To Give or Not to Give: The Pros and Cons of Leaving an Inheritance

03/09/2020 - Retirement

Successful retirement planning is as much about your goals for your golden years as it is about the legacy you want to leave behind.

I ask my clients a whole slew of questions as part of the retirement planning process, from how much money they believe they would need to feel financially secure, to what they would like to accomplish in retirement, and what they would do after their last working day if money were no object. Another crucial question: “Do you want to leave an inheritance?”

I get a broad range of answers to most questions I ask, and this one is no different. Some clients respond that they have already provided their children with so much—putting them through private school, a host of expensive extracurricular activities, and the best colleges. “I’ve already given them everything,” they say. “The rest is up to them.”

They are certainly not alone. Even Warren Buffett has said he is not leaving his kids jaw-dropping inheritances. Though I’m confident they’ll never be uncomfortable, he is insistent that they do something meaningful with their lives—on their own terms.

But leaving an inheritance doesn’t necessarily mean you’ll be encouraging your beneficiaries to live below their potential or to be irresponsible. Many people do it prudently, which, for many, is key—because they still have lives to live.

For most people, the amount they want to leave behind directly affects how much they can spend in retirement. For example, I have a retired client who is 50 years old, and takes 5 percent a year. She could live to 100 and be just fine. But if her goal were to leave each of her kids a half a million bucks, we’d be doing things very differently.

What if she wanted to leave her wealth to a cause she believed in, like a local animal shelter or a charity that provides families with clean water in developing countries? That plan would shift again, and we would address her spending with her legacy in mind.

When it comes to inheritance planning, there are so many things to consider, and my book, You’re Retired, Now What? can help you identify them, so that you can fulfill your goals in life—and beyond.

33 Shares

Disclaimer

This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity.

This blog does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors. It is important to review investment objectives, risk tolerance, liquidity needs, tax consequences and any other considerations before choosing an investment style or manager.

This material contains forward-looking statements, predictions and forecasts (“forward-looking statements”) concerning our beliefs and opinions in respect of the future. Forward-looking statements necessarily involve risks and uncertainties, and undue reliance should not be placed on them. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements.

Investing in securities, including investments in mutual funds and ETFs, involves a risk of loss which clients should be prepared to bear, including the risk that the full investment may be lost. There is no guarantee that you will not lose money or that you will meet your investment objectives.

Dividends are not guaranteed and will fluctuate. Dividend yield is one component of performance and should not be the only consideration for an investment. Investment advisory services provided by GW & Wade, LLC 93 Worcester Street, Wellesley, MA 02481.

Related Articles

»