investments to compound more effectively.

  • Income Tax-free withdrawals: Roth accounts (e.g., Roth IRAs, Roth 401(k)s) offer income tax-free withdrawals in retirement, provided certain conditions are met. This could help shield your wealth from future tax increases.

  • Reduced taxable income: Contributions to traditional accounts often reduce taxable income during high-earning years, preserving more of your income for investment and saving.

  • Compound growth: Earnings within retirement accounts grow on a tax-deferred or income tax-free basis, accelerating wealth accumulation over time. Reinvested dividends and capital gains compound without immediate tax deductions, enabling faster growth compared to taxable accounts.

  • Wealth transfer and legacy planning: While heirs may owe taxes on inherited traditional account balances, Roth account transfers can be income tax-free, preserving more wealth for the next generation.

4. Get insurance

One of the best ways to protect your wealth is by taking steps to ensure it won’t be depleted due to circumstances such as illness or incapacity, death of a breadwinner, or natural disaster. That's why holding five key types of insurance policies is suggested:

  • Health insurance to help protect you from paying catastrophic medical bills.

  • Disability insurance to provide an income stream if you are unable to work due to illness or injury.

  • Homeowner’s insurance to help ensure that you’ll be reimbursed should your home or property be damaged or destroyed by fire, flood, or other mishap.

  • Umbrella insurance to help protect your assets if you are sued for liability by a third party.

  • Life insurance to help protect your family finances in the event of an unexpected death.

Also, remember that permanent life insurance (as opposed to term life) can build wealth, as well as protect it: Whole and universal life insurance include a cash value component that accumulates in a taxed-advantaged way, and can be accessed while you are alive.2

5. Do some tax planning

Tax planning is a strategic approach to minimizing your tax liabilities while remaining compliant with tax laws. By engaging in thoughtful tax planning, individuals can potentially reduce their tax burden, increase their after-tax income, and allocate more resources toward their financial objectives. It's important to note that tax planning is usually done in conjunction with a Certified Public Accountant (CPA).3

6. Think about estate planning

Estate planning involves arranging for the management and distribution of your assets in the event of your incapacity or death. It involves creating legal documents such as wills, trusts, asset protection trusts, and powers of attorney to help ensure that your wishes are carried out and your loved ones are provided for. Estate planning also includes strategies to mitigate taxes, avoid probate, and protect assets. Business owners should also consider business succession planning, as well as looking into key person life insurance for partners and critical employees. Estate and business succession planning should be done in conjunction with a trusted financial professional.3

7. Employ asset protection structures

Those with substantial assets may want to take additional action to help ensure that their wealth is secured by taking advantage of asset protection structures: legal entities designed to safeguard assets from creditors, lawsuits, or other claims. Such entities — including asset protection trusts, irrevocable trusts, and limited liability entities or corporations for business-related activities –– can help protect personal wealth in the event of legal challenges or business disputes.

8. Leverage the legal protections of retirement accounts

Many retirement accounts, such as 401(k)s, are protected from creditors under federal law, offering a potential safeguard against lawsuits or bankruptcy.

Guardian can help

Our financial professionals can take a comprehensive look at your needs and help with investments, retirement planning, annuities, and life insurance to help achieve your goals. To find a Guardian financial professional in your area:

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Frequently asked questions about wealth preservation and protection

Simply put, wealth preservation is about preserving the value and purchasing power of one’s wealth over time by protecting against inflation, taxes, and economic or market fluctuations. Unlike wealth accumulation, which focuses on growing assets, wealth preservation strategies aim to maintain what has already been accumulated.

A solid wealth preservation strategy often includes investing to help keep pace with inflation, risk management to protect against economic and market downturns, tax planning to reduce the amount of wealth erosion due to taxes, and estate planning to ensure that one's legacy and heirs are protected from tax and legal complications.

While some people use the terms wealth preservation and wealth protection interchangeably, they refer to different aspects of financial responsibility. Wealth protection involves shielding one’s accumulated wealth from unforeseen events such as accidents, illness and property damage, and third parties including creditors, litigators, and overzealous tax authorities.

This material is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, and their affiliates and subsidiaries are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation.

1. All investments contain risk and may lose value. Diversification does not guarantee profit or protect against market loss.

2. The primary purposes of life insurance is the death benefit. Life insurance is intended to provide death benefit protection for an individual’s entire life. With whole life insurance the payment of the required guaranteed premiums, you will receive a guaranteed death benefit and guaranteed cash values inside the policy. Guarantees are based on the claims-paying ability of the issuing insurance company. Dividends are not guaranteed and are declared annually by the issuing insurance company’s board of directors. Any loans or withdrawals reduce the policy’s death benefits and cash values and affect the policy’s dividend and guarantees. Whole life insurance should be considered for its long-term value. Early cash value accumulation and early payment of dividends depend upon policy type and/or policy design, and cash value accumulation is offset by insurance and company expenses.

3. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.