Spend Your Money, Leave Life Insurance: A Smarter Legacy Strategy

Most people try to die with a big pile of money. There’s a smarter way — one that lets you live fully and still leave a guaranteed legacy.

There’s a certain kind of financial guilt that quietly follows many retirees through their golden years.

They’ve worked hard. They’ve saved diligently. And now, in retirement, they find themselves afraid to spend. Every vacation feels like a withdrawal from their children’s inheritance. Every home renovation feels like money taken from the grandchildren’s college fund. They underspend, they sacrifice, and they hold back — all in service of leaving something behind.

The sad irony? Many of them will die with more money than they ever spent on themselves. And their heirs will receive it in one of the least efficient ways possible: as a taxable estate, subject to delays, legal fees, and potentially significant tax erosion.

There’s a better way. Retirement income expert Tom Hegna calls it: “Spend your money. Leave life insurance.”

It’s one of the most elegant ideas in retirement planning — and most people have never heard it.

The Traditional Approach and Why It Falls Short

The conventional wisdom goes like this: save as much as possible, invest conservatively in retirement, withdraw carefully, and hope you die with something left over for the kids.

This approach has three serious problems:

Problem 1: You’re not living fully. When the fear of “running out” governs every spending decision, you don’t take the trip. You don’t upgrade the kitchen. You don’t help your kids buy their first home. You sacrifice your own quality of life to protect a number in an account.

Problem 2: The inheritance is uncertain. If you live longer than expected, markets underperform, or healthcare costs spike in your final years, there may be little left. The “legacy” you sacrificed for may not materialize. You gave up your best years for an uncertain inheritance.

Problem 3: What’s left transfers inefficiently. When investment accounts and IRAs transfer at death, they often carry a significant tax burden. A $500,000 IRA that passes to your children is not a $500,000 gift — it’s a taxable income event spread over 10 years (under current SECURE Act rules), potentially costing your heirs $100,000-$150,000 or more in taxes.

The Life Insurance Legacy Strategy

Here’s the alternative that changes everything:

Step 1: Identify the amount you want to leave as a legacy.

Let’s say you want to leave your children $500,000. That’s your goal.

Step 2: Buy a permanent life insurance policy (or use existing cash value) to guarantee that legacy.

A permanent life insurance death benefit is:

Guaranteed — it pays regardless of market performance
Income tax-free to your beneficiaries (under current tax law)
Immediate — no probate, no waiting, no legal fees
Private — doesn’t go through the public probate process

Depending on your age and health, a $500,000 policy might cost $10,000-$20,000 per year in premium.

Step 3: Now spend your investment assets freely.

Here’s where the strategy transforms your retirement. Once the legacy is guaranteed through the life insurance policy, your investment portfolio has exactly one job: fund your best life.

No more holding back. No more financial guilt. The kids’ inheritance is taken care of — it’s in the policy. Your savings are now officially your money, meant to be enjoyed.

📞 Want to see what this strategy would look like for your family? Call 503-832-8555 to talk through the numbers — no obligation.

Why Life Insurance Is a Superior Legacy Vehicle

Let’s compare two approaches for a 68-year-old couple wanting to leave $500,000 to their children:

Approach A: Leave the Investment Account

Keep $500,000 in a balanced portfolio
Withdraw carefully, hope it lasts
At death: children receive the account, pay income tax on withdrawals over 10 years
Effective legacy after taxes: perhaps $350,000-$400,000
Cost to retirees: Years of financial anxiety, underspending, and self-denial

Approach B: Life Insurance Legacy Strategy

Purchase a permanent life insurance policy with $500,000 death benefit
Pay premium from portfolio (a portion redirected to certainty)
Spend remaining assets freely and fully
At death: children receive $500,000 income-tax-free, immediately, without probate
Effective legacy: $500,000 (full amount, no tax haircut)
Cost to retirees: A structured premium, with the freedom to spend everything else

The math often works in favor of the insurance approach — particularly because the death benefit is income-tax-free, which can make a $500,000 policy worth more to your heirs than a $500,000 IRA.

What About IUL — Indexed Universal Life?

For retirees who also want tax-free income during their lifetime, Indexed Universal Life Insurance (IUL) offers a powerful variation on this strategy.

An IUL policy builds cash value tied to a market index (like the S&P 500) — with a floor of 0% so you never lose principal to a market downturn. Over time, that cash value can be accessed as tax-free income through policy loans.

This creates a triple benefit:

Tax-free income during retirement (from policy loans/withdrawals)
Market participation with downside protection
A guaranteed, income-tax-free death benefit for your heirs

IUL isn’t right for everyone — it works best when implemented early enough for the cash value to grow. But for retirees in their 50s or early 60s, it can be a remarkably efficient combination of income planning and legacy planning.

The Emotional Case: Permission to Live

Beyond the financial mechanics, this strategy does something numbers can’t fully capture: it gives retirees permission to live.

The anxiety of “I might leave my kids nothing” is real. It’s one of the most common emotional weights retirees carry. And it quietly steals joy from what should be the most rewarding chapter of life.

When the legacy is locked in — guaranteed, income-tax-free, and waiting — that anxiety disappears. You can book the trip to Italy without guilt. You can help your daughter with a down payment. You can give generously to causes you care about.

You can finally enjoy the money you spent 40 years building.

Tom Hegna puts it plainly: “The greatest gift you can give your children is not a pile of money. It’s the knowledge that you lived fully, didn’t burden them, and still left them something meaningful.”

Is This Strategy Right for You?

This approach works best when:

You have a clear legacy goal (a specific amount you want to leave)
You’re in reasonably good health (insurability matters)
You have investment assets that could be partially redirected to premium
You want the certainty of a guaranteed outcome rather than a probabilistic one
You’d spend more freely if you knew the legacy was protected

It’s less suitable if:

You have significant health issues that make life insurance cost-prohibitive
Your entire focus is on maximizing income with no legacy goal
You’re already in your late 80s and the math doesn’t work

A Conversation Worth Having

Every family’s situation is different. The right legacy strategy depends on your assets, your health, your tax situation, your family dynamics, and what “leaving something behind” actually means to you.

What’s universal is this: dying with a big pile of investment accounts is not automatically the best outcome for your heirs. And holding back from living your fullest retirement to protect an uncertain inheritance is a real cost — one most people are paying without realizing it.

A smarter strategy exists. It starts with a conversation.

Schedule a Free Legacy Planning Conversation →

Or call Rodney directly: 503-832-8555

Legacy Wealth Services — Rodney Cummings, OR License #18847712, licensed in 22 states.

This content is for educational purposes only and does not constitute personalized financial, tax, or investment advice. Life insurance and annuity products involve risks and benefits that vary by carrier and policy. Consult a licensed professional before making financial decisions.