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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For me the key point here is the determining of “enough”. It can only be judged in hindsight, and only over the long term.
Investment returns can go down as well as up, it is easy to forget that in the current frothy market. Talk to a Japanese investor and they’ll likely complain about having experienced essentially 0% total return on investment over the last 20 years or so. It sucks to be them, but it also highlights that we don’t have to look very far to observe such things actually happening.
Therefore giving away the overage in a good year may well be an own goal, as it can’t be used to offset/supplement returns in a bad year. This is an important consideration, given the downside of getting this wrong is eating cat food at age 90 because we’re too old to get a job cleaning tables in a McDonalds.
I think charitable donations are a noble thing, but I does it really matter whether they receive the money via a drip feed only in good years, or as a lump sum in the form of a bequest? Probably not.
The only real difference is the dead don’t experience the warm fuzzy feeling from feeling like they’ve done a good deed, which I would personally be happy enough to forgo if it meant ensuring that my “enough” got me safely over the finishing line.
You’re totally right about overages and offsetting bad years, etc. I didn’t really explain that plan here because I wanted to stay focused on the central question, but the short answer is: Yes, we won’t be stupid. ;-)
As for whether to give in one big bequest or drip it out over the years, I think it depends on how long you expect to live, what issues you’re passionate about, and how urgent the need is. The stuff we care most about, environmental issues, need that funding NOW, not in 50 or 60 years when our time is up. So if we want to have any impact, we need to not hoard that cash for later. But if, say, you care most about art, then saving it up until the end might make sense, and a big gift might get a museum wing named after you or something. :-)
I think it would be nice to have enough money that we could give along the way and have a bit left over at the end to give. That way, we wouldn’t have to be overly worried about running out near the end (given that we live extremely long and healthy lives, of course!). It would be nice to be able to help the grandkids with college, for example, or perhaps do what my grandparents have done for my parents–give them lump sums each year through the gift tax exclusion (or whatever the $14k per person yearly limit is called). I used to work in a non-profit and I believe that a lump sum might be preferable to a charity given that they could use it to fund a big project. But every charity also need yearly giving to keep them afloat, too.
I certainly don’t want to have so much money that my relatives are circling like vultures, waiting for me to die! :) Ugh, what an image!
Congrats on six more months to go! You’re getting so close!
I hadn’t even considered the circling vultures possibility — maybe a good reason to let folks know in advance that all your money is going to charity! ;-) And if you’ve already put money into trust for the grandkids, then there won’t be any surprises. I know that nonprofits like big gifts, but those are harder to budget around, no? And regardless, I just can’t stomach the thought of not giving to important causes for 50-60 years until we’re gone! There are too many urgent needs now!
Thanks for the congrats — what’s even more exciting/terrifying is that we give notice in under 4 months! :-X
I love what you’re doing with the DAF, of course.
Regarding the question, plugging numbers into FIREcalc will show you that you could end up with less than you have today or 20x as much. It has everything to do with both total return and sequence of returns, both of which are mostly beyond your control.
If you have a lot of money later in life, you may have worked more than necessary, but that can only be known in hindsight. I’m more than willing to work a few extra years to contend with that “problem.” It beats the pants off of maybe working too little and struggling to make ends meet later on.
Honestly, I hope to see my portfolio grow in early retirement. A shrinking portfolio that may need to last 50+ years would make me nervous.
Cheers!
-PoF
You already know you’re my DAF hero. :-) And I agree totally — there’s SO MUCH that’s out of our control with regard to our investments, so to think we can engineer it perfectly and exactly to spend it down right at the end feels a bit foolish… just as it is to think we can know exactly how long we’ll live and the conditions under which our lives will end! If only! ;-)
I get 90% of my happiness from helping others, so having money left over to do that from beyond the grave is a goal, not a risk.
I’d like to read about a way of dealing with RMDs that keep assets in the family rather than just donating it. There are gifting limits that make it complicated. Also there’s the aspect of not spoiling my sons too much.
Thanks for sharing your perspective! I think this is the first topic I’ve come across where the same thing can be seen by some as a goal and others as a risk! :-) And thanks for that input on the RMD discussion — I will explore that!
