10 Best Ways To Build Generational Wealth

Save early and save often to a brokerage account – 401ks and IRA’s are great – but they are taxed as ordinary income at withdrawal and have to be withdrawn within 10 years after death. Real wealth is usually accumulated in the after-tax space. Saving into a brokerage account, reinvesting dividends, building wealth is the greatest single way to build a liquid wealth. Because these assets have a step up in cost basis at death – they can also transfer to the next generation in a very tax-friendly manner.

Own Investment real estate – And I do not mean your primary residence. There is a tremendous opportunity to build wealth through rental real estate which enables others to pay your mortgage off in essence on your behalf, grow your equity and eventually be a substantial income stream. As your equity grows this gives you the ability to eventually purchase additional properties and create a compounding effect. There are of course drawbacks – maintenance, tenants, natural disasters – if it was that easy – everyone would do it – but it most certainly is not a coincident that many of the country’s wealthiest families have intergenerational real estate holdings as a common characteristic.

Start a business – Being an entrepreneur and starting and owning a business allowed my father to go from poverty to being able to provide for his family and countless others as well. Shark Tank is one of my favorite shows because it is the true spirit of America – people taking their financial futures into their own hands by finding a need and solving it with a quality product or service. Being your own boss, growing your income and the value of your entity – can create multi-generational wealth.

If you go the corporate route – There is a path to great wealth as well. However – find a company that offers mobility. Will they help you to get your MBA? Do they offer and give stock options or restricted stock units? Does the stock tend to appreciate (which is important to growing your wealth!)? Do they have a great 401k match or pension? All of my clients who achieved great wealth through corporate America did not do it because of their salary – but because of their incentive compensation through some form of stock plan. I also can’t underestimate the emphasis of a good match. People who stay their entire careers at a company that offers zero match or a 1% match are at a severe disadvantage from their friends and family who maybe saved the same amount – but received a much bigger match from their employer.

Work hard to get promoted – The reality is that for real wealth you can transfer beyond a single generation – you need to climb that corporate ladder. You need to put in the hours, get the degree, earn the respect – and do what it takes to climb. The real rewards in corporate America come to those who can break through the difficult rung of middle manager. When you do – the game changes considerably.

Go Big On Roth – To build big wealth for tomorrow through retirement plans, take the tax hit today and focus on Roth contributions. Roth IRA, Roth 401k if your employer offers, and there are those who are eligible for techniques known as the back door Roth conversion and the Mega Roth Conversion. The more you can add to accounts that have tax-free withdrawals later in life or at death – the bigger the wealth transfer opportunity.

Show No Fear – Wealth is not for the timid. You need to invest “aggressively” and not panic through downturns. Keep your eyes on the 10-20 year horizon – not the 1 week or 1 year horizon. No one ever made a decision while panicking and looked back and thought that was a rational decision. We know capital markets will have corrections and crashes. They may last years. Sometimes it takes nerves of steel – selling when the investment is down only locks in losses. Note that this does not mean take irrational chances or risks. Due diligence is everything….

Do your due diligence – A few wealthy people I know are lucky. Most of them are extremely smart and cautious. They evaluate the pros and cons of the important decisions they make. Then they act decisively and they do not second guess themselves. By doing their due diligence – they have given themselves the strength to be confident. They study history, they study the present and they try to understand “Where the puck is going”.

Do Your Estate Plan – You can build all the wealth in the world but if your children blow it on luxury toys and partying – what was the point? If the government takes 40% in estate death taxes – that sure hurts. More than half* of Americans do not have a current will. As people’s wealth complexity increases – they need more than a will – they need trusts. Trusts allow you to dictate the how, when and why income or principal is distributed.

Have A Great Team – You are not going to build wealth if you do not spend most of your time on the things that will make you the most money. The area that you have developed an expertise in. You need to delegate the rest. This means a great Certified Financial Planner, an excellent CPA and a skilled attorney. It doesn’t end there. You also need a mentor. Someone who has been where you are that you can turn to for advice.

Opportunity Cost Is Everything – Growing up in business classes it was: Michael Jordan doesn’t mow his own lawn. Then it became Tiger Woods doesn’t mow his own lawn. Today it might be Lebron James or Patrick Mahomes. What do all four have in common? They probably don’t mow their own lawn. I have clients who have made millions mowing lawns! But that is because that was their business and what they are best at. Spend your time doing the things that make you the most money and delegate the rest.

Have a Family and Nurture It– There is no intergenerational wealth without other generations! Having a spouse, a partner, to spend your time with and to support each other through thick and thin is vital. And raising good children, spending time with them, teaching them the value of hard work and money. What is the point of any of the above if you don’t have a family to share it with? What is the point of sharing it if you aren’t proud of the people your children are growing into? You have to give your family the most valuable of all assets: your time and your attention. Be present. Leave the work at work.

Chris Kampitsis is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC. www.SIPC.org 6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000 CRN202501-1572890