I’m a Financial Planning Expert: How Retired Millionaires Maintain Their Wealth

Giant yachts and six-figure sports cars are but a few of the outsized luxury items you might think retired millionaires spend an exorbitant amount of money on. Yet the reality might just surprise you.

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Retired Millionaires Live Frugally

Many retired millionaires “avoid excessive spending on items that aren’t needed, and that includes luxury items typically as well,” Troy Sharpe — CFP, CPWA, CTS, founder and CEO of Oak Harvest Financial Group — told GOBankingRates.

“They live pretty frugal lifestyles,” said Sharpe, who has been working with retired millionaires for over a decade. “One of the most powerful elements of building a financial plan is controlling the spending.”

That’s not to say that retired millionaires don’t indulge themselves. Rather, when they do, they’re simply mindful of their spending.

“When they go out, they’re not spending lots of money on the most expensive bottle of wine and doing those types of things,” Sharpe said, adding that while there are some people who “obviously will enjoy some of the finer things of life,” the common thread shared by the wealthy families he works with is frugal spending on luxury items and experiences.

Spending Within Their Means During The Wealth Accumulation Phase

According to Sharpe, successfully accumulating wealth comes down to something very simple: “Spending within your means.” In other words, no dipping into savings, and always spending your income in accordance with the budget you’ve set.

Sharpe noted that “too many young people save up $10,000 or $20,000 and then think it might be OK to spend $5,000 of those savings,” something he asserts doesn’t happen with people who’ve saved a substantial amount of money. “They only spend a portion of their income that they can afford,” Sharpe said. “They always pay themselves first by saving and then investing that money and allowing time to grow the savings.”

In fact, the biggest difference between people who have accumulated a lot of wealth and those who haven’t is that those who have invest their savings, Sharpe emphasized.

“So if you have the income, let’s say 30% of your income goes to savings,” Sharpe said. “Well, you have 70% to spend on whatever you want once the basics are covered. and if there’s enough left over for first-class trips, or fancy cars and purses and items like that, as long as it’s within the income, that’s fine — but not getting into the savings.”

Sharpe said that most people he’s worked with earned their millions by saving and investing their money. He explained that a few million dollars saved might seem like plenty to someone who isn’t a millionaire, but to the people with those savings, it doesn’t seem like a lot.

“They have the same fears and uncertainties that everyone else faces, and that money has to last for the next 25-plus years,” he said. Moreover, their spending habits don’t suddenly change after they stop working. “Once someone has saved a bunch of money and they’re in retirement, you rarely see frivolous spending,” he said.

How Retired Millionaires Approach Taxes

Sharpe also pointed out that most people have accumulated their wealth within “tax-infested retirement accounts,” which can have a domino effect in retirement come distribution time.

“It can cause more of your social security to be taxed,” Sharpe said, adding that it could also push soneone into higher IRMAA (income-related monthly adjusted amount), resulting in higher Medicare premiums.

“Savvy individuals…accumulated money understand the complexities around the tax code,” he emphasized. For instance, they build strategies to take the money out of an IRA in a “more measured” manner, “converting it to Roth or spending it down to target certain levels of their tax bracket and to spread that tax hit out over many years as opposed to waiting until you’re older and being forced to take out these large sums of money all at once.”

Sharpe asserted that much of what he and his team focus on is helping people navigate the tax code. He recommends that anyone who accumulates a high level of wealth should work with a qualified financial advisor, and that their qualified financial advisors should then in turn work with a CPA and attorney. When that happens then, he explained, is a financial synergy:

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“From estate planning to tax planning to income and investment planning, all of those things are working together.”