Are You on Track to Achieve Your Legacy Goals?Submitted by Reby Advisors on May 5th, 2017
No matter where you are on the road to leaving a lasting financial legacy for your loved ones, it is important to take a step back once in a while and make sure you are still on track. In many cases, a few small adjustments may be all it takes to get your legacy goals back on track and give you confidence that you will be able to pass on your assets to your loved ones in the manner you envision.
Our Income Sustainability Analys is a highly useful tool to help you assess the status of your financial legacy and give you added peace of mind. This analysis stress-tests your financial assets relative to their ability to fund all of your goals, including the size of the inheritance you'd like to leave behind. It simulates 1,000 economic scenarios and the impacts they may have on your income streams and on your portfolio, and then gives you your probability of success. If, for example, you are able to fund all of your goals in 820 out of 1,000 scenarios, you have an 82% probability of success.
This assessment can be extremely valuable, particularly when you plug in the amount of money you would like to spend each year to live your lifestyle in addition to the size of the financial legacy you’d like to leave behind. You can then see how adjusting your legacy goals up or down, or increasing or decreasing the cost of your lifestyle, impacts your probability of success. This would be done in a meeting with an advisor after the initial analysis has been prepared.
You may find that simply increasing the amount of your biweekly 401(k) plan contribution is enough to get your financial legacy goals back on track. On the other hand, you may find that the level of sacrifice you would need to make to meet your goal of a substantial financial legacy is simply not realistic. In that case, you may need to look at other ways to leave a legacy for those you care about.
Leaving a Nonfinancial Legacy
Remember, leaving a lump sum of cash is only one way to establish a lasting financial legacy for those you love. For instance, helping to finance the education of your children or grandchildren may be a much better—and longer-lasting—financial legacy than leaving a substantial nest egg.
Let’s take a look at two hypothetical scenarios. The names are made up, but the events described are all too real. In fact, you probably know a few families who fall into one category or the other.
Our first couple, Mike and Julie, worked all their lives to build a business and pass on a financial legacy to their children. They raised great kids and added to their college funds from the day they were born, but they still insisted that their two children pay for part of their educations.
When the time came, their kids went off to college and worked through the summers to put themselves through school and prepare for the future. Today, Mike and Julie’s son, Mark, is an engineer, and their daughter, Jennifer, is a successful doctor. Mike and Julie, meanwhile, are enjoying the fruits of a well-planned retirement, traveling extensively and spending lavishly on gifts for their grandchildren. When they eventually pass on, there may not be a huge nest egg remaining, but their legacy will live on in the successful lives their children have been able to build for themselves.
Now let’s look at the other end of the spectrum, an extremely wealthy couple we will call Bill and Melissa. Bill and Melissa were also quite successful in business, and they have built a substantial nest egg to pass on to their children. Unfortunately, their children are not as responsible, or as well equipped, as young Mark and Jennifer.
Their kids, let’s call them Alan and Claire, were raised in the lap of luxury, enjoying a lifestyle that those born into lesser financial circumstances could never imagine. From a multimillion-dollar home to brand new sports cars for their sixteenth birthdays, their parents made sure that young Alan and Claire never wanted for anything.
When Bill and Melissa passed on, they left their offspring an impressive portfolio of investments, along with business interests well into the eight figures. That multimillion-dollar nest egg was not enough, however, because the children never learned personal finance and the value of money.
I don’t bring this up to preach on parenting, but more as a reminder that it’s okay to put your goals and desired lifestyle first. You’ve done your job as a parent, worked hard all your life, and in almost all cases your heirs would probably be willing to inherit a little less in exchange for knowing you were able to fulfill your own personal dreams.
Legacy Planning Advice
If you are a Reby Advisors client and would like help with your legacy planning, please feel free to reach out to your advisor at any time for advice. You may also request a complimentary Everplans account to help you organize, store, and share your vital estate planning documents. Click here to learn more.
If you are not a Reby Advisors client, request a complimentary income sustainability analysis and enter your legacy goals in the appropriate form field. Within three business days, you'll find out whether you're on track to achieve your goal. Click here to get started.