Retirement Assumptions: What’s Your Legacy Goal?

When you are building out your long term retirement plan, a financial advisor will often have to make many different types of assumptions. I have authored numerous articles around this topic. You need to consider market downside risk, interest rate risk, inflation risk, liquidity risk, tax risk, sequencing risk, and several others. Often, one major mistake made around the discussion regarding building a quality retirement plan is actually having the end in mind. What do you want your legacy to be when you pass on?

This is a crucial conversation to have at the onset of your overall comprehensive financial plan. Consider this for a moment. If you tell your financial advisor nothing, he or she will likely build out your retirement plan analysis by using a ‘death age’. From the conversations you have with your planner or from some default number in the financial planning software, you will arrive a set age usually in the 85 to 90 range. While that rage may be fine with you, most financial advisors will build out your retirement plan with a legacy goal of ZERO! Does that surprise you?

The reason that determining your legacy is so important in your conversations with your financial advisor is that the amount of money you really need to save, the rate of return you need to achieve on your portfolio, and how much money you can realistically distribute throughout retirement will dramatically change depending on whether you tell your advisor that you would like to die with nothing left to your kids or if you would like to leave the kids with at least some sort of inheritance. Have you had this discussion with your advisor?

When you are in the age range of early 40’s to late 50’s, it’s often hard to think about your legacy. Especially when you are still working on your career or business while also putting your kids through school. For most people, it’s not until they turn the age of 70 (in some cases 80) before they get very serious about building their overall estate and legacy plan. When you go through the financial planning process in your accumulation years, estate and legacy planning are usually an afterthought in the overall conversation.

At some point this year, you will either begin the financial planning process or review the financial plan you have already created. When you assess your progress, it is probably a good idea to discuss the assumption around your legacy goals. If all your other assumptions look great in your financial plan and this one is wrong, you’ll be fine when you are old and gray but your kids may end up with nothing.

Written by:
Ted Jenkin

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