Investing for Your Legacy

Are You Investing for Yourself, or Are You Investing for Your Legacy?

Traditionally, financial advisors tell their clients, “Don’t take any more risk than is necessary to achieve your goals.” Following that advice, when you turn 70, 80, or 90-years-old, you should move your money into conservative investments with guaranteed low returns rather than keep your money in riskier investments that could potentially provide higher returns. Essentially, advisors say that it’s more important to protect your money at that age than to double it. Yet, is that always true? Is this conventional wisdom ever flawed?  Should you stop making any potentially risky investments when you reach a certain age? Well, you will find the answer to that question by asking another: Are you investing for yourself, or are you investing for your legacy?

Is it really time to stop being conservative?

Ideally, when you get into your 70s, 80s, and 90s, you will have more money than you will ever need to spend. Let’s say that you have a few million dollars saved, and you are hardly touching it. You’ve paid off your house and your vehicles, and you spend relatively little each month. Even if you have to pay significant medical or long-term care costs, you should have more than enough money in investments, retirement plans, pensions, Social Security, and/or cash to cover your expenses and more. Ordinarily, then, financial advisors would put your money in conservative investments and tell you to quit worrying about.

Yet, think about this. Who gets that money when you die? If you are like most Americans, you are probably leaving that money to your surviving spouse. Ultimately, though, you are leaving the money to your children and grandchildren. If you have confidence that your money will outlast you and your spouse and will transfer to your kids and grandkids, then is it really your money? No, it’s theirs. You are merely the custodian or caretaker of that money.

If you know that you are going to give that money to your children and grandchildren, then maybe you should be investing the money with their goals in mind. Think about their lifestyles, their financial needs, and their financial goals. If your sons or daughters had the million dollars, how would they invest the money? Hopefully, they have decades left to live. Wouldn’t they want to earn significant returns on their investments?

What if you invested the money based on their ages, not yours? If your kids are in their 50s and 60s and your grandchildren are in their 20s and 30s, then maybe you should invest in a portfolio allocation that mirrors their lives, not yours. Obviously, you don’t want to put yourself in financial jeopardy. But surely you can find a balance between protecting yourself and investing for your legacy.

Now, I realize that not everyone reading this will have millions of dollars to pass on to future generations. I get that. However, if you plan to leave any type of legacy for your children and grandchildren, talk to your financial advisor. Work together to design an investment strategy that takes care of your and their future needs. Don’t automatically assume you should stop actively investing at a certain age.

Questions? Let’s meet and discuss.