I can’t help but laugh a bit at the premise: “Oh no, what if I end up with too much money!?” (I know you’re posing the question because others have done so, not because you’re trying to make up you’re own mind on this. 😉)
>> “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.”
I think if you’re feeling deprivation at any point in an ordinary early retirement (ignoring extreme economic circumstances or unexpected events that force a big drop in lifestyle), that’s a problem with your early retirement plan. Like you said, if you’ve figured out what “enough” means to you, not having spent more money won’t be painful. You don’t have to spend every single last cent possible for fulfillment. Yes, maybe you could have driven a BMW X5M instead of the woefully under-powered regular X5, but is that really the end of the world? I’ve spent time with dying family members. Whether or not they’d spent every dollar they could was the last thing from anyone’s mind.
You may have worked longer than you had to, that’s true. But as the other commenters have pointed out, that’s something you can only know in hindsight. Any solid ER plan should count on having worked a little too long as by far the most likely outcome, as the opposite means failure. And even if you worked a few years longer than you needed to from a purely financial perspective, that doesn’t mean all that work was pointless. There’s emotional value in knowing that your plan is secure and having a cushion. For most people, better that than worrying every month that your financial plan is about to fall apart.
I admit it — I laughed, too, at the first note and the second, but then got a few more and was like, “Hmm, maybe this is actually a thing.” ;-) I agree with you in terms of some ER plans being flawed — there’s so much talk in FIRE blogs about OMY syndrome that I think it pressures a lot of people to hurry up and quit already, especially when they read all the stuff impacted by recency bias (but not labeled as such) that shows how much accounts are still growing for folks post-retirement. When actually we should all be taking deep breaths and asking if we truly have enough or if we’re relying too much on winging it, maintaining current bonkers market rates, etc. I think this thinking about spending it all down before the end is right in line with that thinking, which is why it felt worthwhile to address it. And if you work another year or two? Big deal, especially if those years are the difference between comfort and insolvency late in late. As you said, that emotional value is worth a LOT.
Hope you guys are enjoying SE Asia! Excited to read your post today! xo
This is a great story and one that I can relate to. We retired three years ago at 59, following the sale of our business. We had strong IRA’s and good liquidity so we decided to retire. A huge mistake. We had not planned on what would keep us busy! We had plenty of money but too much time on our hands.
After three years, we’ve managed our expenses well, enjoyed life and we will definitely have a legacy to leave behind to our small family. I agree with you about regular scheduled giving but also the random charitable gifts when there is excess money or new found money from projects that pop up. I wish I could get my husband to agree!
I have prepared a detailed analysis on Excel showing we can’t possibly spend it all even if the market doesn’t make a dime, but he is still hesitant to share. I even summarized the last three years of how much our IRA’s grew, our expenses and what our net retained earnings are, but he still worries about the money. I had him write down our cash balances in a journal so he could visualize it, no luck. The message at church yesterday was spot on and supports your theory. Ideas for the hubby? Thanks for your insight!
What a good reminder of why it’s so important to know what you’re retiring TO! As for your intransigent hubs, a few ideas: 1.) Give him time to come around, but keep providing data points along the way. 2.) Make a more emotional appeal about how much this means to you to be able to give, and let him know how it feels when he doesn’t see your heart and intention in this. 3.) Perhaps suggest separate discretionary spending funds for yourselves, and then you can spend yours on charity if you wish (and he probably won’t spend his!). Good luck!
Thank you so much for your help. I look forward to following your blog and I hope you’ll follow both of mine!
I was surprised that this was even a debate, but I think you’ve found the point that I missed with this quote: “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.”
It doesn’t seem like a big deal to me to over save, because I am living a balanced life. I can imagine someone who is miserable at work feeling cheated after thinking about it from that perspective.
To me the answer, though, is to work towards a better balanced life rather than race to the exit at all costs. I am with you in planning conservatively. When your worst case scenario is donating a bunch of money to charity at the end of your life, that seems like a win-win.
Yeah, same here! How we’re living now doesn’t feel like a sacrifice, so it won’t feel unfair if it turns out we oversaved. Glad you feel that way too! And totally agree that having a great life AND leaving something behind is a total win-win.
