To protect your wealth, you need to manage day-to-day and long-term risk. To help manage short-term risk, build an emergency fund to cover three to six months of your family’s expenses in case you lose your job or are unable to work. Tapping your retirement dollars for emergencies can be extremely costly and could derail your future retirement.
Another risk to your wealth is investment risk. Investing too aggressively or failing to diversify can expose your portfolio to unnecessary volatility. In addition, moving all of your dollars at one time can be dangerous to your investment account. Making incremental changes over a longer period of time will help protect your portfolio from the large-scale risk of mistiming the move.
Finally, make sure you are adequately insured against risk. Protect your property through home, auto, and, if appropriate, an umbrella policy. Consider purchasing adequate life and disability insurance to protect your dependents from lost income. And don’t allow your health insurance needs to be put on the back burner, or your wealth could be devastated by a medical emergency. In addition, you may want to think about purchasing long-term care insurance to protect your estate against the ever-rising cost of home health care or an extended nursing home stay.
Following these three simple steps will not guarantee you’ll retire a millionaire, but they will definitely improve your odds. To secure your family’s financial future, assess your progress at least annually, put away as much as you can, and protect your assets by insuring against risk. That way, you can control the things you can and minimize the impact of the things you can't.