Feeling confident in your net worth doesn’t always translate into feeling empowered when it comes to your current spending. If you feel wealthy on paper but restricted in real life, you’re not alone.
Many of our clients are business owners, tech employees, and healthcare professionals. Each has their own version of delayed gratification, the proverbial pot of gold at the end of the asset accumulation rainbow. And when they finally reach certain milestones – vesting schedules, retirement age, or a big liquidity event – those golden handcuffs become a golden parachute.
But what happens if you need more cash flow before you get there?
Steve’s Dilemma
Recently, one of our readers reached out with this exact challenge:
“Hi Lauren! We met in your Gold River office last year. I plan to become a client in 2026 as I have reached my retirement goal. In the meantime, I need your help. I have a high net worth thanks to stock options and inherited properties, but I’m ridiculously cash-poor. I don’t want to derail my retirement plan. How can I improve my cash flow situation?” — Steve H.
Steve and his wife Patricia are not alone. They’ve accumulated Restricted Stock Units (RSUs), consistently max out their 401(k)s, and purchase additional shares through an Employee Stock Purchase Plan (ESPP). On top of all that, Steve is juggling vesting schedules, taxes, and now the costs of managing real estate.
It’s a common story. And it’s exactly where liquidity planning becomes essential.
Why It Matters
Liquidity planning is about more than having a little extra cash in the bank. It’s about making sure money is available when you need it, without derailing long-term goals.
At its core, liquidity planning creates both stability and flexibility, and includes things such as:
- Keeping 3–6 months of expenses in cash
- Setting aside enough for large spending goals over the next three years
- Strategically unlocking assets to increase contributions to tax-advantaged accounts or cover emergencies
Elevated Investor Tip: Liquidity is not just about holding more cash. It’s about knowing which assets you can tap, when, and at what cost.
Borrow Smart: Turning Assets into Cash
If you’re wealthy on paper but limited in liquidity, borrowing against what you already own can be one of the most tax-efficient ways to access cash.
- Securities-Based Lines of Credit (SBLOCs): These let you borrow 50–95% of your portfolio without selling investments or triggering capital gains. (Americans now hold over $138 billion in SBLOCs.)
- Home Equity Lines of Credit (HELOCs): With homeowners sitting on $35 trillion in equity, HELOCs are making a comeback. Over 57% of new HELOCs go to borrowers over 50, often as a retirement cash-flow supplement.
- Private Banking & Asset-Backed Lending: High-net-worth families can borrow against real estate, private equity, or even art. These loans often come with custom terms and competitive rates.
Borrowing wisely is not about taking on just any debt. It’s about using your balance sheet strategically, with a repayment plan that fits your income and retirement goals.
Elevated Investor Tip: Set up a line of credit before you need it. Liquidity is most powerful when it’s available at the right time.
Tap into Whole Life Insurance
Only 20–25% of U.S. households carry permanent (whole life or universal life) insurance with cash value. For those who do, it can be a powerful tool for cash flow.
Borrowing against cash value gives you tax-efficient access to funds without creating a taxable event (as long as the policy stays in force). And if cash flow is tight, you may also be able to minimize premium payments while keeping coverage intact.
Elevated Investor Tip: Review your insurance policies every few years. Hidden cash value could provide liquidity without forcing you to tap into retirement accounts or sell investments.
Equity Compensation: From Handcuff to Bridge
When I started in this field over 20 years ago, equity compensation was seen as a bonus. Today, especially in Northern California, RSUs and stock options often make up the majority of a family’s wealth. That can feel exciting, but it creates two major challenges: limited cash flow and concentration risk.
This is Steve’s reality. He’s wealthy on paper but hasn’t sold a single share. The truth is that the 15% capital gains tax rate is the same whether you sell this year or next. Waiting doesn’t always mean better outcomes. In fact, it often leaves you more exposed to market swings and missed opportunities.
Strategies to consider include:
- Selling vested shares gradually across tax years to smooth out gains
- Using proceeds to cover expenses or diversify into new assets
- Pairing sales with charitable contributions to unlock deductions
- Offsetting gains with losses elsewhere in the portfolio
- Using protective “puts” or “options collars” as insurance, which can also create capital losses to offset gains
Elevated Investor Tip: Equity compensation should never be left on autopilot. Proactive planning turns paper wealth into cash flow and protection.
Rebalancing and Illiquid Assets
Rebalancing is usually seen as investment risk management, but it can also generate liquidity. Selling overweight or highly appreciated assets creates cash while keeping your portfolio aligned with long-term goals.
Illiquid holdings like real estate or private equity require even more planning. That means estimating sale timelines, capital call schedules, and redemption terms, and folding them into your long-term cash flow model.
Elevated Investor Tip: Rebalancing with intention not only manages risk but can also be your most tax-smart source of liquidity.
Tax-Friendly Execution
Even the best liquidity strategy can backfire without comprehensive tax planning. Some powerful tactics include:
- Maintaining a balance between taxable, tax-deferred, and tax-free accounts
- Timing liquidity events to match lower income years
- Using tax-loss harvesting to offset realized gains
- Leveraging year-end opportunities like Roth conversions or charitable donations
- Coordinating closely with our tax team for a fully integrated plan
The Bottom Line
Obviously, being asset-rich doesn’t guarantee a sense of financial freedom or prosperity if your wealth isn’t accessible. True liquidity is about having the confidence to make financial decisions without disruption or worry.
Handled correctly, liquidity stops being a problem and becomes a strategy. For families like Steve’s, it is the bridge between enjoying life today and protecting wealth for the future.
So, if you see yourself in Steve’s story, don’t wait until 2026 to take action. With the right plan, you can create cash flow without sacrificing long-term success.