I certainly think it’s better to be conservative, especially for early retirees, given the sequence of returns risk. In fact, you might want to consider limiting donations for the first 10 years to help mitigate that. Luckily there is a good probability you’ll do well and then you can donate more later but you don’t create unnecessary stress in the meantime.
Also, donations will be spent, missing out on further gains, while your savings are invested. This is why Warren Buffet has focused on investing throughout his life instead of giving until now that he’s closer to death. The investment gains on what he would have donated now dwarf what those donations would have been. So now he’ll be donating a lot more and making a more positive impact. This was a conscious decision on his part……he always meant to donate most of his wealth.
It’s a good strategy to consider if you’re truly focused on making the most positive impact (versus just experiencing the good feelings of donating along the way).
I didn’t go into detail here because I wanted to stay focused on the central question, but the answer is YES, we will be thinking a LOT about sequence risk and won’t be dumb and spend our gains right off the bat. ;-) The DAF will be there to let us give even in down markets, and we’ll be smart about the rest.
As for Warren Buffett, that’s not totally true. He and his wife Susie started their foundation in the early 80s (https://en.wikipedia.org/wiki/Buffett_Foundation), and gave quite a big chunk way back then. They’ve also funded other foundations such as Warren’s sister’s foundation (http://www.sunshinelady.org), and foundations for their children. And while it’s true that he’s given most of his wealth in recent years, he hasn’t saved it all for the end.
Put another way, we care a lot about climate change, for example. I hope to live to 100, so that’s more than 60 years off. If I wait to donate toward climate change for 60 years, it will be far too late. This is an urgent problem that needs action now, and that matters. If you don’t care about that case, swap in the one(s) you feel most passionate about, and ask if they can wait that long to get your support. Then consider that wealthy people give a far smaller percent of their income than do the poor (https://www.theatlantic.com/magazine/archive/2013/04/why-the-rich-dont-give/309254/), to remind yourself that we can’t rely on the rich people who are dying today to fund this important work. ;-)
I actually hadn’t thought about it this way before! I am probably a bit more risk tolerant than many in this community, as I’d be happy enough if I have enough for a happy retirement. But I’ve seen plenty of family members retire with much, much less than many here feel is a “minimum” or “safe”, and you know what? They’re just fine. It certainly helps to have more of a social safety net in Canada, but just to offer an alternate perspective… to me both having enough to last, AND having enough to give away would be awesome outcomes to be grateful for.
Don’t underestimate that safety net! It’s a huge freaking deal. The number of health care-related bankruptcies in the U.S. is still crazy high, and plenty of those people did everything right and planned accordingly, and had insurance. But you don’t need my standard U.S. health care rant. ;-) As for your view on this, I think a balanced approach is a great one — not oversaving well beyond your “enough,” but also leaving something behind.
You’re right, and I’m certainly grateful that my ageing parents will have that safety net. I could see plenty of Americans being stuck with the double jeopardy of potentially having to cover any savings shortcomings for their parents, plus save for their own retirement, and that’d be daunting enough even where a “standard” working life/retirement age applied!
100% yes! We count ourselves as super lucky that 3 of our 4 parents have rock solid military/VA pensions, and the fourth isn’t in horrible shape (though could still need some support at some point). Because we know a LOT of people who are on the verge of having to step in, and that makes reaching FI so much more daunting, as you said.
I don’t see having too much money as being a risk. Much better than the alternative of living in poverty while elderly.
I understand the argument of working more years that we may need to, but when you’re talking about people retiring in their 30s or 40s, with careers of less than 20 years, working a few years too many really isn’t that much in the grand scheme of things.
The concern is people who are 65, who have enough to retire, yet decide not to. Time is not on their side, so there’s definitely a greater risk of wasting years working if they’d prefer to be retired instead.
You make such a great point, Kate! I think how old you are when you retire matters a lot in this thinking. As you said, if you can still quit in your 30s or 40s, is it a huge deal to work another year or two or three to build up that cushion of safety and increase the chance of being able to leave a legacy? Probably not. But in one’s 60s? Very different cost-benefit analysis!
