Do Wealthy People Experience Money Problems?

Are you stressed about money?

Losing sleep?

If so, you’re far from alone. According to a recent Bankrate survey, nearly half (47 percent) of Americans say money issues negatively impact their mental health.

That’s significantly more than their own physical health (39 percent); issues such as war, global climate change, and politics (38 percent); the health of family and friends (33 percent); or relationship issues (30 percent).

As reported by Time, “a study published earlier this year by a team of British researchers suggests that among the serious life challenges that people often face—including divorce, disability, caregiving, illness, and bereavement—financial strain is the most detrimental to health. The results, based on an analysis of proteins and hormones in the blood of nearly 5,000 participants in a longitudinal survey of aging, found that people under financial strain had a nearly 60% greater risk of developing serious health problems, higher than any of the other stressors examined.”

It must be nice not to worry about anything money-related, as you might think has to be the case for the wealthy, right?

Wrong!

The Wealthy Lose Sleep Due to Money-Related Issues Too

A recent Chubb report surveyed 800 affluent Americans and Canadians. These were folks who had at least half a million dollars invested, with 79 percent having more than $1.5 million and 65 percent having over $5 million invested.

Surely, these folks shouldn’t have a (money-related) care in the world.

Despite what you might think, these folks have plenty of money-related worries. Asked what keeps them up at night, here’s what they listed:

• Economic instability
• Healthcare (e.g., pandemics)
• Artificial intelligence
• Energy insecurity
• Climate change
• Social change, diversity, and/or income equity
• Government debt and spending
• Conflicts between great powers (up to nuclear war)

Which of these do I spend time worrying about?

None.

From where I sit, these are such big issues that, as an individual, I have minimal control over. 

So, I do what little I can to mitigate risks, such as following medical advice on vaccination (when vaccines exist), considering potential sea-level rise when choosing where to buy a home, and diversifying investments to reduce the impact of spiraling government debt.

Digging Deeper by Type of Worries 

Home-Related Worries

Asked what they fear relating to their home, these folks identified and shared some of the measures they take to protect and mitigate them:

• Exposure to extreme weather due to climate change (76 percent).
• Damage during renovations (71 percent).
• Cyberattacks such as identity theft (67 percent).
• Fire (64 percent) – most, 48 percent, installed smoke and heat detectors. Shockingly, it seems many didn’t list this as something they do. This is definitely something I’ve done!
• Weather-related water damage, e.g., due to hurricanes or flood (63 percent).
• Weather-related non-water damage, e.g., tornados or hail (56 percent) – a large majority, 48 percent, installed a whole-house generator – this is on my list for the coming year.
• Burst pipes and other plumbing water leaks (54 percent) – almost everyone, 49 percent, installed water-leak detectors – which I did too.
• Local crime, e.g., burglary or vandalism (43 percent) – most, 36 percent, installed high-end home security systems – which I too have done.
• Wildfires (31 percent).

Wealth-Related Worries

When you have a lot, you soon get used to a wealthy lifestyle and fear losing the wealth that makes it possible.

The top worry here, at 80 percent, was investment losses. Next, despite their wealth, was fear of the impact of inflation, at 74 percent. Damage to property due to extreme weather events or climate change was also a prominent worry, cited by 68 percent. The same fraction fear being the victim of financial fraud. Related to investment losses, 66 percent cited fears relating to the competitiveness of our economy. Almost as many, 60 percent, fear job loss or reduced business profits. Nearly half, 48 percent, fear being targeted by lawsuits due to their wealth.

As for me, my top three wealth-related concerns are (1) reduced business profits, (2) investment losses, and (3) lawsuits. Once I start downshifting my business, I expect that top concern to go away, with the other two moving up in prominence.

Worries Regarding Collections

Many wealthy people take up various collections as a hobby. These include art, rare wines, vintage cars, high-end timepieces, etc. And when you have priceless collectibles, you worry about losing them.

For such collectors, the top fears include art fraud (87 percent); damage during travel (86 percent); environmental damage, e.g., from humidity (78 percent); theft (77 percent); fire damage (74 percent); storm or flood damage (64 percent); water-leak damage (59 percent); and accidents caused by kids (59 percent), pets (45 percent), and guests (45 percent).

Since I never took up any such expensive collections as a hobby, these worries are not even on my radar.

Litigation Worries

Asked about worries relating to getting sued, 45 percent most feared accidentally hitting a pedestrian, and related to that, 40 percent worry about car crashes where they might injure others. Nearly a third (31 percent) worry about being sued for assault or harassment. Almost as many, 30 percent, worry that someone else will harm them and not have enough insurance to cover the results. Worries about people getting hurt on their property are also significant, with 29 percent citing slip-and-fall claims, and 24 percent injuries in and around swimming pools. Other worries cited include skiing accidents (20 percent), boating accidents (17 percent), defamation claims (14 percent), and dog bites (10 percent).

To address such concerns, I try to drive well, never hit anyone, avoid harassing people – you know, behave like a responsible adult. To cover things beyond my control, I have an umbrella policy as a sort of legal insurance – if the insurance company stands to lose millions if I lose a lawsuit, they will pay for the best legal defense money can buy (and more on insurance below).

