At Financial Finesse, we are expanding more into financial planning for high-income executives, which is surprisingly an underserved population for unbiased financial guidance.  Many high net worth individuals have access to financial advice but not necessarily from an unbiased source. I recently had the opportunity to work with a group of senior executives with much higher incomes and account balances than the employees that we typically talk with. Now, you may expect that those in the top income tax brackets would have significantly different financial problems than the rest of us and to some extent you would be right. They’re generally able to cover their expenses so they usually aren’t struggling with debt or cash management problems. But other than that, many of their problems are the same ones typically facing other people at the same stage of life. They just have more digits in their numbers. Here are their three biggest financial issues:

1) Needing to save more for retirement. Yes, rich people often have more income to save but their retirement expenses are typically also much higher. In addition, Social Security replaces a much lower percentage of their income and they can’t contribute as high a percentage of their income to retirement accounts. Yet, there is talk of reducing their Social Security benefits and further limiting the amount of their deductions to retirement accounts. All this adds up to having to save more, often without full tax benefits.

2) Poor portfolio management. One difference I noticed is that higher income people are more likely to work with one or more financial advisors. You would think that they would be benefiting from a portfolio of low cost individual equities and sophisticated tax management strategies but more often, I would see high advisory fees layered on top of expensive annuities and actively managed mutual funds in a portfolio that didn’t seem to be designed with tax minimization in mind at all. High income individuals understandably feel that they are too busy to manage their own portfolios but they can save a lot in fees and taxes with a simple portfolio of index funds that is merely rebalanced and perhaps harvested for tax losses once a year.

3) Lack of long term care insurance. This was the single biggest vulnerability I found. A single room in a nursing home is projected to cost about $188k a year by 2018. At that price, only the very, very wealthy (think $20 million rather than $2 million in investable assets) can really afford to self-insure. Otherwise, an individual can earn a lot of money and build up a great nest egg only to see it severely depleted or even wiped out by long term care costs.

If these issues look familiar it’s because they are the same ones we typically see in people with much lower incomes and net worths. To use my colleague’s analogy of retirement as a plane trip, we’re all on the same plane, whether you’re seated in first class or coach. First class passengers may get to enjoy the ride with a glass of wine and a little extra legroom, but we all essentially need the same things to happen to accomplish our common goal, which is to get to our destination safely, comfortably, and on time.