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Roughly 90% of wealthy families lose their fortune by the third generation, according to a study by The Williams Group, a wealth consultancy. 

While that statistic may alarm you, it’s good to know. Let it serve as motivation to manage your assets well

As a high-net-worth individual (HNW), the earlier you begin managing your wealth, the better position you’ll find yourself in retirement arrives. With the right moves, you can live comfortably and so can your children and grandchildren. Isn’t that the goal? 

In this article, we’ll cover how HNW individuals should plan retirement, as well as wealth preservation strategies.

The biggest mistakes HNW individuals make when planning for retirement

Knowing what not to do can help a lot with wealth preservation and growth strategies in retirement. Common mistakes high-net-worth individuals in wealth management include: 

 

  • Neglecting investment management 
    As Bankrate’s chief financial analyst, Greg McBride, attests, too many Americans have a “lackadaisical approach to retirement savings” Don’t put off planning—because it will negatively affect your wealth. Consult with multiple financial advisors. Opt for the professional that can customize your portfolio to meet your risk tolerance, needs, wants, and preferences.
  • Not choosing tax-efficient investments
    Uncle Sam can take a chunk out of your wealth, especially when the highest tax bracket is 37%. HNW individuals should move money to tax-efficient investments, such as Roth 401Ks and real estate investment trusts (REITS).
  • Underestimating longevity
    67% of Americans believe they’ll outlive their savings. When planning your retirement, set yourself up to live comfortably into your 100s. After all, modern medicine works miracles, and you could live much longer than you think.
  • Not focusing on income-producing investments
    Income-producing assets, such as multifamily investments, give you cash flow and ensure you don’t have to liquidate assets at the wrong time. As Don Wenner, CEO of DLP Capital Partners, states, “When you have cash flow, you’re not as worried during downturns. When you don’t have cash flow, downturns put you in a bad place. Because you may need to sell in distress to get cash.”
  • Not accounting for inflation
    From 1913 to 2013, the inflation rate averaged 3.22%. It’s been lower than that in recent years (around 2%). However, when planning for retirement, factor a 3% inflation rate into your calculations.
  • Not communicating with heirs
    A report in Money Magazine details that many HNW individuals don’t communicate to future generations how the family’s wealth should be managed. Through transparency about your wealth, communication about strategy, and establishment of roles and expectations, you can ensure your wealth is handled well by your heirs (and that will greatly reduce the chances of that money being squandered). That’s how you build generational wealth.

How much money will HNW individuals need to retire

There’s no magic number for how much money you need to retire. It depends on your circumstances and lifestyle. 

As an HNW individual, a rule of thumb is that you need 75% of your pre-retirement income per year in retirement. For instance, if you make $200,000 per year at your job, aim to have $150,000 per year in retirement income. That will give you financial security and enable you to live comfortably. 

You may ask: Why the 25% reduction? 

In retirement, you have fewer expenses than you did before. The kids have moved out, you’ve paid off your mortgage, and you no longer have to save money for retirement. 

Now, when you make your calculations for how much you should save and invest, use conservative numbers, factor in inflation, and account for a few more years than your life expectancy. This ensures you have enough to last. 

For example, if you make $200,000 and plan to retire in 10 years, your income would be the equivalent of $269,870 per year (if inflation averages 3%). If you expect to live 30 years in retirement, calculate the money you’ll need to live 35 years (to be safe). To figure out how much you need to retire, do the following calculation:

  • $269,870 x 35 = $9,445,450 (you’ll need 75% of that amount to live comfortably)
  • $9,445,450 x 0.75 = $7,084,087.50  (that’s the amount to fully fund your retirement)

That equates to roughly $202,400 per year you need in retirement income. You technically don’t need to save the $7+ million before retiring. If you plan wisely, you can generate income from your investments and other sources in retirement.  

To figure out how you’ll sustain that income, add up all your income sources in retirement, including inheritance, social security, investment returns, business distributions, real estate rental income, and more. If you have any gaps, take steps to increase your retirement income so you can meet your needs. For instance, generating more income in retirement could be as simple as moving savings into a multi-family real estate fund

How HNW individuals can earn high-yield investment returns before retirement—without all the risk

By allocating money to the right assets, HNW individuals can generate consistent, passive income before and throughout retirement. Some popular investments for wealth preservation and earning income during retirement include: 

  • Roth IRAs and Roth 401Ks: Get tax-free growth and tax-free withdrawals. These tax-efficient investments can be passed to your next generation too. 
  • Dividend stocks: Benefit from long-term capital gains and receive dividends.
  • Rental properties: Get cash flow each month via rental income.

Of course, these investments do carry risk. However, given the historical success of each, any one makes sense if you can handle the ups and downs with your portfolio, or the hard work of managing properties. The investments do provide cash flow, which is vital. 

