Retirement planning isn't easier for rich people, expert says

Being wealthy doesn’t make retirement planning any simpler, according to one retirement expert.

While affluent Americans benefit from a high net worth, their assets aren’t always investable or easily tappable, Charles Sachs, director of planning at Kaufman Rossin Wealth, recently told The Final Round at Yahoo Finance.

“You could have some things in real estate, illiquid assets in a business,” Sachs said. “So, it’s important when we’re talking about retirement planning that, really, we’re focusing on investable dollars or soon-to-be dollars coming into cash.”

He offered three pieces of advice for well-heeled individuals when it comes to preparing for their golden years.

Tip 1: Downsize

It’s a common strategy, but effective, Sachs said. By selling your higher valued home and moving into a smaller, cheaper space, you can use leftover dollars for retirement.


“We’ve seen that trend here in Miami where people are downsizing,” said Sachs. “Getting out of that big 4,000-square-foot house to a condo half that size. Sometimes the costs go down dramatically.”

Florida, Miami, South Beach, Hotels and luxury condos. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images)
Florida, Miami: Some affluent retirees tap illiquid capital by trading in their houses for condos instead. (Photo: Jeffrey Greenberg/Universal Images Group via Getty Images)

Tip 2: Utilize a backdoor Roth IRA

Higher earners are shut out of using a Roth IRA, which allows you to withdraw contributions tax-free. If your income exceeds $137,000 according to the IRS you can’t contribute. Likewise if you’re married and your income exceeds $203,000.

But a higher earner can still contribute to a traditional IRA and convert some or all of those funds into a Roth IRA, Sachs said.

In general, the advantages of a conversion include tax-free withdrawals in retirement and a tax-free inheritance. There also are no mandatory requirements to withdraw money at a certain age.

While there’s flexibility, you should remain mindful of the risks. For instance, the amount you convert adds to your taxable income in the year of the conversion. You also can’t withdraw funds penalty-free until five years after the conversion.

A retirement advisor talking to two women at the Free Financial Planning Clinic at Hyatt Regency Hotel. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images)
A retirement advisor talking to two women at a financial planning clinic at Hyatt Regency Hotel. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images)

Tip 3: Have an exit plan from a business

If you own a stake in a business, create a way to sell your portion when you retire, so you can access trapped equity.

“When you also think about illiquidity, think of companies that you may or may not have an ability to have an out for those dollars to come in,” Sachs said.

Overall, Sachs doesn’t rule out owning illiquid assets when nearing retirement, but striking a balance is practical.

“When we see folks, they have a fair amount of assets in their retirement accounts, IRA accounts, or even different pension plans,” he said. “So, there should be a nice, robust combination between illiquid assets and investable assets.”

Dhara is a writer for Yahoo Finance. Follow her on Twitter @dsinghx.

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