I refer to the second tier as the accumulation tier. The two blocks in the accumulation tier are education funding and retirement funding. The plan to pay out of cash flow can be especially painful, if your children are going to college at or around the time you are planning to retire. On a daily basis, I attempt to educate clients about the expense of private school, college and extracurricular activities combined with the effects of inflation in regard to education, which is reaching the 7 percent range. The ability exists to defray these costs with the compounding effects of planning and investing sooner rather than later.
Retirement planning is the other block in the accumulation tier.
Surprisingly, even though planning for retirement might seem like an obvious task to tackle, many of the clients I see are putting it off. There are many high net-worth people who are buying houses, cars and taking trips and who have minimal amounts saved in their retirement accounts. The common response is early retirement while maintaining my current lifestyle without spending my principal. However, the compounding effects of planning and investing early can make these goals attainable. It is important to protect this wealth from the expenses associated with long-term care.