It is estimated that there is almost $20 trillion invested in Individual Retirement Accounts in the US. It can be assumed that the purpose of this capital is for retirement, but I’m sure in some cases the money will be used while the account owner is still working. What exactly will be purchased with the proceeds is anyone’s guess. Some will use it to take a vacation, others for a new roof on their home. While others still will use the money to pay for basic living expenses such as food and electricity. There may even be a few fortunate people who do not plan on using the money at all or don’t really need it. For those folks I would encourage them to think creatively about what they could do with the money, if not in their lifetime, then in their children’s.
Whatever your intentions are with your investments, it is just very important to have them- intentions that is. Purposeless capital can be dangerous capital. For example, let say a married couple has some very strong fixed benefits. Their social security and pensions in retirement will cover their expenses in retirement and then some. The couple also has some money invested in IRA’s. Because they believe they will never use the money, and that their children will inherit the funds someday, they believe they have a long investment time horizon and want to take on a lot of risk so the account will grow to be very large by the time they pass. In theory this sounds like a reasonable approach. But in practice things can be very different. An account with maximum risk will be volatile and if the value is down, say 40% over a 12-month period, the investors quickly forget that they don’t need the money and want to make the biggest mistake of all and sell when their investments are down.
Even if you believe you won’t need the money you have invested in your lifetime, it is still important to be purposeful with it. Instead of having a goal of maximum return, try imagining what your heirs might use the money for. Or perhaps setting up a gifting arrangement while you are still living would be a better strategy. There can be many different purposes for your capital and only you as the investor can decide what your purpose ought to be. Developing a strategy requires some work, but I assure you it is work worth doing.