The financial security planning process creates a lifelong approach to achieving your retirement vision, taking into account the realities of lifespan, health and other potential risks. Your retirement plan may be in order, but have you considered what you would like to leave behind to family or charities? It is never too early to contemplate your financial legacy.
You may find it challenging to think about retirement many years in advance, and pondering the end of life can be even harder. But if you are even thinking about leaving a legacy to family, friends or charity, it has to be part of your lifelong planning process. Your financial representative can help you work through the steps involved in creating a legacy plan. Some key questions to consider:
- What Does "Legacy" Mean to You?
For many people, leaving a legacy encompasses not only financial gifts but personal ones such as values, integrity and work ethic. Your financial legacy can embody your personal values while taking many forms, from cash and investments, to property, to opportunities for charitable giving. Legacies also can have various purposes, whether it is financial support for a spouse and children, college expenses for a grandchild, or a scholarship program that will last for generations. An in-depth conversation with your financial representative can help you understand the many options available and decide what type of legacy you wish to provide.
- How Much Will You Leave, and to Whom?
Selecting a target dollar amount well in advance offers the best chance of meeting your legacy goals. Make a detailed list of your assets and of the individuals or causes that you might want to support. Doing so early will help you plan your legacy bequests separately from your retirement and ensure that you have funds available for both.
- What Financial Options are Best Suited to Your Vision?
There are myriad options for leaving a financial legacy and it is up to each individual to decide what works best for them. Some people use a permanent life insurance policy to give tax-free proceeds to their spouse or children. Others bestow funds or property through their wills, or pass on assets while they are still living. (See our article on gifting.) There are trusts, flexible investment designs and other ways to maximize your disbursement and minimize expenses. Determining what works for your situation is a personal choice, best made in consultation with your financial representative and professionals in the Northwestern Mutual Financial Network with particular expertise in estate planning, business, trusts and investments.
- How Will You Protect Your Legacy?
Managing risk is the foundation of your financial security plan and key to achieving your goals. During prime earning years, disability income insurance is essential because it replaces your earnings if you are injured or unable to work, allowing you to continue building funds for retirement and legacy giving. You'll also need to be prepared for possible health care and long-term care expenses, which can profoundly impact retirement assets and overall financial security. The average annual cost of home health care or a skilled nursing facility is more than $75,000 per year — find out more information using our Cost of Long Term Care Study.
Remember, your legacy encompasses who you are and how you want to be remembered — the qualities that have inspired others as well as the person who has achieved financial success. Like a personal legacy, a financial legacy is the end product of long-term commitment and effort — following core principles and behaving consistently over time to make your vision a reality.