Bob French, CFA

Should Legacy Goals Be Part of Your Retirement Plan?

Figuring out how to plan for your legacy goals is a nice problem to have. But that doesn’t mean you shouldn’t worry about it. Whether or not legacy goals are part of your plan can seriously impact what your retirement will look like.

Including them means you’ll have less to spend on yourself (and you’ll need to save more before you retire). Leaving them out means you can spend more, but your legacy will simply be comprised of whatever is left over when you pass.

There’s no right answer here – the decision comes down to what is important to you. How upset would you be to leave behind less than you anticipated, or even nothing at all?

When You Shouldn’t Worry About It

If this doesn’t really bother you, then you probably don’t need to include legacy goals in your financial plan. That doesn’t necessarily mean you don’t want to leave anything for your loved ones. You may hope to leave something, but the specific amount might not matter a great deal to you.

If that’s the case, leave them out. Your financial plan – at least your primary plan – should focus on the most important items to you.

When You Should

If you have a specific amount in mind – or even a bare minimum – that you want to leave behind, then you should definitely include legacy goals in your planning. Since it’s important to you, you need to structure your finances to meet those goals.

What to Do If You’re on the Fence

Most people fall somewhere in the middle. You want to make sure you leave behind a good amount, and it would bother you if nothing was left over when you pass, but you’re flexible on the amount.

This is where the art of financial planning comes in.

People on the fence handle this problem in many ways. One common solution is to include legacy goals in your plan and increase the relative size of the diversified investments portion of your portfolio. The result is increased overall expected return and higher risk.

Since the size of your legacy goals is flexible, you have some wiggle room. If things start getting tight with your plan, you can reduce the size of your legacy goals to compensate.

Financial planning is about finding the right situation for you. This strategy may work for you or it may not. But what’s important is that you think clearly about what goals are important to you, and how to build your financial plan around them.

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