Before we launch into our detailed discussion of how to allocate your retirement savings to pensions and other retirement income products, we believe that you have to ask yourself a very difficult question. And, more importantly, you have to come up with an answer! Here’s the question: who do you love more, yourself or the kids? Who is more important—is it you, or is it them?
Yes, of course, we know this is a very awkward subject to contemplate. And rest assured that we would never bring it up were it not for the fact that your optimal course of action is quite sensitive to the answer to this question.
Okay, let us phrase the question in slightly different, more financial, terms. Think of it this way: what is the purpose of the retirement savings account, investment portfolio, and mutual funds you have worked so diligently to accumulate over your working years? Is this money truly meant to finance your own retirement, or is your intention to leave something for the next generation? On a scale of zero to 100, what percentage of your current assets would you like to bequeath as a legacy to your family and loved ones, and what percentage would you like to spend while you are still alive?
Now, whether you have no kids or a very large and loving family, the answer to this question is by no means obvious or to be taken for granted. You may have many children and grandchildren who are grown-up, self-sufficient, ...