Rebekah Barsch is executive officer and vice president of Planning and Sales at Northwestern Mutual.
When I retire, I want to go to sleep each night without feeling guilty about spending the money I've worked so hard to save.
In my role in the financial planning business, I see far too many people struggle with spending their money in retirement. Why? Because they're worried that if they spend too much, there won't be anything left for their kids or grandkids or the charities they want to support. They're torn between leaving a legacy and living the life they envisioned for themselves in retirement. And as a result, they often don't take that trip to Tuscany or fulfill their dream of buying a second home.
I want to tell you that it’s possible to do both. You can give yourself permission to enjoy retirement and leave a legacy. The key is to include legacy planning as part of your retirement income plan. When you establish a formal plan for leaving something behind, you can accomplish three things:
- You free yourself to enjoy the money you've saved for your retirement.
- You leave the legacy you intend.
- You leave money behind in the most efficient way possible.
That's something many people don't think about—how to leave a legacy in the most efficient way possible. The fact is, all assets are not created or distributed equally, and that's one of the most important reasons why you should take the time to plan, in advance, for your legacy. There can be a tremendous difference in the experience your heirs will have based on the types of assets you leave.
I learned this firsthand when my parents passed away. My mom’s life insurance policy was, by far, the easiest for me and my siblings to manage. There were no accounts to be dealt with; the proceeds were tax free; and the funds were distributed quickly. That wasn't the case with other assets in the estate. And that experience has had a huge influence on my plan to leave a legacy. My own estate plan has life insurance benefits going to my family and other assets going to charities. That way, my legacy is structured in the most efficient way possible with insurance proceeds transferring smoothly to my children, and my investment assets—including my IRA—making their way to my favorite non-profit organizations without income taxation.
Of course, every person's approach to leaving a legacy is unique; yours will be based on your circumstances and your intentions. But one thing is clear: If you have expectations about leaving something behind to family or to charity, do yourself—and them—a favor. Plan for it. Don't leave it to chance. Work with your financial advisor to incorporate legacy planning into your overall retirement income plan. When you do, you can be confident in knowing your wishes will be honored efficiently. And perhaps most important, once you know your heirs will be taken care of, you can give yourself permission to enjoy your well-deserved retirement.