Hmm. I think from a (soon-to-be) parent’s perspective, I hope to leave a legacy, at least a small one. But from a daughter’s perspective, I hope my parents spend every last dime. And I tell them this often. They, of course, aren’t listening to me. It’s funny how that goes, no?
I have wondered how much opinion on this is driven by whether one has kids… but we feel strongly about leaving something behind and we don’t, so maybe that theory’s out. ;-) And I think it’s wise not to count on any inheritance, even if one might be coming. Chances are good we’ll get a little from Mr. ONL’s side, but we aren’t making any plans for that money — and we know that his parents are likely to make large charitable gifts when the time comes, and we fully support that!
Gosh, so much to think about! I really struggle with this. From a philosophical point of view- I would be very surprised if I was thinking about money on my death bed (but there’s no way to know for sure!). But from a pragmatic perspective I would feel truly awful if I knew I would be unloading debts and liabilities onto my family when I die (and I know that’s going to happen to me when some of my relatives die). I would love to be able to die at a net zero. I wouldn’t want to live my life so frugally just for the sake of giving money post life, but I wouldn’t want to have nothing left to cover funeral costs etc.
As always- such a good discussion!
You’re so right to take that big step back and think first about not being a liability to anyone when your time is up! I know many, many people who would be so much happier if their relatives had left them with no debts, etc. And I think it’s a great thing to know about yourself, too, that you wouldn’t want to live so frugally to be able to donate at the end that you wouldn’t enjoy life in the meantime. :-)
Very thought provoking. I did not think much about this at all, but then I don’t have any children. My plan does include a legacy, however, because I wanted to have a nice health care contingency. You never know.
I think it’s a good thing to think about, and to plan accordingly! Maybe one day soon we’ll actually have reliable health care that won’t bankrupt anyone (I can dream, right?!) and then you could spend some of that health care contingency on causes you care about. :-)
I’m not going out of my way to leave a legacy at death, but it certainly would not sadden me to do so. I want my kids to be self sufficient without things from me and without any fear of having to take care of me… But if I left them a chunk of cash at the end I’d be cool with it. As you said I’m enjoying life with no regrets.
Leaving a big charitable legacy certainly doesn’t have to be everyone’s goal, but I love that ending up with money leftover doesn’t feel like a fail to you! What’s important is that you’re not sacrificing like crazy now so that future you would have something to resent!
I learned about DAFs from JLCollins’ book. I’ll likely use one in the years I do Roth conversions. I would be planning on regular charitable giving anyway, but the DAF gives the most benefit by putting the deduction in one year. It’s a good idea to use one also if we find RMDs and SS to be beyond our needs at that time. But, we also don’t have to spend so much, and could reinvest in taxable accounts.
As for spending it all before our final breaths vs legacy, I’m sure the legacy could be put to good use within extended family or charities. I hope to have saved/invested enough so not to be a financial burden to our sons, which may be more important. That is a legacy in itself.
More fundamentally on leaving a legacy is what you have done in your life vs how much money you left to others in the end or even during your lifetime. Make a difference in the lives of others. Invest your time.
Exactly right — and that’s why we want to fund our DAF this year, in our last high bracket year! In the future, we won’t even be able to itemize, so we’ll get no tax benefit for future donations — but of course we still want to give! So a DAF is a perfect solution for us.
And I LOVE your point that not being a financial burden is itself a wonderful legacy — I couldn’t agree more!
First world problems eh! Early retirement is the ideal time to donate a kidney if your health is good. I haven’t actually done this myself but I know someone who has and it makes them beyond criticism in any financial decisions they take.
I’ve posted info here before on how to sign up to be on the bone marrow registry, which I believe can link you to organ donation as well. Such an important thing for more people to do!
This whole argument shows that people still undervalue a passive income machine.
A farmer doesn’t cut down his orchard and butcher all of his milk cows just because he’s nearing the end of his life. He knows that the orchard and the herd are worth far more if they continue to produce.
Quit valuing your investments according to their dollar amount, and start valuing them by how much they can produce. To build up a great passive income machine, and then tear it apart just because you can’t benefit from it anymore…that feels selfish to me.
