Keeping Your Wealth Intact

Financial planners and experts offer tips to help you protect your hard-earned assets

by Karyn McCormack

By your mid-40s, you've worked for at least two decades and, with any luck, built a nice nest egg. Now, don't blow it.

"Around that time you should be shifting from accumulating assets to preserving assets," says Sue Stevens, director of financial planning at Morningstar (MORN) and president of financial planning firm Stevens Portfolio Design in Chicago.

One of the challenges for 45-to-55-year-olds is managing very large expenses such as college education and perhaps health care for an elderly parent—that's why they're often called the Sandwich Generation. "Most people don't realize how much life is going to cost them," says Holly Isdale, head of Wealth Advisory Services at Lehman Brothers (LEH) Investment Management in New York. In particular, many folks underestimate the cost of retirement, she says. You also need to get a handle on disability costs.

Once you've assessed future liabilities, Isdale recommends keeping your estate plan simple. She sees many people who choose exotic or complex strategies find that their accountant and attorney haven't coordinated with each other and accounts don't get placed in the proper trust. "An estate plan will fail if you haven't done the care and feeding needed," she says. "Pay attention to the details and deal with the little stuff."

Here are some tips from financial planners and experts to help you protect what you've worked so hard for over the years.

Streamline Your Investments

"At this age, oftentimes you get portfolio sprawl," says Christine Benz, director of mutual fund analysis at Morningstar in Chicago. In other words, you have many different investment and/or retirement accounts after working at various companies during your career.

If you have too many investments, you might be "overdiversified," Benz says. As a result, your returns may look like a broad market benchmark, but your costs could be higher. So if you own two large-cap value funds, determine which one is the best by measures such as lowest fees and longest tenured manager, and dump one of them.

Also, make sure you don't own too much of your employer's stock. This is common among senior executives in this age group. Don't own more than 5% to 10% in any one stock, Benz advises, because that introduces a lot of company-specific risk.