You already know that you can’t take your retirement savings with you. But you can use it to leave behind a helpful, substantive legacy for your children and grandchildren.
Even a relatively small inheritance can help pay for college, empower your children to start their own businesses, and even serve as an incentive to begin building their own nest eggs. Here’s how to begin building a legacy that will outlive you.
Invest Your Own Inheritance
Retirement planning begins well before your senior years. If you’re lucky enough to get an inheritance, don’t waste it on a shiny news sports care or vacation home. Invest in your future by working with a financial advisor to sock that money away for the future. A small windfall can turn into a massive stockpile of cash if you invest early and intelligently.
Get Plenty of Financial Counselling
A single meeting with a financial advisor right before you retire is not enough. Nor is one meeting with the guy who manages your investments. You need extensive and ongoing financial counselling at every stage of your career. The right financial advisor can help you explore retirement investing options, work around financial constraints such as debt and low income, and ensure you’re continually getting the most out of your money. Find a financial advisor you trust and like, then meet with them at least yearly.
Try a Pre-Death Inheritance
Why shouldn’t you get to enjoy the fruits of your labor? Rather than leaving your inheritance for your children after you die, try giving them the money beforehand, so you can enjoy the results. This is particularly helpful if your children are not money savvy and may need some guidance. If you don’t have much retirement savings, or are still trying to build a nest egg, see if you are eligible for a reverse mortgage. This tax-free money taps into your home’s equity, offering you funds to start a nest egg or give to your children.
Consider a Trust
An inheritance only ensures your child will be flush with cash. It makes no guarantees about what he or she will do with it. Everyone struggles with managing a large windfall, particularly if they have previously faced financial problems. Help your child spend his or her inheritance wisely by setting up a trust. You can set specific terms for the use of the money, select a trustee who controls the cash, or prevent a child or grandchild from accessing the funds until he or she reaches a certain age or achieves a milestone, such as graduating from college.
Take Care of Yourself
Being a parent means selflessly devoting yourself to your children, so it can be tough to prioritize your own needs. But you absolutely should. Consider this: if you don’t have enough socked away for retirement, your children could end up funding your medical care and other needs in your golden years. So tempting as it may be to give them lots of cash and minimize your own savings, you must ensure you have enough money before you start planning a gift to your children.