Three Levels of Wealth, Part Two: The Amount Greater than "X"

by Jeff C. Johnson

Two dollar bills

As described in my previous post, many people have very little or no wealth to pass on to heirs or to give to church or charity. Still, many do make heartfelt gifts to important causes, writing checks from earned income and leaving what they can to their family when they pass.

Level two and level three wealth, by my definition, involves those who have more money than they need to live the rest of their lives comfortably. Determining the amount needed for a full life after working is an important function of a wealth adviser. “X” is the amount of money, wealth, assets, and income needed to be highly confident of financial success in retirement (i.e., never running out of money).

Therefore, the amount greater than “X” is money NOT needed to provide for a comfortable lifestyle. If you can determine the amounts you need, and do not need, for a lifetime of income, you can benefit in the following ways:

  • You can be even more confident that you have adequate money to provide a lifetime of income. At my firm, Buckingham Strategic Wealth, we use a powerful planning tool to help our clients understand how confident they should be in their life-income plan.
  • You can now consider how you will transfer from the amount greater than “X” to your family, to your church, or to your most important charitable causes.

Too many people are unintentional with their wealth-transfer plan, leaving random amounts to children and a few charities at the end of their lives.

Wouldn’t it be far superior to consider how to maximize the value of the wealth you transfer to your heirs and your charities, possibly during your lifetime, rather than entirely at the end of life? As a nice side effect, income taxes and estate taxes can be reduced, sometimes substantially, in the process.

In my book, The Eight Points of Financial Confidence, you can learn more about determining “X” and how to approach your wealth-transfer planning.