In recent weeks, as I’ve been writing a lot about the importance of projecting conservatively and making sure you have plenty of money left for your later retirement years, I’ve gotten several questions about what happens if this approach means we have money leftover at the end of our lives. (I’ve also been getting a lot of questions on RMDs — required minimum distributions after age 70 — and I’ll be tackling that topic later this summer.)
That question itself is nothing new, but what is new (to me anyway) is how several folks have characterized it: as a risk. They see the possibility of having funds left at the end as a negative outcome they are actively working to mitigate, just as they would any other risk.
I define risk as something that’s unequivocally bad, like if we have a decade of stagflation, or contract a major illness that could bankrupt us if we don’t have adequate health insurance. Ending up with money left? That’s never struck either of us as a bad outcome. But enough people raised the notion that it felt worth exploring.
Dying With Money Leftover — Or Not
Before we tackle this question, we have to acknowledge that this whole question presupposes a rather massive assumption: that we’re all going to make it to a ripe, old age, after living a happy, fulfilling life.
If we were to die tomorrow, of course we’d leave a lot of money behind because we haven’t started to spend any of our early retirement savings yet. I assume this is not what we’re talking about when folks say it’s a negative outcome to die with money leftover.
There’s also an assumption baked into this that we know exactly how long we’ll live, which of course none of us do. We also don’t know if we’ll be relatively healthy until the end or require years of nursing care. For today, we’re ignoring those variables and assuming that we have some general sense of how long each of us has.
Then the question becomes:
Is it fundamentally a good thing or a bad thing to die with sizable cash or assets left?
“You Can’t Take It With You” // “Enough” Is Enough
On a stuff level, we are fully on board with “you can’t take it with you.” Having helped a close relative downsize after 20+ years in a big house, I am forever determined not to accumulate so much stuff that I need help to deal with it all. We’re also believers in the “use it up” philosophy as opposed to the ruthless Konmari-style decluttering that sends a lot of stuff to landfills, even when it’s donated. Those ideas combine to tell us: buy as little as we truly need, and no more. We’re not always perfect at this, but we keep getting better.
Money feels different to us, though, and knowing we can’t take it with us doesn’t necessarily make us want to be sure we spend it all down before we die. But there’s an aspect to this philosophy that makes total sense to us:
If you end up with money leftover, it could mean you were unnecessarily depriving yourself along the way, or that you worked longer than you had to.
And that’s compelling! The biggest step in working toward financial independence or early retirement is determining what your personal “enough” is. That’s a number that few of us arrive at quickly. It takes time and experimentation to refine it, and many sessions with a budget and a (metaphoric) scalpel. It’s not crazy to think that we might actually get attached to that “enough” number, and feel like we screwed up in some massive way if it turns out we way overshot it and ended up with far more than we needed.
Aiming For a Legacy // Doing Good Beyond Your Own Life
On the other end of the spectrum is the school of thought that says it’s a win to be able to leave a financial legacy behind, either with inheritances to loved ones, or with a large charitable bequest.
The upside of this one is obvious: feeling that we’re able to do good beyond our own lives. But the potential downside is still worth mentioning: We may have worked longer than we needed to, and it’s possible we’re depriving ourselves too much along the way to leave a legacy behind.
The Hybrid Approach: Leaving a Legacy Along the Way
Of course, like in most things, it’s not all or nothing. It’s possible to focus on doing good without saving it all until the end of life, just as it’s possible to focus on spending down your stash by the end without spending all that money on yourself. And that approach is to leave a legacy along the way.
This will most likely be our approach, donating any overages in a given year to charity, in addition to funding our donor advised fund (DAF) before we quit this year. In fact, this approach is my blanket answer to most questions about higher-than-expected-income, or tax “burden”: just donate the difference. Worried about RMDs kicking out more than you need and costing you too much tax? Donate the extra. Earned more in dividends this year than you need? Donate the difference. Etc.
The overage approach is one way to leave a legacy along the way — essentially gifting funds to loved ones or making charitable donations with any investment growth or windfall income above and beyond what you need — but it’s not the only way.
The other possibility is to budget for giving each year. We plan to continual our annual giving in retirement, even though we’ll have to scale it back dramatically over what we’re able to do now while employed. I’d go so far as to say that anyone who can afford to retire early can afford to give — it’s our responsibility. (Donating time is good, too, though most nonprofits would rather have your money than your (wo)manpower. Or at least they’d prefer you volunteer regularly instead of sporadically, so you don’t require training for very little value to the organization.)
How You Live Your Life in the Meantime
Fundamentally, this question isn’t one about charitable giving or passing on money to loved ones, though you know I never miss a chance to encourage all of us to be generous to those less fortunate.
It’s about what would feel worse to you: knowing on your deathbed that you have millions in the bank, or knowing that you’ve just about spent your money down?
To me, the answer to this question hinges absolutely on how you’ve lived in those intervening years, and what you perceive you’ve sacrificed along the way.
If you saved and scrimped and denied yourself simple pleasures so that you could leave work, and then continued to live extremely frugally? Then having a bunch of money left at the end would probably feel like a great injustice, like you’d wasted all those years instead of living it up a bit more.
But if you’ve been able to quit work before it destroyed your health, you didn’t sacrifice too much along the way, you lived comfortably in retirement, and then you still had money left at the end? That would undoubtedly feel far less like an injustice, and more like a nice bonus that you’d also get to leave a legacy behind.
Which I think means there’s a lesson in this. (Isn’t there always?) It’s yet another reminder that we can’t live completely for tomorrow at the expense of enjoying life today. If we want to live our happiest, best life, it’s all about finding that balance — whatever it looks like for each of us — between focused saving and selective spending on the things and activities that make us happiest. But if we drive ourselves to misery along the way, we rob ourselves of the joy throughout our lives, as well as robbing ourselves of the ultimate joy of feeling proud to leave a legacy behind.
What’s Your Vote?
Alright guys, time to weigh in. Which side do you fall on? If you feel wishy washy about it, ask your gut: “If I die tomorrow, would I feel proud to have money to pass on or donate, or would I regret having scrimped so much and missed out on life experiences I wish I’d had?” Let’s duke it out in the comments! ;-)
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