facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Top 5 Financial Planning Challenges Of Generational Wealth Thumbnail

Top 5 Financial Planning Challenges Of Generational Wealth

By J. Peter Simon

Do you want to leave a lasting legacy that spans generations to come? If you’re like most of our clients, the answer is a resounding yes! And while this is a noble goal to have, many wealthy individuals underestimate the unique challenges that come with leaving behind generational wealth. Today we’re going to talk about the top 5 financial planning challenges of generational wealth (and what you can do to combat them). 

1. Maintaining Wealth For More Than Three Generations

Have you ever heard the old proverb “Shirtsleeves to shirtsleeves in three generations”? It’s the idea that most generational wealth doesn’t make it past the third generation. In most cases, it looks like this…

The first generation grows up poor and works diligently to create wealth. The second generation saw their parents’ work ethic and struggles, so they appreciate and protect the wealth that’s passed on to them. The third generation, however, never witnessed firsthand the hard work and sacrifices their grandparents made to build their wealth. As a result, they don’t appreciate the wealth they receive, and they squander it.  

It’s difficult to plan for a generational shift that may not happen for another 20 or 30 years, but there are systems you can put in place to prevent it from happening. Which leads us to challenge #2.    

2. Focusing On The Right Threats To Wealth

Many wealthy individuals assume the market and economy are the biggest threats to the preservation of their wealth—but this is far from the truth. Most often, the biggest threat to generational wealth is a lack of communication. 

As we discussed in #1, most generational wealth doesn’t make it past the third generation. We’ve all been taught to not talk about money—sometimes even within our own family. But if you’re not communicating with your loved ones about your assets, they may not know how to manage them once you’re gone.   

The key to mitigating this threat is to openly communicate with your family about the following:

Tell stories and share about the struggles the previous generations went through to create wealth. It is important to instill a strong sense of appreciation and work ethic in the younger generation. What you want to communicate is that wealth is not created overnight and that if you are lucky enough to have more than you need, you ought to carefully preserve it. 

Your expectations for spending and preserving wealth. What do you think the appropriate use of your families’ money is? How long do you expect it to last? Talk about this with your children and grandchildren so that your expectations are clearly understood. 

How wealth is a means to an end, not an end itself. Share with the younger generation that money in and of itself doesn’t bring you fulfillment, rather it is simply a tool that helps you achieve your vision of a better future. Money is a means, not an end.

3. Choosing A Sustainable Withdrawal Rate 

Do you know what percentage of your assets you can safely spend each year to preserve your wealth indefinitely? For most people, the answer is no. For the past two decades, 4% has been the industry standard for a sustainable withdrawal rate. (1) But recent studies show the 4% rule may not be as conservative as we thought given the current interest yields on bond index mutual funds. (2) In my experience, no more than 4%, 5%, or 6% is a sustainable withdrawal rate. 

The truth is, your sustainable withdrawal rate depends on many factors, such as your retirement plan horizon, portfolio mix, and risk tolerance. Once created, this rate must be monitored over the course of your lifetime to ensure it remains sustainable. 

4. Having A Strong Generational Wealth Management Plan

Creating sustainable generational wealth is both an art and a science. As we mentioned in #2, communication with family members is one part of the equation, but the second part involves deploying comprehensive strategies to protect your wealth. 

These strategies are more technical in nature and may include things like:

  1. College funds
  2. Scholarship programs
  3. Foundations
  4. Tax saving strategies
  5. Trustees
  6. Charitable giving, and more 

5. Lacking An Outside Support System

If you’ve spent decades building your wealth you deserve to have a trusted team in place to protect it long after you’re gone. A financial advisor can help bridge the gap between facilitating conversations with loved ones and putting together a strong financial strategy for sustaining wealth. (Think of this person as a master of both the art and science of generational wealth management.)

At Simon Quick Advisors, we specialize in working through the complexities of managing generational wealth. We’re here to help you in as many ways as possible, from laying out your legacy goals to creating a holistic strategy to creating a financial plan across multiple generations. It is so fulfilling to us to have the opportunity to provide ongoing financial and investment support to those who will inherit your wealth after you.

Do you have additional questions about generational wealth? We'd love to chat! 

Drop us a line

About J. Peter Simon

Mr. Peter Simon became a partner at Simon Quick in 2017 and is based in Morristown, NJ. Prior to that, Peter Simon co-founded William E. Simon & Sons, LLC along with his late father, former Treasury Secretary William E. Simon, and his brother, William E. Simon, Jr., in 1988. He currently serves as Co-Chairman of the Firm and The William E. Simon Foundation. Peter Simon earned a BA in Psychology from Lafayette College and also attended NYU’s Graduate School of Business. To learn more about Peter visit his LinkedIn.


  1. http://www.retailinvestor.org/pdf/Bengen1.pdf
  2. https://www.onefpa.org/journal/Pages/The%204%20Percent%20Rule%20Is%20Not%20Safe%20in%20a%20Low-Yield%20World.aspx


Simon Quick Advisors, LLC (Simon Quick) is an SEC registered investment adviser with a principal place of business in Morristown, NJ. Simon Quick may only transact business in states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. A copy of our written disclosure brochure discussing our advisory services and fees is available upon request. References to Simon Quick as being "registered" does not imply a certain level of education or expertise. No information provided shall constitute, or be construed as, an offer to sell or a solicitation of an offer to acquire any security, investment product or service, nor shall any such security, product or service be offered or sold in any jurisdiction where such an offer or solicitation is prohibited by law or registration. Additionally, no information provided in this report is intended to constitute legal, tax, accounting, securities, or investment advice nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. It should not be assumed that future performance of any specific investment or investment strategy will be profitable, equal any corresponding indicated performance level(s), be suitable for your portfolio or individual situation, or prove successful.