What People Do to Protect Against and Mitigate These Risks

Protecting against loss is what insurance is all about. This is why the wealthy usually have policies such as homeowners, auto, boating, umbrella (also known as excess liability), professional liability (also known as errors and omissions insurance), life insurance (term or permanent), cybercrimes including identity theft, health, etc.

However, many wealthy people self-insure when the expected loss isn’t significant to them, or at least buy policies with high deductibles to reduce premiums.

Personally, I buy all the coverage that’s relevant for me (e.g., I don’t own a boat, so I obviously don’t buy boating insurance). I also set high deductibles on my policies since I’d rather take a small risk that I’ll need to pay, say, $1000 in case I’m in a car accident rather than be sure to pay hundreds more each year in premiums. 

By the time I avoid claims for several years, the premium savings more than covers a potential large deductible.

Next, physical and electronic protections such as home security systems, protective perimeters, and professional services to inspect and correct imminent issues. All these make sense to me, and I use them as appropriate.

Finally, protecting against economic, investment, and related losses requires prudent diversification across asset classes, geographical regions, industries, etc. This too is something I practice.

What Worries and What Myths Do the Pros See with Their Wealthy Clients?

I asked financial advisors who work with high net worth clients for their experience with what worries their wealthy clients, including what myths they often need to address. Here’s what they said.

Benjamin Simerly, Founder, Lakehouse Family Wealth says, “I consistently hear from wealthy clients that their top worries in retirement are the effects of volatility on their retirement income and the values of their assets, especially their primary residence. This as in how market changes may affect their ability to sell it and move. Many wealthy clients have a dream move or two in retirement, and market volatility can significantly hamper their perceived ability to make those geographic moves without losing money. My key advice for these clients is to review their big-picture financial plan. Their investments are chosen for several reasons, and we continually reassess with clients if they still meet their goals. Often, reviewing that plan together puts worries at ease.”

Simerly points out an interesting case of opposing myths. “The top myths I hear are opposing views of the same product – annuities. The two biggest myths are (a) that annuities are the ultimate answer for everyone and (b) that they’re pure evil. The reality is that it’s far more about fit to the specific client family, their tax situation, and their estate goals. There are annuities in every flavor imaginable now, and while I don’t recommend them often, they can be a big help when they fit a client’s situation and values well. It is all about fitting into the situation and values.”

Carman Kubanda, Financial Planner at Innovative Wealth Building, adds, “Most of my high-net-worth clients worry about paying too much in taxes. They are looking for the best ways to minimize their tax bill. Smart planning to get ahead of this as early as possible is always a good idea.”

However, Kubanda cautions, “One of the most common myths I hear is that everyone needs to do Roth conversions. But there are some scenarios when that is not a good idea. Another myth is that bonds and bond funds are a ‘safe’ investment. The coming year may serve up a reminder that there is still risk even in a ‘conservatively’ invested portfolio.”

Sean Polley, Private Wealth Manager at Polley Wealth Management, agrees, “The biggest concern of the wealthy is taxes. With everything going on right now, what will taxes look like in the future and how can they be smart about taxes. It isn’t about not paying taxes, just not paying more than they must. Tax planning is an ongoing process that starts on January 1 each year. We need to understand their business, business structures, and what they are doing on an annual basis. With this, we can optimize their tax liability by making adjustments throughout the year.”

Omar Morillo, Founder, Imperio Wealth Advisors expands on the theme of taxes, “Wealthy clients are often concerned about estate taxes, which can significantly diminish the value of assets passed to heirs. Federal estate taxes can be as high as 40 percent, and certain states impose additional estate or inheritance taxes, further complicating matters. With changes in federal exemption limits expected in the coming years, clients are worried about how much of their estate will be taxed. These concerns drive a focus on strategic planning through tools like trusts, charitable giving, and lifetime gifting to reduce tax exposure and preserve wealth for future generations. Managing these structures can sometimes add stress and complexity to the already busy lives of wealthy clients.”

Michael Rosenberg, Managing Director of Diversified Investment Strategies, lists several risks, “The people I speak with are often concerned about various risks related to their money, including market risk, tax risk, inflation risk, longevity risk, and healthcare risk. This group typically has significant assets and previously enjoyed high incomes. However, once they retire and start living off their assets, these specific risks become more pressing compared to when they were working. In our practice, we develop tailored strategies to help reduce market risk, including the sequence of return risk, which occurs when market downturns align with the beginning of the distribution phase. We also implement strategies to mitigate tax risk, protecting against potential tax increases imposed by the government. Healthcare risk is another key area we address.”

Daniel Bishop, founder of Black Swan Advisors, has an interesting take. He says, “‘Rich’ is an imaginary someday that is two to 10 times more than we have now, but when we get to that milestone, we find the goalpost is just as far away. Your problems are mostly the same, some have just changed their mask.”

The Bottom Line

Sure, rich people don’t have to worry about covering their bills, losing their homes, not having food to eat, or being unable to afford their prescriptions.

However, the above describes the broad range of money-related worries that rich people do lose sleep over.

You may be justified in feeling these would be “great problems to have,” since they mean you have a lot of money, but that doesn’t make them any less stressful for the people involved.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.