What a perfect analogy! And while I can see the “you can’t take it with you” argument, there’s something about it that feels very scorched earth to me!
Having money left over is a win for me. It will help our kid or we can donate it to some worthy cause.
Yeap, having too much money at the end of life is a lot better than not having enough.
Totally with you, Joe! I would rather have too much than not enough every day of the week! :-)
Great topic! If I died tomorrow, I’d feel good about having money to pass on and donate because I don’t feel like I’m missing out on much. I have my “enough” and it’s a really good feeling, especially since this year I’m experimenting by not drawing down on any of my retirement funds (I’m in regular, not early, retirement by the way). Hopefully, I’ll continue to have “enough” through the rest of my life, despite my high healthcare costs.
Thanks, Gary! :-) That’s awesome on all counts! Knowing you’d have funds to pass on, being happy/content with that fact… love it. And what a sad commentary is it that I’m envious of folks at “traditional” retirement age because at least there’s Medicare, while those under 65 are staring into this gaping abyss of health care nothingness. :-/
My answer to this would entirely depend on the point in time you asked me. Seven to ten years ago, leaving money behind would have me going out the door bitter because I had been sacrificing so MUCH in the prior seven years to get to that point, and hadn’t enjoyed a penny of it on the way to building financial stability. Three years ago, I started relaxing enough to enjoy the stability we had earned. We’re entering a new period of frugality / tighter belts so I wouldn’t be thrilled to kick the bucket now with our assets as they are, because I’d be leaving my family with not quite enough, but we’re striving to keep a balance between saving and paying down the new debt and still living a fulfilled life. It’s a lot harder, for me, to live a totally ascetic life with my husband, child, and dog, than it was when I was single and that’s not a bad thing.
I’m so glad to hear (see) you say it’s not a bad thing that you’re living a less ascetic life now with your family! That’s so important. You have totally legit and valid reasons to focus on saving, but you have to enjoy your life along the way, or what’s the point? And your point-in-time point is a really good and important one! I wonder if we all have a bit of that depending on where we are in our own journeys.
I don’t think my leaving money to anyone would do any good. If I leave it to my kid, they didn’t earn it, if I leave it to a charity, most charities aren’t very effective. So I will do my best to spend some and leave enough assets to generate income.
There is almost zero chance a health incident would bankrupt you unless you have no money at all, but we can fear unlikely events but they aren’t what we should plan for. The most costly health event is a liver transplant and unless you are five sheets to the wind writing this, this is very rare.
So can’t wait to see what the future has in place for me. I think dredging through a job that we don’t like so we don’t have to “scrimp and save” is far worse than scrimping and saving. I find myself rarely happier when I spend a bunch of money vs. not spending hardly any. My favorite trips so far still tend to be the low cost National Park system, for example.
I would rather have money left over in the end because you never know if you’ll live to be 100 and you’ll need it. I also would still receive fulfillment knowing that my kids or a charity would be receiving some of the money.
I’ve actually thought about the possibility of forming my own charitable foundation with its own specific purpose so if I have money left over then I have a little more control to make sure it goes to making the world a better place.
That being said however, I do think you need a healthy balance between living and enjoying your life now while also investing in the future. It depends on your life’s goals and circumstances, but I definitely think it’s possible to come up with a healthy balance.
I completely agree a healthy balance is possible! And I looooooooove your charitable foundation idea! I know they can be a lot of work to set up, so we’ve wondered aloud (I wouldn’t go so far as to say we’ve planned for this) if we could donate in a big way to an existing foundation that does good work and aligns to our personal mission. Much like how Warren Buffett is turning his fortune over to the Gates Foundation even though he has his own foundation already. ;-)
There’s a sure-fire (sure-FIRE?) way to leave exactly zero when you die: buy an annuity. But there is the issue of high fees. And most annuities are not CPI-adjusted. So, most of us are left to self-insure against longevity for the next 50-60 years.
The one fundamental reason for having money left over is that this is an asymmetric risk: Having money in the bank at the end (and thus not having used enough money during retirement) is less of a problem than running out of money at age 70. To hedge against this risk it’s prudent to budget conservatively with the safe withdrawal rate. Even if you don’t want to leave a bequest.
