“A key financial question for retirees, is what to do with their hard-earned retirement savings. For example, some investors 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.”
Once you get to retirement, it’s important to identify what your goals are for your nest egg. Do you intend to spend it down enjoying your golden years, pursuing passions and activities that bring you and your spouse joy, or do you want to leave an inheritance to loved ones? The question is posed in the article “Will You Spend Your Retirement Savings or Leave It Behind? The Answer May Surprise You,” from the Warwick Advertiser.
For many people, the goal of retirement is to do all the things that had to be put off while working. That might include a hobby that requires time and resources, travelling, purchasing a vacation home, or fulfilling a dream of going back to school. If that’s your retirement dream, bear in mind that these dreams all come with costs. Spending in the early stages of retirement often goes up, as retirees are still healthy enough to do everything on their bucket lists.
Given the reality of longer life expectancies, it’s important for retirees to understand that they may be living from their retirement investments for three or more decades. That means that you’ll need to have enough money to cover routine expenses plus health care and most likely, long-term health care services. Make sure your financial planning takes these factors into account.
Once you know how much money you’ll need for your costs of living and health care, plus inflation, then what’s left behind is your retirement fun money.
Knowing how to work within the constraints of a budget, is actually more important during retirement. You can’t just go back to work for a few decades, if you find yourself running short. You still may need to pick up a part-time gig on the side. However, that income is quite lower than a full-time position at the peak of your earning career.
What if leaving a legacy is more important to you than buying a second home? Just like the plan for retirement fun, you’ll need to do some financial planning to make this goal come to fruition. Remember that your legacy will include whatever is left at the time of your death, as well as what you may give while you are living.
Giving your children or grandchildren their inheritance while you are alive, is a way to enjoy the gift twice — once when you give and a second time when you see what they do with your gift. You might want to help the family reach their own financial milestone, like covering the cost of a college degree, helping with a deposit on a home or helping to pay off a mortgage.
Charitable giving may also be part of your legacy. If there is a charity, foundation, or alma mater that aligns with your values, you may choose to set aside a portion of your estate for a donation.
Regardless of whether you are planning on spending everything, giving away your assets to family members, or to a preferred charity, an estate plan is necessary to ensure that your wishes will be followed.
Your estate plan needs to include written instructions on how you want your assets to be distributed. That usually happens through a will, and trusts are often part of an estate plan. Make sure that you know what your beneficiary designations are—these are the people who are named in your insurance policies, investment accounts, IRAs, 401(k), or other retirement accounts. They will receive the assets as noted in the beneficiary designations, regardless of what your will says.
Remember: “An ounce of prevention is worth a pound of cure.” When making your estate plans or when probating an estate or administering a trust, do not go it alone. Be sure to engage a Cincinnati estate planning attorney.
For more information about estate planning, probate or trust administration in Cincinnati (and throughout the rest of Southwest Ohio) and to review free resources regarding estate planning, probate or trust administration, visit my website. If you have questions regarding this article or a particular legal matter, feel free to contact me at 513-399-PLAN (7526).
Reference: Warwick Advertiser (April 18, 2019) “Will You Spend Your Retirement Savings or Leave It Behind? The Answer May Surprise You”