There is absolutely nothing wrong with leaving a legacy. Either in works, ideas, morals or money: I believe all of us should shuffle off this mortal coil leaving something to make it better.
Personally, the difference between having enough to live well in retirement and use it all up and living well in retirement and leaving more than I started with is a comparatively small amount of money.
Let me put some numbers to that.
Let’s say you start retirement with $500,000 in your retirement account, and let’s assume you invest in a diverse stock portfolio, like a total stock market index fund. Let’s also assume you and your spouse draw 25K a year in social security.
If we draw 80% of the net (of inflation) returns off the portfolio a year, that’s an average of roughly 7%, or $35,000. If we do that, our principal will never be depleted, even accounting for inflation, and we can live on the returns forever. And leave a financial legacy. To kids, grandkids, the local dog shelter, a scholarship fund for a gunsmithing school; whatever you think will leave the world a better place.
If we put that same $500K in a joint life annuity type arrangement (I refuse to call it an investment, because it isn’t) at age 67, you get……..roughly $35,000 a year until you die, and you leave nothing. Oh, but that $35K you get out of that “safe” annuity…. is NOT indexed to inflation, so when you’re 87, it’ll go at most half as far as it does today.
Either way, you have $60K of disposable income per year.