Think of this analogy: going to the airport to catch a flight. The cost of arriving 1h early is less than the cost of missing the flight. Same kind of asymmetric risk.
Are we the only ones hoping that there are some better annuity options on the market in a decade or two? We certainly wouldn’t sink all of our assets into them, but we wouldn’t mind trading some spend down for a little certainty, assuming fees could come down and inflation could be fully accounted for.
Seconded! Higher interest rates will make this possible.
Let’s hope!
My nerdy finance opinion on annuities… I think the way that our monetary policy is in this country is so different now than it was when annuities were a great investment and interest rates are so darn low, that it’s good to keep your eyes open but I wouldn’t hold your breath (I like your comment about a decade or two!). Perhaps this is the “new normal”. I finally finished YMOYL and it’s fascinating to think that Joe Dominguez was able to retire on ultra-conservative government backed securities which at that point were regarded as incredibly safe investments. I don’t know if U.S. government investments are safe or not these days, lol.
I KNOW! It’s wild that they could recommend treasury bonds as a retirement vehicle at one time, and I’m super curious to see what the updated edition Vicki is working on now will advise. Whenever I lend that book out, I have to say to people, “Ignore the investment section!” ;-) And yeah, no rush on annuities. They make no sense now, but I would definitely not rule them out if things change in the future.
We want to have enough that we don’t have to budget every penny and scrimp and save. We don’t want to have to worry about outliving our savings, and we want to be able to say yes to friends and family in need and other worthy causes.
If we have money left after we die, so much the better. We’ve already planned and written our wills so that family members can continue paying it forward.
I love every bit of this. The balance, the generosity, the focus on looking forward. So great.
“Après nous le déluge” ;-)
Haha — we hope so! (Assuming you mean “deluge” in a positive way!)
I want it all; to live a great life, help people along the way in targeted, effective ways, and then leave a huge, compounded legacy to continue helping the world long after I’m gone. :)
One big part of this this is truly knowing yourself, and your values, and being able to live a great life without necessarily meaning great consumption.
If you take less for yourself, you can leave more to grow in the future, and make a positive lasting change.
I look at Warren Buffett as an example- someone who could buy just about anything, but chooses to live a consistently simple, relatively modest life, which is compatible with his own values and his own brand of happiness.
Buffett is a great example to learn from in another, more human and tragic way, too.
Warren’s first wife Suzie was a very compassionate philanthropist.
Their idea was for him to build enormous wealth with to his own strengths, and let her give it away compassionately, in accordance with hers.
He was so focused on compounding and building, and delaying the giving part for later, when he would have even more to give, that he ran out of time, when Suzie unexpectedly died young.
I think he’s said it is one of the only things he regrets in his life, and he often says that the only thing he can’t buy is more time.
I think it’s possible to have it all if you approach it in a careful, deliberate, thoughtful way. :)
I love your balanced approach! I definitely want to scratch my head when I’ve heard people say they don’t plan to give because doing so would mean depriving themselves. (Also, where is their sense of gratitude for even being able to consider pursuing FI?!)
I see having funds left over as a goal in our planning. Those remaining funds can be spread between the kids or their kids and/or handed out to various charities. Most likely, Mrs. SSC will just be in charge of them since I’m statistically destined to die first. :)
Like others mentioned, because running out of money means failure on planning, and all the trappings that come along with that scenario, No thanks. I do not want to end up in that boat. I literally just shuddered thinking about it. :)
So yes, I am planning on having money left over, I just haven’t decided who is going to get it. If I died tomorrow would I be sad about any “deprivations” I’ve forced upon myself to get to where we are today? Not really. I don’t feel deprived, which is why I think I’d be comfortable with our spending assumptions and post income Lifestyle. Maybe I’d wish I’d eaten more ribeyes, or bacon wrapped lobster or lamb, or more sushi, or other “pricier” types of food. Or maybe it’s just lunchtime and I’m hungry, lol.
Ha — I’m sure Prof SSC will make good decisions about how to apportion your estate at the end. ;-) And LOL — I recommend not making financial decisions when you’re hungry at lunchtime! Those splurgy meals start to get a lot easier to justify then! Ha.
