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Pensionize Your Nest Egg: How to Use Product Allocation to Create a Guaranteed Income for Life, 2nd Edition by Moshe A. Milevsky, Alexandra C. Macqueen

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18 Step 6: Calculate Your Expected Financial Legacy

We are almost done! The last big conversation we need to have before you are set up to pensionize your nest egg is about the trade-off between your income in retirement (when you are alive) and your financial legacy (after you have passed on).

Now, we’ve gone over the theoretical aspects of this conversation several times already, in Part Two. What you need to do now is figure out the value that you want to leave as a financial legacy, which is Step 6 in the process of pensionizing your nest egg (see Exhibit 18.1). Whatever number it is, you need to identify this amount so you can assess your plans going forward.

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Exhibit 18.1 The Seven Steps to Pensionize Your Nest Egg: Step 6

To complete this step, you need to know if you’d be satisfied with (to use one extreme example) no assets left over at the end of life—or even living on borrowed money—or if you really need and expect to have $100,000, $250,000, or $500,000 left as a legacy. Now, we know that your total legacy may include lots of nonfinancial (in the sense of investable) assets that nonetheless have value, from your grandmother’s silverware to the family summer vacation house. For this calculation, we are only taking into account your investable assets.

You don’t need to worry about plotting any frontiers on a graph—you just need to know how much of your current assets ...

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