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The Biggest Financial Concerns Of Affluent Investors

Updated: 03/30/2022 by Financial Samurai 64 Comments

The more money you have, ironically, the more worries you might have too. Personal Capital, a digital wealth advisor with free financial tools, released its latest Affluent Investor report. Among other things, it highlights the biggest financial concerns of affluent investors.

The biggest surprise from one of its surveys is that folks with more than $500,000 in investable assets are most worried about a financially secure retirement. Think about that for a minute. With the median retirement savings for 56 – 61 year olds in America at only ~$20,000, Americans with 25X that amount cite financial security as their top worry!

With $500,000+ in investable assets alone, one can presume that most survey respondents have net worths in excess of $1,000,000. After all, about ~85% of the typical American’s net worth is tied up in their primary residence. Check out the survey results.

The Biggest Financial Concerns Of Affluent Investors

What the mass affluent worry about the most - The Biggest Financial Concerns Of Affluent Investors

I bet most people in the world would consider having $500,000 in investable assets plus a home to be a financial life well done. Therefore, we can conclude that affluent investors have to be one of the most paranoid demographics around, especially since 38% said they are also worried about losing their wealth.

It is fascinating the biggest financial concern from the mass affluent is that they will run out of money.

Why Are Affluent Investors So Paranoid?

Most of the people who’ve been able to amass over $500,000 in investable assets are probably older than 37, the median age in America. Therefore, one can postulate that these investors have lived through the housing crisis and maybe even the 2000 dotcom bubble with a significant amount of assets.

They’ve seen their investments get slashed by a third within 12 months a couple of times. They know dozens of people who were let go from a job they needed and remained jobless or underemployed for years.

When you amass $500,000+ in investable assets, you naturally start getting paranoid about losing all your money that took years, if not decades to accumulate. That paranoia only tends to get worse the more money you have in risk assets. After all, it takes a 100% return to get back to even if you lose 50% of your money.

Why My Concerns Grew

Once I accumulated over $1,000,000 in investable assets, it no longer seemed prudent to allocate all my money towards stocks. Instead, I began piling most of my money into real estate to diversify away from my 401k, my company stock, and my career in equities. Little did I truly realize my “diversification,” starting in 2003, was actually a 5X leverage concentrated bet on San Francisco real estate.

The irony with having very little to invest is that you simply don’t have much financial worry. Think back to how happy you were in high school, college, or the first few years after work. All you cared about was having a good time and maybe saving a little money on the side for a vacation or a new ride. Is it any wonder why so many of us were happier before the age of 35?

It was only until after I built some passive income and started this site did my investing paranoia begin to wane. Writing about your fears is a lot like speaking to a therapist who helps put things into perspective.

My Top Three Financial Concerns

Here are my biggest financial concerns.

1) Poor investment returns from my rental home proceeds.

Although it’s been a relief to no longer manage a rental property that comes with a $23,000 a year annual tax bill, I know I’ll be disappointed with myself in 20 years when I revisit how cheap I sold it for. The only solution to minimizing disappointment is earning at least a 5% annual return on my proceeds that cause minimal worry.

My hope is that real estate crowdfunding, the stock market, and the municipal bond market will provide such an outcome, but I’ll never know for sure. So far, my investments in all three asset classes have done well since I sold my rental property in 2017. However, there was a big scare in March 2020.

2) A large decline in my online business.

My online business provides fantastic supplemental income to my current passive income investments. I’m constantly reinvesting more than 50% of my online income to create more passive income. But one day it might go way down or go away.

But as I look into the future, I’m thinking of taking things down a notch to spend more time with my son and daughter. I’m too tired post over one year of lockdowns since the pandemic began. It’s time to enjoy life more!

The creation of the FS iTunes channel is one way for me to buy time during the weeks I no longer want to write. It’s potentially a new revenue generator as I’ve already been offered two sponsorship proposals.

3) The financial well-being of my in-laws.

My parents are thankfully financially secure due to their long careers in the US Foreign Service. They lead frugal lives with no debt, minimal expenses, have healthcare, and pensions for life.

