Legacy or lifestyle: What do you want to do with your wealth?

It seems like a simple question, but have you really considered it? You have money, and it’s socked away in various investments and accounts. So what’s the end game? What is all this money for, and are you teed up to achieve that ultimate goal?

Broadly speaking, you can go in three different directions, each with its own roadmaps and roadblocks.

A good financial consultant can build a portfolio designed to meet whatever goals you set in whichever direction you choose, so the only question left is…

What do you want?

I want to leave a legacy.

Basic legacy planning is what people often think of with regard to wealth. How can I enjoy my money while also leaving something for my kids or a foundation to support the causes I believe in?

In these cases, the focus of your financial plan will be to protect the nest egg at the center of your investments. The amount you want to leave behind is up to you. It can be a firm number that stays as is or a starting point that can grow before you pass it on.

The options for leaving money to family are different than the ones for philanthropic goals. Both can be focused on preservation and growth, but how they get there – and the tax implications – are very different.

Regardless, your portfolio will be carefully designed to support you while leaving a healthy amount behind as your legacy.

I want to live comfortably.

This is the “best of both worlds” approach. It allows you to leave a legacy by transferring some wealth while also focusing on income generation and big purchases so you can live the lifestyle you worked so hard to achieve.

With this option, your goals would be growth, but really just enough to generate the annual income you need. That would leave your nest egg available for major purchases and the investments that can produce that growth. In the end, there may be something left behind, but that’s not the central focus. As long as you get what you want, having something at the end is just a bonus.

It’s mine, and I want to enjoy it.

Some might call this the selfish route, but I like to think of it as the “you can’t take it with you” option. You have money, and you want to spend it. And if there’s nothing left at the end, at least you enjoyed yourself.

Reaching this goal is a lot less complicated than leaving a legacy. It would start with a projection of what you want to do and what you want to buy. The portfolio would be designed to throw off income every year – however much you need for your recurring lifestyle expenses – and support the big trips, new cars, homes, boats and whatever else you plan on buying.

As you go along, the portfolio would grow to keep pace with inflation and maybe a little more. Because you don’t plan to leave anything behind, it would eventually draw down pretty close to zero. But hey, you sure had fun spending it.  

Whichever direction you choose, talk with your financial advisor and CPA about how to get there. They can go over your options and explain how to get what you want.

Nathan Kurita is a managing director for Pinnacle Wealth Advisors and can be reached at Nathan.Kurita@pnfp.com.