How would you spend/save inheritance?

How would you burn out a sizeable but not massive inheritance intended for retirement?

  • Spend it mostly on my own retirement (very little intended left, maybe kids get lucky, maybe not)

    Votes: 2 18.2%

  • Save base amount, live off interest but don't worry about inflation or # of kids (10% less for me)

    Votes: 6 54.5%

  • Save base amount and also account for inflation (even less for me - ~20%)

    Votes: 0 0.0%

  • Plan for you and all future kids to get equal value amount in retirement (much less for everyone)

    Votes: 1 9.1%

  • Honestly I'd just blow it all on stupid toys and a series of really bangin' NC4x4 get togethers

    Votes: 2 18.2%
  • Total voters
    11
RatLabGuy

RatLabGuy

You look like a monkey and smell like one too
Joined
May 18, 2005
Location
Churchville, MD
Was talking through a fun thought experiment w/ a buddy, curious of the spread of opinions here - particularly those w/ (or plan to have) kids.

Hypothetical situation:
You have 3 kids. Your parents pass away and leave a sizeable inheritance to you and your siblings. Not massive but enough to be comfy. For the sake of math lets say each sibling received $1.5m.
This is NOT "windfall" money - they have been intentionally saving for a long time so there will be a notable family wealth fund to pass along. Converting trad IRAs to Roths (paying the taxes up front) to minimize tax burden, living intentionally below their means, etc. They were enabled to do so by a smaller but notable amount from their parents.
They did not leave explicit instructions for what to do with the money, but did imply it was to ease retirement and certainly were interested in the grandkids etc.

You are approaching retirement age (lets say, 55). You weren't planning on this and have a meager savings of your own.

Which of the following would your do?

A - Spend it mostly on yourself. Plan to spend most of it in your retirement, w/o explicit plans for the kids, maybe they get lucky and get some bc you kick off early, maybe not.
For math's sake, assuming a conservative 9% market value increase and 3% inflation and you increase your draw the same % over 30 years, you can start off around $101k/year before it runs out.

B - Plan to leave the same $$ left to you based on "today" dollars. - $1.5m - which in 30 years has the buying power of less than half as much.
This is a draw of around $93k.

C - Account for inflation, regardless of # of kids. Plan to leave the "future value" of the same amount left ($1.5m), something like $3.1m.
This makes your draw $82.5k

D - Note B and C get cut up by multiple kids inheriting so it dwindles over generations. So instead you plan for it to grow so all kids get the same amount you and your siblings did. E.g. for 2 kids it needs to double, for 3, triple, etc, also planning for inflation. Hence every kid for all future generations retires (no getting it early) w/ the future equivalent of $1.5m and if this scheme continues the fund should go for perpetuity. This is functionally the same your generation received.
For 3 kids this makes everyone's annual draw the future equivalent of around $45k for 30 years. Now nobody is getting a lot but everyone has a guaranteed base pension

E - just blow it all on stupid toys and a series of really bangin' NC4x4 get togethers

And yes, the real lessons here are that (1) inflation is a bitch and (2) kids are very expensive
 
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Lots of variables for myself and heirs. Many people can have a meager saving and live different ways, Poverty, middle class with no debt, middle class with debt,(ballin out entire life knowing they were set when parents pass)
Then there's the Kids, are they pieces of shit and sponge off everything and everyone, or are they struggling because housing has more than doubled but wages have remained the same. Or are they successful and you have taught them to save early and not be in debt so they can retire comfortably.

If I can, I pass it on, depending on the situation with or without restrictions maybe a trust with age restrictions above situations considered?

Generational wealth seems to be more of an obtainable situation if planning by the baby boomers and Gen X have also lived within their means.
My parents are very comfortable with their financial situation and so are we (I don't think I'm getting $1.5M ) My wife and I are going to be comfortable in retirement also. (thanks government pension) We have never considered what we might receive as an inheritance as part of our retirement plan. And we have instilled the same financial skills and mindset in the kids. (one Y and one Z) I think they will both be good by the time they reach the age of retirement, but housing is the biggest hurdle they face.
 
I don’t necessarily want to leave it all to my kids when I die. My parents (thankfully both still living) taught me a lot of things, but one thing they taught me is that they take joy in seeing me and my siblings being able to enjoy something they provided while they are still alive. Years ago they paid for the materials for a deck for my brother and for a concrete patio for me. They could have held that money and gave it to us when we died, but we’ve all enjoyed family time on that deck and that patio and made memories.
2 or 3 years ago my Dad called me and my brother to a room in the house, opens his safe, pulled out two pew-pews, and said I need to thin the herd and I’d rather watch you boys take them now then not see it after I die. I told my brother he was oldest, he got first pick. There was not a dry eye in that room.

So yes, I want to leave some to my kids, but I also hope to be able to give some to them before I die so my wife and I can share in the joy.
 
i think it would depend on the situation for each family. Id pay off all debts while still working, this would allow you to put more of "your" money away for retirement. I would also probably use some to do things with the family, maybe go on a family trip that everyone wanted to do but just wasnt in reach. Im not talking Disney, like a month traveling Europe with the whole family (id want the kids to be old enough to remember it). thats a memory and stories that would live on. like most here i dont expect anything from my parents or in-laws, but if they asked would i rather get x amount of money or we could all go do something as a family i would pick the trip. money can be made and lost, time with family is something youll never get back.
 
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And gold. Physical gold.
 
$100k to somebody in their 20s is life changing. Pay off student loans, down payment on a house, etc. $500k to somebody in their 60s after their parents die.... Meh. Not really moving the needle.

The Roth can be handed down, too.
 