I personally don’t want too much leftover. If I had any left it would go to my two children and for some amazing crazy twist of fate that we had an ridiculous amount I might add in a few key charities. But that’s not my goal, I plan to push my spending each year as needed to enjoy my life. I believe in doing now rather than later to charities and providing sweat equity, volunteering and what ever else I can do for them today not tomorrow. If I am living happily spending now to have a comfortable life then I will have more life energy of myself to give to others. We would of course do all the little donations and GoFundMes that pop up throughout the year. So we are more along the line of “balance” but lean a lot more towards today.
It’s interesting to hear your perspective after lots of folks here advocated for doing the big gift at the end instead of giving along the way. And I think given your interest in nature and the environment, that also makes a ton of sense — because if we don’t protect this stuff now, it won’t be there to protect when our time is up!
I didn’t even have to mention who I would and have been helping and you knew :) The time to act has always been now.
I mean, it’s kind of obvious, right? ;-)
That’s interesting… I don’t think that having a pile of money leftover is a bad outcome at all. It probably means I worked a couple or few more years than I needed to work. I’m hoping that big picture, it gives me some flexibility to donate money as I see fit during these next 60ish years. I didn’t really plan for it, but intuitively, if you spend less than the maximum amount that you can spend every year and maybe earn some money here and there through book sales (speaking to you specifically, Ms. ONL – I plan on earning money through my 2nd career in swimsuit modeling), and if financial markets don’t fundamentally change, there should be plenty of money to hand out along the way, and at the end. I’ve kind of viewed it as a “let me see how this plays out”, hoping to maintain similar levels of generosity as I’ve undertaken over the years. It’s important to me but I didn’t spend a lot of time dwelling on how I would undertake it. It’s good to plan and figure this all out but like I keep saying, until you are FIRE and don’t have that cash flow coming in every month from your job, you just don’t know how this will all work. It’s good to have those plans in place but likely the specifics are going to be different than you had anticipated.
I think you’re in the majority on this one, which is nice to know given that we agree. ;-) Though I will add it’s been interesting to learn that most authors earn very little on book sales, just should that ever become a reality in this household. (Unlike swimsuit modeling, which I’m sure is very lucrative.) ;-)
I think it’s good to talk to folks who don’t agree too! I love hearing different opinions and reasoning as I’ve got a lot to learn still. Of course that carries the caveat that we are practicing civil discourse based on a point of mutual respect from the outset of the conversation. And we didn’t even talk about how having more time to give to important organizations might be even more valuable. To date, I’ve mostly given my money away since I didn’t have a lot of time. The rewards may be greater for both sides of the equation when we give ourselves (as long as I don’t go overboard and overcommit and schedule too much). Cool to be able to test it out, though!
The research among nonprofits is clear that they really do need more money, not necessarily more volunteer time, unless it’s sustained, predictable amounts of time from consistent and skilled volunteers, which you would likely be. But it’s worth reminding all of us that, as much as we want to be of value to others, we’re actually a burden to nonprofits if we hop around or dabble. Better to commit and dig in!
Great point. I think you have mentioned it before but it’s worth reiterating. And it’s the reason why I’m going to take my time and figure out where my help can be best used. It seems like some of these well organized non-profits I’m researching make their volunteers commit to a weekly schedule, like it’s a real job and want you to find your own replacement if you can’t make it to your regularly scheduled committed time.
From a volunteer’s perspective, of course I understand not wanting to commit to an arrangement like that (or even feeling disdain at not being appreciated for whatever I might deem worthy to give of myself), but from the org’s perspective, can you imagine constantly training new people and then getting little to no return on that effort? What a waste. That’s why we hope to always donate some funds in addition to digging in deeply with a few volunteer commitments instead of dabbling across many.
I have one gig I’m planning to commit a 2 hours a week to, after my 60 day hiatus. I need to spend a little more time out of my bubble and so that’s a good place to start.
Agree that’s a perfect place to start!
Oh and on the volunteer perspective, I get it! That’s one of the things I look for as a characteristic of a better run one. I don’t think I understood that before I started getting more out of my bubble. :)
Hooray for growth! ;-)
This is a great topic. Well done.
