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View Winners → Lifestyle Jan 17, 2023
Photo courtesy of Jean D. Koehler
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A key financial question for retirees is what to do with their hard-earned retirement savings. For example, some may find it more fulfilling to provide a college fund for grandchildren rather than purchase a second home for themselves. The opposite can also be true, and that’s okay.
In my experience working with retirees, I’ve found it’s critically important to identify what each person’s goals are for their nest egg. Do they want to spend down their assets pursuing activities that bring them joy — or would it be more fulfilling to leave an inheritance to loved ones? If you find yourself wrestling with the same question, read on for some considerations that can help determine the right approach for you.
The rationale for spending down your wealth
On one hand, you may enter retirement with the primary goal of living the lifestyle you’ve worked so hard to earn. Pursuing a hobby, traveling, purchasing a vacation home or fulfilling another retirement dream may be exactly what you envisioned for your later years.
If you fall into this category, keep in mind that these plans likely come at a price. Given the realities of longer life expectancies, it’s crucial for retirees to be prepared for a retirement that could last for several decades. This means your savings will need to cover routine expenses, which are likely to rise due to inflation, as well as the potential for health and long-term care services. Ensure you allocate enough dollars for these purposes before deciding whether or how much money to spend down or leave behind.
The rationale for leaving a legacy
On the other hand, if your primary retirement goal is to leave a legacy to your loved ones, it’s important to start nailing down the details of inheritance plans early. As you do, keep in mind that your legacy includes what you plan to give as an inheritance upon your death, in addition to what you give and value today.
Perhaps you are eager to give your children and grandchildren a helping hand. Your generosity could make a significant difference in helping them reach key financial milestones, such as achieving a college degree, purchasing a home or paying off a mortgage.
Or, maybe you prefer to contribute funds to a charity, foundation, or alma mater that aligns with your values. Think about donating to causes that are most important to you or have made a significant impact on your life.
Whether you give to your loved ones, philanthropic causes or both, create or update an estate plan to document your wishes. Your plan should include written instructions (e.g., a will or trust) and up-to-date beneficiary designations on all your accounts.
Finding a happy medium
Spending your assets or leaving an inheritance are both great options. Yet many of my clients hope to accomplish both. If this applies to you, too, know it’s possible to find a middle ground. After all, each person’s retirement dream is unique, so your financial plan to accomplish it should be, too.
As you weigh your options on how to allocate your savings, it may be important to you to talk with your spouse or partner about what brings each of you the most joy. Once you’re aligned, communicate your intentions with family. Estate planning can be a tough topic to raise with loved ones, no matter how much or little money you plan to pass down. But having the conversation can alleviate tension down the road while giving your children confidence about what to expect.
If you’d like a second opinion on how to achieve your retirement dream, consult a financial advisor and estate attorney. These professionals can offer advice and encouragement, helping you to find your own happy medium between spending and providing an inheritance with your assets.
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Jean D. Koehler, CLTC®, CRPC®, RICP®, CKA®, is a Financial Advisor with Ameriprise Financial Services, LLC. in Arcadia, Ca. She specializes in fee-based financial planning and asset management strategies and has been in practice for 22 years. To contact her, please visit her website at https://www.ameripriseadvisors.com/jean.d.koehler/ or call her office at (626)254-0455. 55 East Huntington Drive Suite 340, Arcadia California 91006.
Ameriprise Financial and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.
Ameriprise Financial and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.
Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.
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