My in-laws, however, are not as lucky. They are surviving OK, but I want them to be thriving at their age. I want to find a way to financially help them without offending their honor. This is a tricky subject that deserves a dedicated post.

Related: How To Make A Lot Of Money In The Stock Market And Still Feel Bad

4) Living long enough to see my children grown up.

Perhaps my biggest concern isn’t a financial one. Given we had children late, we won’t be around as long as we could have been in their lives. Therefore, the goal is to get in ideal shape and live as long as possible. I’d like to at least see my parents grow up and find someone who loves them.

Try Not To Let Wealth Get In The Way Of Happiness

The amount of financial worry six figure income earners and high net worth individuals have is quite a paradox. But paranoia helps investors accumulate more capital in their lifetimes than those who couldn’t give two poops about financial freedom. However, investing FOMO never allows folks to ever be satisfied with how much they have.

The key to being financially happy when you’re already doing well is to compare your current self to your past self and not to other people. If you can focus on your own progress, dare I say your happiness meter might jump up a point or two!

Recommendation To Build Wealth

Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.

After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how you’re doing. I’ve been using Personal Capital since 2012 and have seen my net worth skyrocket during this time thanks to better money management.

Retirement Planning Calculator

Diversify Into Real Estate

Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income. Stocks are fine, but stock yields are low and stocks are much more volatile. The -32% decline in March 2020 was the latest example. However, real estate held steady and appreciated in value then. 

Diversification and owning a real asset helps minimize financial concerns. I’d much rather invest in a stable asset that provides shelter and income than a security that could lose half its value overnight.

Take a look at my two favorite real estate crowdfunding platforms.

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing.

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.

I’ve personally invested $810,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000. 

The Biggest Financial Concerns Of Affluent Investors is a Financial Samurai original post.

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Filed Under: Retirement

Author Bio: I started Financial Samurai in 2009 to help people achieve financial freedom sooner. Financial Samurai is now one of the largest independently run personal finance sites with about one million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse. In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing.

Order a hardcopy of my new WSJ bestselling book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. Not only will you build more wealth by reading my book, you’ll also make better choices when faced with some of life’s biggest decisions.

Current Recommendations:

1) Check out Fundrise, my favorite real estate investing platform. I’ve personally invested $810,000 in private real estate to take advantage of lower valuations and higher cap rates in the Sunbelt. Roughly $160,000 of my annual passive income comes from real estate. And passive income is the key to being free.

2) If you have debt and/or children, life insurance is a must. PolicyGenius is the easiest way to find affordable life insurance in minutes. My wife was able to double her life insurance coverage for less with PolicyGenius. I also just got a new affordable 20-year term policy with them.

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Comments

  1. EW says

    January 14, 2018 at 1:09 pm

    Becoming wealthy does not eliminate worry. My wife and I have worked hard have been fortunate to have reached the upper 0.1% of income earners. We are retiring this year in our early 50’s but although we don’t worry much about money, we have shifted our worries to our kids futures(will they choose a partner wisely) and our own health. It’s certainly less stressful but the worries are part of the human condition.

    Reply
  2. Liam says

    December 22, 2017 at 10:50 pm

    I’m of two minds about this, but I’m not paranoid as downturns usually don’t last long. And yet…

    As millions of Boomers (a generation that was given a planetful of resources and did very little with it – besides consume) retire, one wonders if the stock market will suffer a stagnation lasting for a decade or more as they cash out their 401k and Roth plans. As the demo pyramid becomes a cylinder, it will take a while until that sorts itself out. Likewise as they sell their expensive houses for smaller ones, one wonders who will buy them in twenty years as most millennials are broke and have limited prospects for the future due to systemic changes in the economy.

    This is all depressing stuff, but given the low level of savings and investments among that generation, it’s possible that the selloff won’t be as dire or dramatic. It would be ironic if the lack of savings of the Boomers is what keeps the market from being flat or in a tail spin until 2035 or so.