When you have some folks that might need the money after we are gone like disabled or handicapped relatives, I want to leave some behind. I take it as a sign that I was a bigger benefit than drain on the world while I was here.
Tom @ HIP
Thanks! And that’s a great way to think about it — dying with money leftover is proof that you were a net giver, not a net taker. ;-)
I am fine with dying with a large net worth. You never know how long you will live. I have many relatives who are in their mid 90’s. I would rather have the money to provide a comfortable life in my latter years than run out. Plus, who knows what type of health care you might need. A high end nursing home costs $9K per month today. God knows how much it will cost in the future. From a conservative point of view, dying with money in my opinion is a WIN. Plus, what ever is left will go to my charity of choice since we don’t have children.
That’s so awesome that you’ve got longevity in your genes! It’s great, too, that you acknowledge the potential high costs in those late years. Nursing home costs can be high, as you noted, plus a huge chunk of our lifetime health care tends to happen in our last few months of life. But I also love that you are happy to donate any leftovers to charity once you don’t need the money anymore. ;-)
The concept of having too much money is hilarious to me.
I am perfectly content not doing things in my life that others feel they need. I don’t need luxury cars or super fancy vacations each year. I don’t buy a lot of stuff. If you did value that stuff, though, I could see how my lifestyle would be seen as being “deprived”.
IMO it all comes down to personal preference.
But I bet if you had two dying people – one with a significant amount of wealth to pass on, the other who scraped by for the last few years – this question, almost all of them would say they’d rather have money at the end. After all, like you point out, you can always give money away while you live.
I don’t disagree! Having too much money is a problem I’d gladly welcome, not see as a failure! But enough folks raised some version of this argument that it felt worth exploring. ;-) And yeah, I think you’re right about those folks on their deathbeds, though I also see the point that if you felt like you sacrificed so much, it might feel like a waste.
It’s almost like saying to you as you pick your meal, ‘aren’t you afraid you’ll have enough to take home?’ If I’m hungry now, and eat it all, then I do. If I have leftover, then I do.
I think the alternate risk, of trying to spend down, and what if you out live your money? I’m too self sufficient for that. I’d rather have enough, and if it’s extra, I’m sure it’ll go to good use when I’m gone. (Or not, but I won’t know it.)
I also hear or hear about people who either expect to work until they die, or older generation who assume their kids will take care of them if they run out of money. The trouble comes when the ‘kid’ (ie my age) is the one saying they have to work ‘forever’, & don’t have plans or capacity to take on their parent (s). In my experience when people make either statement, it’s not to the relative, it’s to friends etc. Without the intergenerational communication both parties are in for an unpleasant surprise.
Yeah, I feel 100% certain that no one planning for early retirement has any desire to outlive their money. And aiming to spend it all down means living a bit more dangerously with those funds, which increases the risk of running out. No thanks! And yeah, the mentality of expecting others to take care of you in retirement is troubling. I know that it’s a deeply ingrained idea in some cultures, but on a practical level, it has so many potential pitfalls.
I have never worried that I would have too much money. This feels like such a ridiculous premise.(I know people asked you repeatedly, but it just does not compute for me.) If I worked “more than I needed to” and was a little bit richer, I don’t think I would be mad at former ZJ. She only has the data in front of her. Richer future ZJ can do more good things for more people and causes. All of this sounds like a good thing to me.
Haha — My initial reaction was similar. Like “Could this even happen, and if it did, how would this possibly be bad?!?!” I think part of why it feels ridiculous is that “too much money” in only a thing if you hoard it rather than using it to do good. One of my favorite things about reaching FI is the feeling that we will actually be able to do real good with causes we care about.
I am constantly plotting for how I can spend this “too much money” to help my friends in crisis (thank you healthcare). Wouldn’t it be great if I could close out her gofundme so that she can access healthcare this year and not have to find more people able to throw in $25 a pop?
Ugh. I’m so ashamed of our society that this has become a thing.
It’s truly terrible. The shear number of people who have to crowdfund caring for their bodies. Our country’s priorities feel off to me.