In Perspectives

Given the experience that I have had working with high wage earners, I have uncovered a less discussed truth: they have a difficult task in order to continue their lifestyle throughout retirement.

People that are used to living on above average incomes have several hurdles to overcome.  They usually pay more in taxes, they are accustomed to a certain lifestyle and you can argue that they have limited capacity to save on a pre-tax basis.  Let me explain further:

Let’s take a family that is used to living off of $250,000 per year.  Let’s assume that they have a tax expense of 40%, which leaves them with $150,000 to live off of each year.  Let’s also assume that only one family member produces that income and they are able to “max out” their 401k plan ($18,000 in 2015 if under 50, $24,000 if over 50).  This amount is just less than 10% of the gross earnings per year while working.  Although $24,000 is a lot of money, it will do little to replicate their lifestyle.

Let’s contrast that with a family that earns $100,000 per year, but has managed to sock away that same $24,000 into their retirement plan.  The hurdle to reproduce that level of income in retirement is much easier to overcome for two reasons; one being the much lower living expenses and the other being how much they are saving on a percentage of income basis.  Saving 24% of your gross income is tremendous and rare, but it certainly happens.  The asset base that is needed to reproduce that lifestyle can be much lower and Social Security will also count as a much higher percentage of the overall income picture in retirement.

High wage earners that are interested in reaching financial independence need to carefully think through this reality and plan accordingly.  Regardless of your income, the message remains the same:  “It’s not what you earn, but what you keep.”  The burden of retirement savings will continue to be shifted from employers and the government to individuals.  Those that start saving early, maintain a high level of savings throughout their working lives and keep their living expenses within their means will have the ability to experience a retirement that is filled with options and financial flexibility.  In other words, “financial independence” is the target.

Plans like 401k/403b/IRA’s are a start and Social Security is certainly an asset, but additional plans and concepts will be needed in order to maintain a similar level of spending in retirement.  At Legacy Trust, we have the expertise to help you quantify your goals and to recommend strategies that will help you reach your idea of financial independence.

Legacy Trust and Your Right to Financial Privacy

At Legacy Trust we have established policies and practices that respect the financial privacy of all individuals who use our trust company. We believe it is critical to comply with the laws and regulations designed to secure your financial privacy. Your relationship with us as our client is very important to us, and we want you to understand our policies and practices about handling your information.

This Policy applies to you – This Policy applies to our relationships with individual clients who inquire about or obtain products or services from us for personal, family and household purposes.

Strict security measures – We take the security of information very seriously. We have established security standards and procedures to prevent access to client information. We maintain physical, electronic and procedural safeguards to guard client information.

Limited employee access – We have established procedures to limit employee access to information to only those employees with a business reason for accessing such information. We educate our employees about the importance of confidentiality and client privacy. We take appropriate disciplinary measures to enforce employee responsibilities regarding client information.

Why we collect information – We collect information about you to:

  • accurately identify you;
  • protect and administer your records, accounts and funds;
  • help us design or improve our products and services;
  • understand your financial needs;
  • save you time when you apply for new products and services; offer you quality products and services; and comply with certain laws and regulations;

We collect information – We collect and maintain your personal information so that we can provide investment management and other services to you. The types and categories of information that we collect and maintain about you include:

  • Information we receive from you to open an account or provide investment advice or other services to you (such as your home address, social security number, telephone, financial information and investment objectives).
  • Information that we generate to service your account or from our transactions with you (such as account statements and other financial information).
  • Information on your transactions with nonaffiliated third parties.

We have established procedures so that the financial information we collect is accurate, current and complete. We are committed to work with you to promptly correct any inaccurate information.

Our selective sharing of information – In order for us to provide investment management and other services to you, we do disclose your personal information in very limited instances, which include:

  • Disclosures to nonaffiliated companies as permitted by law, including those who help us service your account (such as providing account information to brokers and custodians).
  • Other limited disclosures as permitted by law, for example, required reports to government entities.

We do not share your information with third parties for marketing purposes. We do not sell your information.

Former clients – If you end your relationship with us, we will continue to adhere to the privacy policies and practices described in this notice.

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USA PATRIOT Act

Important Information About Procedures For Opening A New Account

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

We apologize for any inconvenience this may cause; however, federal law prohibits us from waiving these requirements.

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