5 habits of successful investors

Key Points

  • The majority of high-net-worth individuals didn’t inherit their money but have saved wisely
  • Surpassing the million-dollar mark is about achieving confidence rather than status
  • Successful investors share key characteristics that anyone can emulate

Acquiring $1-3 million in assets is a retirement goal for many Americans. Depending on desired lifestyle, health, geographic location and a variety of other factors, some people may need less and many people may need much more to live comfortably in retirement.

There’s no doubt that hitting the million-dollar mark can be a morale booster. Those who have done so are twice as likely as those with less to be “completely confident” they’ve saved enough to last in retirement, according to our Pay Yourself in Retirement study.¹ They’re also twice as likely to be “extremely confident” in their family’s future.²

So, what’s their secret? Our research shows that high-net-worth individuals share certain key characteristics when it comes to saving, planning and communicating. And you don’t need to have millions of dollars to practice better money habits — they’re behaviors anyone can emulate. Here are five key takeaways we discovered when we asked successful investors how they achieved financial confidence.

Less than half of millionaires received an inheritance1. They begin saving early

No surprise here, right? Almost half of those surveyed invested in a 401(k) before age 30.¹ They’re also more likely to pass knowledge on to their kids so they can start saving early: Close to 4 in 10 of those who discuss money management with their adult children reported that they began these discussions when their children were under 18 years old.² While it’s tempting to think many were born wealthy, less than half of those surveyed received an inheritance — and of those receiving an inheritance, only 10% inherited $1 million or more.²

2. They mix it up – strategically, of course

The word “diversification” in finance is akin to the word “location” in real estate. In other words, it’s important. Spreading your assets among different types of investments is key to mitigating risk and benefiting from growth. In fact, our research shows that 7 in 10 of those with more than a million dollars in assets rebalance their portfolios at least once a year.¹ They also think outside the box: While 88% say their retirement income will come from a 401(k) or IRA, 79% also have money in other types of savings or investments.

83% of millionaires say taxes are key to their withdrawal strategy3. They’re proactive about taxes

Strategies such as tax diversification can be just as beneficial as asset diversification when it comes to planning for retirement, yet it’s something that many individual investors neglect to do. Millionaires make tax planning a top priority: 83% say tax treatment of investments is one of the most important issues when deciding how and when to draw income.¹ And more than half say they’ve discussed ways to minimize taxes in their estate planning.²

4. They think about their legacy — a lot

More than 6 in 10 of millionaires with an advisor report that they’ve talked to their advisor about handling assets after death. While it’s not necessarily the most pleasant topic, the result may be worth it: Of those surveyed, 80% are on track to leave an inheritance.² Other key factors? More than 7 in 10 have a formal will or estate plan, and 4 in 10 of those with an advisor have talked to their advisor about how to communicate with family members about inheritance.

5. They often share an advisor

It may not be a big eye-opener that millionaires are more likely to work with a financial advisor — 64% say they rely on outside expertise.² What’s more interesting is that 44% of those whose parents also have an advisor use the same financial advisor as their parents.² Since money can be a primary source of tension and even estrangement among families, sharing an advisor could be a game-changer when it comes to helping your hard-earned wealth stay in the family.

Talk to us

Inspired by the tips above? Your advisor can help revisit your plan no matter where you’re at in meeting retirement savings goals.