Yet to put yourself in the best position, you should look for investments that deliver consistent, high-yield returns in the years prior to retirementwithout taking on a lot of risk. That enables you to take advantage of the assets you’ve accumulated, without exposing yourself to a market downturn. 

So, what are these sorts of investments?

Enter real estate investment trusts (REITs) and real estate lending funds.

How the DLP Housing Fund can help you preserve and grow wealth

There’s no such thing as a truly risk-free, high-yield investment. However, some investments get closer to that than others. Such investments suit HNW individuals as they approach retirement. You can leverage your sizeable portfolio and enjoy large gains, without taking on too much risk. 

“At DLP Capital Partners, we aim to set HNW individuals up for success in retirement. We operate by two principles: No losses and consistent returns. Disciplined investments in real estate enable us to produce consistent income for our investors without losing money,” describes Wenner. 

That’s why we’re proud to launch the DLP Housing Fund, an industry-first hybrid flagship fund. 

A hybrid REIT, the Housing Fund includes a blend of debt funding to experienced operators and equity investments in multi-family communities and single family housing. 

When you invest in the Housing Fund as an HNW individual, your preferred returns get priority over our management fees. For this hybrid REIT, we’re striving for 12%+ net returns to investors each year. 

To better preserve your wealth, the Housing Fund maximizes your liquidity with monthly distributions, in addition to above-market equity returns. This puts you in a better position to withstand any market downturns and grow your wealth for a lifetime and beyond. It also provides the benefit of tax sheltering through depreciation and tax-deferred 1031 exchanges. 

“Through the Housing Fund, we aim to provide consistent, high-yield returns while mitigating risk. We can do this through strong in-house management, intimate market knowledge, and disciplined buying and lending,” attests Wenner.

How the DLP Housing Fund can help you preserve and grow wealth

There’s no such thing as a truly risk-free, high-yield investment. However, some investments get closer to that than others. Such investments suit HNW individuals as they approach retirement. You can leverage your sizeable portfolio and enjoy large gains, without taking on too much risk. 

“At DLP Capital Partners, we aim to set HNW individuals up for success in retirement. We operate by two principles: No losses and consistent returns. Disciplined investments in real estate enable us to produce consistent income for our investors without losing money,” describes Wenner. 

That’s why we’re proud to launch the DLP Housing Fund, an industry-first hybrid flagship fund. 

A hybrid REIT, the Housing Fund includes a blend of debt funding to experienced operators and equity investments in multi-family communities and single family housing. 

When you invest in the Housing Fund as an HNW individual, your preferred returns get priority over our management fees. For this hybrid REIT, we’re striving for 12%+ net returns to investors each year. 

To better preserve your wealth, the Housing Fund maximizes your liquidity with monthly distributions, in addition to above-market equity returns. This puts you in a better position to withstand any market downturns and grow your wealth for a lifetime and beyond. It also provides the benefit of tax sheltering through depreciation and tax-deferred 1031 exchanges. 

“Through the Housing Fund, we aim to provide consistent, high-yield returns while mitigating risk. We can do this through strong in-house management, intimate market knowledge, and disciplined buying and lending,” attests Wenner.

Fund TypeReal Estate Equity & Direct Lending Fund
Fund Investments
Direct Real Estate Ownership &
First Position Secured Real Estate Loans
Direct/Indirect SecurityEquity Ownership in
Real Estate & Mortgages
Inception DateJanuary 2020
Fund TermEvergreen
Distribution Frequency
Monthly (Pref), EDC Distributed to Investor Accounts Annually
Targeted Monthly
Distributions
6% Annualized
Preferred Return 6% Net, Paid Before
1.5% Management Fee
Management Fee1.5% Subordinate to Preferred Return
Targeted Annual Return Net to Investor12%+ Net
Return Split80/20 Upon Achieving 6 % Preferred Return & 60/40 Upon Achieving 12% Net IRR to Investors
RedemptionsAnnual
Benefits of LeverageYes
IRA Investment OptionYes
Tax Shelter through DepreciationYes
Target Fund Size$1 Billion
Target Minimum Investment$250,000
Manager
Co-investment
Minimum 5%
Committed Capital
Must Be AccreditedYes
Audited FinancialsYes, CohnReznick
Legal Counsel
Seward & Kissel, LLP
Institutional OptionYes
Reporting FrequencyQuarterly

Now, what if you have a retirement account? How can invest in the Housing Fund? 

Well, we have good news. You can invest your retirement money into the DLP Housing Fund through a self-directed IRA. Many brokerage firms, such as Charles Schwab, allow you to set up a self-directed IRA. The account gives you access to alternative investments with your retirement account, including real estate funds like we offer at DLP. 

So, if you want to earn consistent, high-yield returns before and during retirement, we’re here to help. Call us at 610.488.2375 or RSVP for a dinner.

Don’t miss your chance to hear about the New Housing Fund at one of our upcoming investment dinners!

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