How to Align Your Retirement Spending with Your Life Goals

Retirement is a deeply personal experience, and your unique goals will play a big role in how you approach your finances during this phase of life. Some retirees want to enjoy their money fully, spending every penny on themselves, while others are focused on leaving a legacy for their children or grandchildren.

Many people fall somewhere in between—wanting to enjoy life but also leaving something behind if possible. Let’s explore how different retirement goals affect the way you spend your money, and how we can tailor strategies to fit your vision for the future.

The "Spend It All" Retiree: Maximizing Enjoyment, Not Legacy

For some retirees, the primary goal is to use their money during their lifetime, with no concern for passing down assets. These clients often say they want their "last check to bounce," meaning they want to use up their resources fully.

Here are some key strategies to consider for the "Spend it All" Retiree:

• Lifetime Income Annuities: Products like immediate or deferred income annuities can ensure a steady, guaranteed income for life, without leaving a significant sum to heirs. This can provide peace of mind, allowing retirees to spend confidently knowing they won’t outlive their income.

• Increased Spending Flexibility: If a financial plan projects a large surplus at the end of a client’s life, it might be time to reassess. Instead of leaving money untouched, we can help clients explore ways to enhance their lifestyle. This could include:

  • Travel and Leisure: Taking those dream vacations or traveling more frequently, knowing that their plan supports it.
  • Upgrading Day-to-Day Life: From luxury purchases to renovating a home, clients can spend more on enjoying their life now.
  • Memorable Experiences with Family: Some clients may want to enjoy their wealth by spending it with loved ones, such as organizing family reunions or helping family members with major life expenses.

• Maximizing Social Security Benefits: Delaying Social Security until age 70 ensures a higher monthly benefit, allowing retirees to enjoy a higher level of spending without the worry of outliving their money.

The focus for these clients is to enjoy every moment of retirement, making sure their financial plan supports the lifestyle they’ve dreamed of.

Legacy Builders: Leaving the Most for Heirs

On the other end of the spectrum are retirees who are focused on leaving as much money as possible to their heirs or charitable causes. These clients are willing to live frugally to ensure they pass down significant wealth.

Here are some key strategies to consider for the "Legacy Builder" Retiree:

• Aggressive Roth Conversions: One of the most powerful strategies for legacy-minded clients is converting traditional IRAs to Roth IRAs. By paying taxes upfront, they allow their heirs to inherit the account tax-free, potentially preserving a large sum of money. This strategy is especially effective for those who anticipate being in a lower tax bracket in retirement.

• Second-to-Die Life Insurance Policies: These policies provide a tax-free death benefit to beneficiaries upon the death of the second spouse. It’s an effective way to pass down wealth without having to worry about estate taxes eroding the inheritance.

• Minimizing RMDs: Required Minimum Distributions (RMDs) can reduce the amount of wealth passed to heirs. Strategies like Roth conversions or drawing down traditional IRAs early can minimize the impact of RMDs, helping preserve wealth for the next generation.

• Charitable Trusts or Donor-Advised Funds (DAFs): Clients with charitable intentions can establish a charitable remainder trust or donor-advised fund to provide income during retirement while eventually passing assets to a charity, offering both legacy-building and tax benefits.

For clients who aspire to build a legacy , the goal is to ensure their financial plan protects and maximizes the value passed on to their loved ones or charitable causes.

Balancing Spending and Legacy Goals

Most retirees fall somewhere between the two extremes. They want to enjoy their retirement years, but they also want to ensure there’s something left for their heirs, if possible. These clients need flexible strategies that can adapt to their goals.

Here are some key strategies to consider for those who want to balance spending and leaving a legacy.

• Flexible Withdrawal Strategies: A dynamic withdrawal strategy, such as the guardrails approach, allows retirees to adjust spending based on how well their investments are performing. This approach helps ensure they can enjoy life now while preserving assets for later.

• Hybrid Annuities or Variable Annuities: These products offer both guaranteed income and market growth potential. They allow retirees to cover essential expenses with guaranteed income while still providing an opportunity for a legacy, depending on investment performance.

• Trust-Based Estate Planning: Using trusts as part of their estate plan ensures that any remaining assets are distributed according to the retiree’s wishes, providing flexibility in retirement spending while safeguarding what’s left for beneficiaries.

• Social Security Bridging: By using taxable investments to cover expenses before taking Social Security at age 70, retirees can maximize their benefits, preserving tax-advantaged retirement accounts for their heirs while ensuring a steady income.

This balanced approach allows clients to live comfortably while still having the potential to pass down something meaningful.

Conclusion: Your Goals, Your Retirement Plan

Ultimately, retirement is a personal journey, and how you spend your money should reflect your goals and aspirations. Whether your priority is to enjoy every last penny or to leave a significant inheritance, the right financial strategies can help ensure you live the life you want and make the most of your savings.

At Haywood Wealth, we specialize in crafting personalized retirement plans that align with your vision for the future. As expert retirement planners, we can help you navigate your financial goals, optimize your retirement income, and ensure your plan supports your unique aspirations.

Contact us today to explore how we can help you achieve your retirement dreams.