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SINCE RETIRING, WE’VE done a lot of traveling. One thing that continually stands out is just how crowded airports have become—even top-tier airline lounges are sometimes packed to capacity. Watching the endless stream of travelers, my wife often turns to me and asks, “Where do all these people get their money?”
I suspect some of them, especially the older travelers, are “middle-class millionaires.” They didn’t build their wealth through massive salaries. Instead, they accumulated it gradually through home appreciation, retirement savings, disciplined investing, and decades of compound growth.
That’s how my wife and I built our net worth. We grew our savings slowly over the course of our careers through patience and discipline. Now that we’ve reached a point where we feel we have enough, our focus has shifted from growing our wealth to protecting it.
Here are three ways we are protecting our hard-earned savings while continuing to enjoy our retirement.
Fortifying Our Liability Coverage
Ever since a friend told me that his own son-in-law sued him after falling down his stairs, I’ve been concerned about our own liability exposure.
I don’t consider us to live a lifestyle that would expose us to a particularly high risk of being sued. We don’t have a dog, swimming pool, rental property, or boat. Even though I consider our risk relatively low, I’ve become more conscious of how much we have to lose from an unexpected liability claim, such as a severe auto accident.
I’m not an attorney or insurance professional, so I’m not suggesting that our approach is appropriate for everyone. But it did lead me to take a closer look at how our assets might be protected if we were ever sued and a judgment entered against us.
In recent years, our modest California home has appreciated significantly alongside real estate values across the state. When I considered our home equity together with our taxable savings and other assets, we eventually concluded that our existing umbrella coverage was no longer sufficient for the amount of wealth we had accumulated.
I also learned that California’s homestead exemption provides a certain amount of protection for equity in a primary residence, although the rules are more complicated than I had previously realized. The amount of protection depends on the circumstances and is subject to statutory limits and adjustments. For our home, I didn’t want to assume that all of our home equity would be protected from a judgment.
Our IRAs also have statutory protection under California Code of Civil Procedure §704.115 based on what is deemed reasonably necessary for retirement support. Learning this gave me some comfort, but it also reinforced the fact that different types of assets can have different levels of protection.
Our taxable brokerage account, however, does not have the same type of statutory protection. It remains exposed to potential legal claims.
We ultimately purchased additional umbrella coverage through a specialty insurer. Securing that extra layer of protection provides us an invaluable peace of mind.
Adopting a Moderately Conservative Asset Allocation
Now that we’re in our 70s, we feel we can afford to be less aggressive in the stock market. Our portfolio is currently allocated 45% to stocks, 45% to bonds, and 10% to cash.
This asset allocation gives us enough exposure to growth to help combat inflation while providing some protection against a severe bear market.
Consider a difficult scenario in which the stock market falls 40% and the bond market declines 10%. Under those conditions, our portfolio would lose roughly 22.5%. Alternatively, if our 55% allocation to bonds and cash holds its value while stocks absorb the full 40% decline, we would still have 82% of our portfolio’s value intact.
This allocation gives us a larger cushion against a severe stock-market downturn. It would allow us to rebalance into stocks after a major decline, rather than being forced to sell stocks when prices are depressed.
More importantly, this asset allocation has so far allowed us to maintain a comfortable lifestyle without worrying about market swings.
Hiring a Financial Advisor
I don’t recommend a financial advisor for everyone. In fact, if we were younger, we probably wouldn’t have one. But at age 75, I have to concede that I’m not as sharp as I used to be, and I can get emotional at times.
Those aren’t ideal qualities to have in a world where scammers are becoming increasingly sophisticated.
What I like about having a financial advisor manage our money is that I have to go through my advisor to access our funds. That extra layer of protection helps protect our portfolio from scams—and from ourselves. It gives us a chance to pause and think things through rather than make an emotional decision in the moment.
At this stage of our lives, we’re paying for more than investment management. We’re paying for another layer of discipline and protection—and for the peace of mind that comes with knowing someone else is looking out for us.
Focusing on Making It Last
Now that we’re retired and have accumulated enough to support the life we want, our priorities have changed. We don’t need to squeeze every last dollar of growth from our portfolio. Instead, we’re trying to make what we’ve built lasting—protecting it from lawsuits, market declines, scams, and, perhaps most importantly, our own mistakes.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. Follow Dennis on X @DMFrie and check out his earlier articles
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