Lifestyle vs. Legacy Assets: Spending with Intention in Retirement

When I meet with AMAC members, one of the most important conversations we have isn’t just about how much they’ve saved—it’s about which assets to spend first and which are better preserved for their heirs.

I call this distinction Lifestyle Assets vs. Legacy Assets.

Lifestyle Assets: Designed to Spend

Lifestyle assets are the funds you rely on to support your retirement: daily living expenses, travel, health care, and enjoying the life you worked hard to build.

Most often, these assets are traditional IRAs and 401(k)s. While they’ve helped millions of Americans save for retirement, they come with a tradeoff: every dollar withdrawn is taxed as ordinary income.

That tax burden becomes even more significant when those accounts are passed on. Under the SECURE Act, IRA assets left to a non-spouse beneficiary must generally be withdrawn within 10 years, with income taxes owed on every dollar distributed.

For heirs already in their peak earning years, those forced withdrawals can push them into higher tax brackets. In some cases, when federal and state taxes are combined, 40–50 percent of an inherited IRA can end up going to the government instead of the family.

For this reason, I often encourage clients to treat traditional retirement accounts as lifestyle assets—the ones to spend first, while you can manage the tax impact yourself.

Legacy Assets: Built to Preserve

Other assets are far more efficient to pass along.

Roth IRAs, once open for five years, allow tax-free withdrawals for both you and your beneficiaries.

Non-qualified brokerage accounts typically receive a step-up in cost basis at death, often eliminating capital gains taxes on lifetime growth.

Both can serve as excellent legacy assets, offering flexibility and tax efficiency.

Final Thoughts

Tax laws have changed, and many families are surprised to learn that retirement accounts can become tax traps for the next generation. With thoughtful planning, you can enjoy your retirement while passing on your legacy more efficiently.

At RoseMark Advisors, powered by AMAC, we help members design retirement income and legacy strategies that keep more of what they’ve earned in their family’s hands, not the government’s.

Signed,
Frank Kestler
Financial Advisor, Rosemark Advisors