Can boomers afford to leave a legacy?

Ken Teegardin/SeniorLiving.com/Flickr

(MoneyWatch) As baby boomers enter the last third of their lives, it's only natural that some will begin to think about the legacy they might leave after they're gone. And when you hear the word "legacy," you might think first of leaving a financial inheritance.

The trouble is, when you consider the meager retirement savings of most boomers, the next thing that most likely comes to mind is fuggedabatit!

Unless you have $500,000 or more in retirement savings, you should be focused on maximizing your lifetime retirement income rather than determining how you'll distribute your assets after you die. And since the vast majority of boomers have much less than $500,000 in retirement savings, figuring out how to turn that money into a paycheck that lasts throughout retirement should be your No. 1 concern.

My retirement income scorecard series illustrates the reasons why many Americans won't be leaving a financial inheritance. For a married couple aged 65, the annual payout rates in this series range from roughly 3 percent to 6 percent of savings. Applying these percentages to retirement savings of $500,000 produces annual retirement incomes ranging from $15,000 to $30,000. At these income levels, even when you add in Social Security income, your main goal should be to make your income last the rest of your life, so you can avoid leaving your children the legacy of needing to move in with them in your later years because you've run out of money.

Fortunately, many Americans are coming to this conclusion. According to Merrill Lynch's "2012 Affluent Insights" survey of Americans with more than $250,000 in investable assets, only 26 percent felt confident they could leave a financial inheritance for their children.

But does this mean you'll leave this earth without a trace? If you're creative, you can still leave a meaningful legacy to your children, grandchildren or even society. First, if you have substantial home equity, keep it in reserve in case you need long-term care in your final years. If that time comes, you can tap your home equity through a home equity loan, reverse mortgage or by simply selling your house to cover the cost of care. And if this happens, most likely your home equity won't fund a legacy. But if you don't need this care, however, your home equity can become part of a financial inheritance.

You can also leave your possessions -- jewelry, furniture, cars, art, family mementos and other items that your family may treasure in the years ahead.

Most important, you can create a meaningful legacy while you're still alive -- a legacy of your time and attention. Spend time with your children and grandchildren; with Skype, you can do this even if you're separated by thousands of miles. You can write letters, too -- young children often love the old-fashioned paper versions over emails.

You can volunteer for causes that improve your family and community. Your example of how you treat friends and family, how you treat acquaintances and strangers, and how you treat the earth will leave a legacy that will be felt long after your children and grandchildren might have spent any money you leave for a financial inheritance.

Your memory may be the most lasting legacy you can create. So when you're planning your retirement, spend time planning exactly how you'd like to be remembered, then act on it. Those cherished memories may be the most important thing you leave behind.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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