For readers who wonder—and worry—if you will have enough money to comfortably retire and be able to leave an inheritance, you are not alone.
Even high-net-worth families live with this uncertainty.
According to Michael Finke, a professor at the American College of Financial Services, people in the top 20% of the wealth distribution could easily spend an additional $1 million during a 30-year retirement while still earmarking 40% of their initial wealth as a buffer.1
In other words, even wealthy Americans are reluctant to spend and enjoy their retirement for fear of running out of money. This issue is so common there’s a name for it: “the retirement consumption puzzle.”
For high-net-worth families, in particular, the puzzle involves balancing a comfortable lifestyle with your goal of leaving a meaningful legacy.
Studies show that people who spend more in retirement and feel financially secure are happier1, but we also know that the prospect of living to 95 or 100 makes people nervous about spending too much during their prime retirement years. It could mean compromising estate and legacy plans.
The upshot is that families can have it both ways with the right kind of planning.
The process starts by taking a clear-eyed, detailed look at your overall financial picture and measuring it against your long-term cash flow needs and legacy plans.
The first step is to review every line item on your balance sheet—liquid assets, investments, real estate, business ownership, private equity, alternatives and personal assets like valuable collections. Then, we look at the liability and cash flow side of the ledger, running a detailed analysis of current debt, ongoing expenses and current and future cash flows versus current and expected expenditures.
The key is to gain an understanding of how your asset levels could change over time—which means factoring in projected returns and volatility—while also considering the impact of expected withdrawals during your life expectancy. Legacy planning comes after this exercise, as you’ll have a better idea (conservatively) of how much money you expect to have left.
Planning for longevity and unexpected costs is vital. According to the Social Security Administration, a 65-year-old in the U.S. today has a roughly 20% chance of living beyond age 90.2 Healthcare should also be factored as a potentially major expense. Fidelity Investments estimates that an average retired couple will need approximately $315,000 (after tax) for medical costs during retirement, excluding long-term care.3
A final piece of this broad overview of your financial situation should also ensure you have emergency reserves in cash, equal to about one year’s worth of expenses. Taking this step safeguards your assets against surprises and can also prevent you from having to sell securities or other assets during a market downturn.
Setting Your Legacy Plan in Motion
Once you’ve performed this analysis and have a clearer idea of what assets can be earmarked for inheritance and/or charitable giving, you can embark on legacy planning.
For high-net-worth families, building a legacy goes well beyond just having a will. Estate planning tools like trusts and beneficiary designations allow you to transfer wealth efficiently while mitigating your tax liability, and you can also benefit from smart gifting strategies. For 2025, for instance, annual exclusions allow up to $19,000 to be gifted tax-free per recipient.
Some families also want to make charitable giving part of their legacy. Giving in this way can come with the dual benefit of helping people in need while also realizing some tax benefits.
The issue is that while many families want to give, they are not always aware of unique strategies for how to give. The planning landscape is filled with technical terms and acronyms, from donor-advised funds (DAFs) to charitable remainder trusts (CRTs) to qualified charitable distributions (QCDs). The list goes on and on. A financial advisor is crucial in this realm, especially when making a big or lifetime-size gift. You want to ensure you are taking advantage of all the possibilities and tax benefits while also double-checking that the charitable organization you are working with qualifies for a deduction.
Aligning Your Investment Strategy with Your Retirement and Legacy Goals
During wealth accumulation years, investment goals are often relatively straightforward—investors want growth.
Retirement planning and legacy planning can shift priorities because there’s now a balance to be struck between ensuring adequate cash flows over your lifetime while also achieving the growth needed to finance legacy and charitable goals.
This is where determining an appropriate asset allocation is paramount, as you want to diversify to reduce risk while investing across a range of asset classes with different risk, growth and income profiles. Tax efficiency is equally important, where the overarching goal is to maximize after-tax returns through strategic asset location and tax-advantaged accounts.
If this all seems like too much to manage, don’t worry—financial advisors, estate planners and tax professionals can all work together to design a custom plan and investment strategy for your family, with the central goal of ensuring your wealth endures. Working with an advisor also means your plan is reviewed regularly to ensure you remain on track and that any changes to your financial situation are reflected in the strategy.
Sources:
[2]: https://www.ssa.gov/oact/STATS/table4c6.html
IMPORTANT DISCLOSURES
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. In addition, information presented in this presentation is believed to be factual and up to date, but Newport Capital Group, LLC does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.
This presentation includes forward-looking statements and opinions, including descriptions of anticipated market changes and expectations of future activity. Forward-looking statements and opinions are inherently uncertain, and actual events or results may differ materially from those reflected in the forward-looking statements. In addition, all expressions of opinion are subject to change without notice in reaction to shifting market conditions. Therefore, undue reliance should not be placed on such forward-looking statements and opinions.
The tax and estate planning information offered by Newport Capital Group is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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