Inheritance shouldn't be a retirement plan. However you can't plan for everyone thinking that way. The money doesn't go as far as one thinks. I'm 40, married, no kids - no parents left, no grandparents left. Mother in law is all. So I've gone through this already with both good and bad stories of how it ends up.

Step 1: Protect the family from their own greediness. If there is money to be left as designated gifts, put the individual amounts in trusts to be distributed to each party after the will is read and estates are settled. Include levels of succession should the beneficiary unexpectedly pass first. The rest should go into a trust for yourself/spouse to be distributed equally to the designated parties. Could be all kids, grandkids whatever. If you get a good attorney and the right language, anyone that disputes a will and gets greedy can get told to FO. No Contest Clause.

I'm an option A person. You're not talking about generational wealth. Which is wild to think that 1.5 million is not generational wealth, but its true, if done correctly it could be generational convenience. Set it aside, be smart and live comfortably. For sake of the OP's question...Ideally by 55 we have no mortgage on either house or land. That money at 55 for me would mean I "retire" on the spot, don't touch my existing investments, take a draw and operate our farm full time and as long as it breaks even, I'm happy. That draw on 1.5 million takes the place of the income from "the man". In doing that it opens up a chunk of time in the week to put my equipment to work for someone other than myself which mean another income stream. Given family history, the feasibility of that draw long outlasts me and my wife so there would be something leftover for our godson and niece, along with all of the property and equipment etc. They'll be fine and we will have protections in place to ensure that.
 
If I had existing retirement/brokerage accounts, it would be a game changer. It would allow me to slow down greatly or even fully retire.
1.5 mil in the market, which grows at 12% traditionally, will allow you to pull a sizeable divident each month and live very comfortable. If you withdrew 8% a year that's $120k before taxes and accouting for inflation, you ain't touching the principle. You could pull more from time to time and then tighten up for a year and let it grow back.
My retirement is MY retirement. Not my for kids or whomever else.
 
Jody Treadway said:
If I had existing retirement/brokerage accounts, it would be a game changer. It would allow me to slow down greatly or even fully retire.
1.5 mil in the market, which grows at 12% traditionally, will allow you to pull a sizeable divident each month and live very comfortable. If you withdrew 8% a year that's $120k before taxes and accouting for inflation, you ain't touching the principle. You could pull more from time to time and then tighten up for a year and let it grow back.
My retirement is MY retirement. Not my for kids or whomever else.
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Your numbers are a bit aggressive, imho. I'd stage the market at 7.5% consistent and calculate your draw rate at 4% - but we all get to make our own plans and choices.

To OP's original question, I would do none of the above, theoretically.

In reality when my parents pass, hopefully a long time, they will leave me nothing but debt - which the estate will settle what it can and the balance will be wrote off.

If I were in the Op's scenario and the theoretical money was left to me, and not stated to be left FOR my kids, I'd simply funnel it into my current financial plan and let it flow through the steps. My kids inheritance is covered by those steps. I set out to break the cycle when I was 17 years old. I dont worry about past generations, I worry greatly about future generations - however I also fully plan to share some of their inheritance with them when they are alive. Down payment on first house, etc. Money is nothing more than a tool and a tool without a job is just an ornament.
 
Our financial guy was trying to set us up to leave a "legacy"
Planning our investments for a death around 85 yrs old.
He told us the number we'd be leaving the kids if we stuck to this particular plan. To which I told him to readjust because......


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Shreddinlettuce said:
Whatever you do put it in a trust so inheritance tax doesn’t destroy it
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Agreed.

I cannot choose any of the options either. If there is anything left coming my way when the times comes I hope to not even need to use it and will try to set up something of a perpetual safely net for the next generation.
 
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Shreddinlettuce said:
Whatever you do put it in a trust so inheritance tax doesn’t destroy it
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The first $15,000,000 for an individual or $30,000,000 for a married couple inherited is tax free.

If you exceed those amounts …I mean you can probably afford some taxes.
 
A. I have one son who gets what I have left when I die.
I would def put in investments and live off of that mainly but would not be afraid to spend some principal to make my life better and to help my son as I go. But I can live well below $100k per year and still do just fine so I could actually grow that money. I have no debt now and really don't need nor want any big ticket items. But I would retire immediately because that's something I won't get to do in my current situation, I have savings and investments but they will not solely support me as I age. I'm still funding them as hard as I can go.
 
First, pick a percentage to blow -- say 5% of the 1.5mil. 75k to take care of that 'money burning a hole in your pocket' feeling. Buy a boat, RV, take the vacation of a lifetime, etc.

If you have kids, the younger the better, drop a few k into a 529 to grow for college, more if they're older. That is real help, better than them inheriting it when they're 50/60. Same if you can set up some seed money for their (hopefully) first major purchase -- down payment on a home. If you got more than one or two kids, you already screwed up your life, so you get to keep working.

Then, the decision -- is whatever is left enough to retire early? If a 4-5% max withdrawal rate won't match your current salary, are you willing to make the lifestyle and budget changes necessary to let you retire? What is that free time/freedom worth?

Don't underestimate the additional value of a job with benefits -- like healthcare premiums (individual commercial policy) for the 2 of us -- I could buy a new car every year.

Lifestyle.... With 1.5 million, you can live like a king in an average house/neighborhood/lifestyle. Go to a fancy house, fancy neighborhood...higher budgets, less comfort zone, you'll have the same worry most people do -- every bill that comes in. Live below your means (which everyone should do anyway, but don't).

So, I'd do that....buy a toy, set kids up for college, then do what it takes to retire. Use that work time to do good for people. Find a purpose, let other people suffer that daily grind for nothing.
 
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