5 Steps to Take if You Want To Create Generational Wealth
Written by
Laura Bogart
Edited by
Nick Friedman
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
When you hear the term “generational wealth,” you might think of the extremely rich and elite. But you don’t have to be wealthy to leave your loved ones a financial legacy that will set them up for long-term security. Here’s how to get started:
1. Establish a Comprehensive Estate Plan
Estate planning is one of those things many people put off or assume only the wealthy need. But in reality, having a clear plan in place is non-negotiable for anyone wanting to ensure their assets are passed down efficiently and according to their wishes. Without it, your loved ones could be left to deal with complicated legal hurdles or frustrating financial entanglements.
A will is a start, but for more robust protection, a trust is your best bet. Trusts can help reduce estate taxes and provide long-term financial security to your beneficiaries. They give you more power to control how and when your assets are distributed, such as releasing funds only at a certain age or milestone. They can even assist with more complicated requests like protecting the interests of an unmarried partner or caring for a family member with a disability.
At a minimum, you should set up the titling and beneficiaries on your accounts–whether bank accounts, retirement funds, or insurance policies–to make sure that you’ve got the right people listed to receive those assets upon your death. These should be reviewed at least annually across all your financial accounts and life insurance policies. If you have a trust set up, often the trust will be named as beneficiary — a step that can simplify your plan.
2. Have a Clear Savings and Investment Strategy
Of course, having an airtight estate plan won’t matter if you don’t have wealth to pass down. That’s why you need to get intentional about building wealth through investing. You’ve probably already identified your short- and long-term savings goals, such as building an emergency savings fund or purchasing a home you hope to pass down to your children. But are you truly laying the groundwork for building wealth that spans generations? How are your long-term savings invested? Are your investments properly diversified? Are you taking full advantage of tax-advantaged savings vehicles?
This is where working with a financial professional can make all the difference. A financial services professional can assess your risk tolerance, help you set up investments that align with your long-term goals, and, most importantly, adjust the plan as your family’s financial needs evolve.
With New York Life, you can collaborate with one of more than 12,000 agents who can help you develop an expert plan that is fully customized to your family’s needs, whether you’re looking to buy a house, put away money for college, or explore investment solutions.
Your consultation with this agent isn’t just one-and-done — it’s the start of a relationship with a team that can help you stay on track with your wealth-building efforts.
3. Make a Retirement Plan That Preserves Your Wealth
As you plan your financial legacy, you’re probably not centering yourself. That’s admirable, but you can’t pass down wealth if you run out of money in retirement. You’ll need to build multiple income streams to ensure that you can live comfortably in retirement without burning through your savings.
You likely have retirement accounts like a 401(k) or Roth IRA, but if you’re looking to build wealth you can pass on, you’d be wise to explore other options, from passive income from real estate to income annuities that provide lifetime income. New York Life offers fixed annuity options that can help provide a reliable income stream in retirement, allowing you to stretch your savings so you can pass on the wealth you’ve worked so hard to build.
4. Use Life Insurance to Protect and Transfer Wealth
You know life insurance can help protect your family from financial hardship when you’re gone. But did you know it’s also one of the most effective ways to create and preserve generational wealth? Whole life insurance guarantees a death benefit, so your loved ones will have financial support no matter when you pass away. These guarantees of a whole life policy are based on the claims-paying ability of the issuer. Unlike term life insurance, whole life policies also grow cash value over time, which you can borrow from or leave as part of your legacy.
Life insurance isn’t the only kind of insurance that can protect your loved ones. As life expectancy increases and healthcare costs rise, many families find themselves in the awful predicament of having to drain their savings to pay for care for aging parents. One of the greatest acts of love you can do for your loved ones is to purchase a long-term care policy that will cover what Medicare won’t. These policies can help cover care expenses so your children won’t have to dip into their own finances for your care.
5. Teach Financial Literacy to the Next Generation
Passing down financial knowledge to your kids is every bit as important as passing down wealth. In fact, if you’re setting yourself up to leave real wealth behind, it’s absolutely essential.
You should be regularly talking to your kids about money in age-appropriate ways. Tell them why you set up an auto-draft to fund your savings. Talk to them about investing even before they quite understand the terms. Explain why you pay your credit card in full every month. If your family has a business, consider how you can pass on the skills to manage and grow it — not just the ownership. A solid estate plan is only as effective as the heirs’ ability to manage it.
Bottom Line
Building generational wealth is possible with smart planning, strategic investing, and ongoing financial education. Need some professional advice? The experts at New York Life have the tools to help you build and protect wealth for generations to come. Get started here to set up a consultation with an agent.
More From GOBankingRates
