What’s the Purpose of Your Money

Two of my clients, Jack and Beth, a retired couple, mentioned that they started discussing how they wanted to spend their money during retirement on a trip south to visit their children. Beth wondered about giving their kids money now so they could see and enjoy the benefits it brought to their children instead of passing it down to them as an inheritance. Jack was more hesitant and told me he was concerned about possible market downturns and how they might affect them during retirement. Their questions led us into a discussion about how they wanted to spend their money during retirement and, ultimately, to the question: What is the purpose of their money?

It came down to Jack and Beth facing a problem that arose from a need for more clarity about purpose. When they asked me, “What’s the right thing for us to do here?” I told them that there are all these different types of things that you can do with your money. But the reality is that it comes down to two basic purposes. The first is that you can spend your money and use your assets as income to fund your lifestyle. The second is that somebody else can spend your money. Both admitted that they had never thought about the purpose of their money before. But this got them thinking about what money they wanted (or needed) to spend for themselves and what money they would like to give to their children. Thinking about money in this fundamental way can provide clarity of purpose and make financial planning decisions easier.

Your Purpose is as Unique as You Are

Retirement is a time when you finally get to kick back, relax, and enjoy the fruits of your labor. But a crucial question often arises: What should you do with your hard-earned assets? It’s a dilemma that many retirees grapple with, and there’s no correct answer. Let’s explore the factors to consider when deciding whether to spend or save during retirement.

First and foremost, taking stock of your financial situation is essential. Having a clear picture of your financial needs lets you make informed decisions about allocating your assets. Next, think about your goals and priorities for retirement. If your primary focus is enjoying your retirement to the fullest, you might opt to spend more freely and worry less about leaving an inheritance. Or are you more concerned about leaving a legacy for future generations? If leaving an inheritance is important to you, you’ll need to carefully balance your spending in retirement with your desire to pass down wealth to heirs. You can read more about the options for How and When to Pass Down Assets to Your Loved Ones.  There’s no right or wrong answer here—it all comes down to what matters most to you. If you have specific aspirations or obligations, such as funding a grandchild’s education or supporting a charitable cause, you may prioritize saving to ensure those goals are met.

A Few Factors to Consider

A crucial factor to consider is your risk tolerance and longevity outlook. Jack mentioned to me during our initial conversation that he was concerned about possible market downturns and how they might affect them during their retirement. While adopting a YOLO (You Only Live Once) mindset in retirement is tempting, it’s essential to strike a balance between enjoying the present and planning for the future. Assessing your risk tolerance involves considering your comfort level with market fluctuations and the potential impact on your retirement portfolio. If you’re risk-averse or have concerns about outliving your savings, you may lean towards conservative spending and prioritizing asset preservation. Conversely, if you’re more adventurous, you might feel comfortable taking on more risk and spending more freely.

Ultimately, spending your assets during retirement is deeply personal and hinges on your unique circumstances, values, and aspirations. There’s no right or wrong answer—what matters most is finding a balance that aligns with your financial goals and lifestyle preferences. Whether you choose to live it up, leave a legacy, or a little bit of both, the key is to approach retirement planning thoughtfully and strategically.

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