The Retirement Paradox: Are You Investing Enough to Match Your High-Income Lifestyle?

The High-Income Challenge: When Success Outpaces Your Savings Strategy

Congratulations on achieving the kind of financial success that only high-net-worth Metro Detroit professionals experience. As an executive or partner in Troy or Birmingham, your income has officially entered the Acceleration phase—but has your retirement planning kept up?

Many high earners—those with substantial six-figure incomes—find themselves focused on maximizing current success—a new home, private school tuition, or a significant charitable contribution—only to find their retirement portfolios haven't grown commensurate with their income level. You cannot afford to manage your wealth by guessing; you need a strategic, objective approach.

We believe true Retirement Planning starts with aligning your savings strategy to your future needs. The goal isn't just to save something, but to save enough to support the lifestyle you're building now.

Here are three strategic moves we use to help our clients make sure their retirement savings are keeping pace with their high-income trajectory:

1. Reassess Your Retirement Target: Planning for Longevity, Not Just Age 65

A generic retirement calculator often falls short for high earners. If your annual income is significantly above average, simply maxing out a 401(k) may not be sufficient to maintain your current standard of living for a retirement that could easily last 30 years or more.

• Go Beyond the Rule of Thumb: Instead of relying on a formula, your plan should be Goals-Based Planning, tailored to your unique desired retirement age, assumed inflation, and anticipated spending (e.g., travel, healthcare, legacy giving).

• Stress-Testing: We use sophisticated modeling to stress-test your portfolio against various economic scenarios, helping provide financial clarity and a clearer picture of what you truly need to accumulate.

*Projections are hypothetical and for discussion purposes only. They do not predict actual results. Market conditions and personal circumstances may cause outcomes to differ materially.

2. Utilize the Full Spectrum of Retirement Vehicles

Once you hit high-income levels, you often outgrow or max out standard retirement vehicles quickly. Strategic planners must look at the full array of options to supplement traditional plans:

• Backdoor Roth Contributions: or individuals whose income exceeds Roth IRA limits, this strategy may provide a way to convert after-tax assets for potential long-term, tax-advantaged growth. 

• Considerations: The approach requires careful execution to avoid triggering taxes under the pro-rata rule, and future legislation could impact its availability. Because this involves multiple transactions, errors in timing or reporting can result in additional taxes or penalties. Always consult a qualified tax professional before implementing.

  
  

• If your employer offers a Non-Qualified Deferred Compensation plan, it may provide a way to defer part of your income and postpone taxation until retirement, when your tax rate could be lower.

• Considerations: These plans are unsecured promises by the employer, meaning deferred amounts remain subject to the company’s creditors. Withdrawals are governed by strict IRS rules, and flexibility is limited. Employment changes or future tax-law updates may also affect outcomes.

  
  

• Brokerage Accounts: For many high-net-worth clients, the personal, Taxable Accounts —your brokerage—will be the largest part of your retirement income. It's crucial that these accounts are managed with Tax-Aware Asset Location strategies to reduce unnecessary taxation year over year.

3. Integrate Insurance Design for Wealth Protection

Your ability to earn a high income is your greatest asset. Protecting that income from unexpected life events is foundational to a solid retirement plan. Insurance Design is not just about protection; it's a component of Wealth Preservation.

• Review Disability Coverage: Standard group disability policies often cap out at a low benefit relative to a high-earner's salary. We review and structure supplemental disability insurance to help ensure your income is adequately protected if you become unable to work.

• Considerations: Benefit definitions, waiting periods, and coverage limits vary by policy. Premiums are typically paid after-tax, which may affect benefit taxation.

  
  

• Permanent Life Insurance (when appropriate): Certain permanent life insurance policies can offer both a death benefit and the potential for cash-value accumulation that grows tax-deferred. Policyholders may be able to access that value later through loans or withdrawals to supplement other income sources.

• Considerations: Policies include ongoing premiums, internal costs, and possible surrender charges. Accessing cash value may reduce the death benefit and may create tax consequences if the policy lapses or is surrendered. Regular reviews are necessary to keep coverage on track.

Ready to align your high income with a sophisticated retirement strategy? email us at office@staltfinancial.com, call 248-733-4344, or schedule a time at www.calendly.com/staltfinancial.

Don't let your hard work be outpaced by an outdated financial strategy. A thoughtful, fiduciary-level approach is essential for delivering the clarity you need to secure your financial future.

Stalt Financial, LLC (“SFL”) is a Registered Investment Adviser. This material is provided for informational and educational purposes only and should not be construed as investment, tax, or legal advice. Tax laws and regulations are complex and subject to change. Clients should consult a qualified tax professional for advice specific to their situation. Investing involves risk, including possible loss of principal. Past performance does not guarantee future results. For more information, please see our Form ADV at www.staltfinancial.com.