    Reply
  3. Eric says

    December 22, 2017 at 7:36 am

    Sam – thanks for the great post. I was wondering if you might be able to share more about your experiences living with parents in the foreign service. Where did you live as a child (geographically)? Are you fluent in any other languages? What kinds of schools did you attend? It sounds like a remarkable childhood. I remember living in the Philippines as a three year old (military family), but this was the extent of my overseas experiences. I imagine that growing up overseas with new places every few years (assuming you moved around a lot) kept things fresh and interesting. I’d love to hear more on this. It would be interesting to see a blog post perhaps quantifying what it would cost to be able to do this for career professionals with a “normal job”. Thanks again.

    Eric

    Reply
    • Financial Samurai says

      December 22, 2017 at 7:44 am

      It was a great adventure. Went to international schools in Taipei, Kuala Lumpur, Osaka, and Lusaka.

      My Mandarin used to be pretty fluent. But now it is Rusty. It’s such a shame and I’d like to go live abroad in a Mandarin speaking country to get it back.

      Reply
      • Danny says

        January 8, 2018 at 9:47 am

        Hey Sam, you can get it back by watching TV Channel 26 in SF. I lived in Taipei and Kuala Lumpur before but I kept my Mandarin speaking by watching Chinese soap-opera on TV. As you may know, the more languages that you speak which help your memory in old age. Good Luck.

        Reply
        • Financial Samurai says

          January 8, 2018 at 9:51 am

          So funny you mention this because I have 26 episodes of some Korean drama dubbed in Mandarin that I am prepared to watch. Period dramas are the best! If you’ve ever watched winter sonata and this other one I forget.

          Reply
  4. multimillionaire says

    December 21, 2017 at 6:07 pm

    I do have all the listed worries to various extents. On top of that, one always have to work and plan to prevent the taxmen take their big cuts especially for a year like 2017 with the portfolio annual ROC up in the 45% range. Always have to bear in mind though a return like this is not typical and unusual. We are in the sandwich generation in which we are not poor but definitely not rich yet to retire and yet the income taxes (both federal and state) are killing us.

    Reply
  5. SMM says

    December 21, 2017 at 2:11 pm

    I like the last part the best; to compare yourself to yourself from the past rather than others. I suppose it also makes sense why older folks may worry about a market downturn, especially if they may be retired and are counting on their retirement assets to fund their life.
    Instead of concerned, I would say I’m focused – most of the time :-) on channeling $$$ to retirement and after-tax accounts that can have the time to grow.

    Reply
  6. birdsofafire says

    December 20, 2017 at 7:56 pm

    I can relate to this even as someone in their mid-20s. It’s seeing everyone around you and competing with that average instead of the actual average.

    These days I spend most of my time fretting I won’t retire by my deadline and wishing I had started saving back in high school. Also, how to minimize taxes as the tax bill is so complicated.

    I haven’t asked my CPA yet, but I’m curious if you’ll still have to pay AMT if you’re an LLC? So essentially it’s a 21 percent cap, unless you make over the AMT amount? At the very least, the pass through clause is exciting! I’m sad about SALT though :/.

    Reply
  7. OMGF says

    December 20, 2017 at 8:12 am

    My biggest worry is not having enough diversification in my asset portfolio. I’m trying to get there through business ownership and real estate, but I’m paranoid the bottom will fall out before I can get there.
    I’m not at a half million in investable assets yet, so maybe I should still be in the Hakuna Matata phase, but my brain doesn’t work like that.

    I also worry about my parents losing their pensions in retirement due to markets or budget cuts. My folks are two lifelong public sector workers who didn’t save much for retirement outside of their pension plans and Social Security. If anything happened to their retirement income it would likely fall to me to ensure their wellbeing.

    Reply
  8. Chelsea @ Mama Fish Saves says

    December 20, 2017 at 6:47 am

    Interesting that covering healthcare costs isn’t an option in the Personal Capital survey. We have over $500K in investable assets and my biggest concern is the rising cost of health insurance premiums and how much of my retirement budget that will ultimately take up. Which I guess would make me select “being financially secure in retirement”. I would love to see a follow up survey from Personal Capital on what makes those people worried – healthcare, market downturns early in retirement, etc.

    Reply
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