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Old 03-26-2011, 04:54 PM   #61
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It scares me on behalf of the 80 people who work at our nonprofit that only about 15 contribute to their 403 B account. We ( the employer) contributes 5% of salary for each person, and we have a financial advisor from the retirement co. come talk to them each year, but hardly anyone contributes. I have always contributed about 13-14% of my salary for the 27 years I've been the director. But even those whose family incomes are $60000 to $80000 most don't participate. They definately don't LBYM- instead they are buying the latest cars for their kids and tech items, etc. They think I'm strange because my husband and I drive 10 yr old cars and our house is paid off. I wonder what is going to happen to them.
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Old 03-26-2011, 06:45 PM   #62
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My dad, 80 years old, has about $250k in savings (some stock and bond mutual funds) but also has SS and a small pension. Combined, he gets by okay. He paid cash for a new car 4 years ago and doesn't pay much in taxes because of the many tax credits (i.e. income, property) he qualifies for due to his age. He is on Medicare, of course, and has a MediGap insurance policy. He has had some dental bills which are out-of-pocket. His house is paid off, the same year he retired (in 1994).

He has a financial advisor (Ameriprise) who began overseeing his finances shortly after his wife (my mother) passed away in 1995 - she handled all the finances and set things up for him as she knew she was nearing her death after a 4-year battle with cancer. I take a look at the quarterly statements he gets just to make sure he isn't getting ripped off. Thanks to his Ameriprise adviser, my dad and I went to a lawyer to amend his will and get other estate planning documents in order.

Betweem his financial advisor. his accountant (who seems to find all kinds of tax credits even though he pays little or nothing in income taxes), and his dentist (whom he raves about all the time despite being a bit pricey), he is pretty happy about things. When his ladyfriend returns after a long vacation he will be even happier!
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Old 03-26-2011, 06:52 PM   #63
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Thanks to his Ameriprise adviser,
Someone praising Ameriprise on these boards. We have a first.
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Old 03-26-2011, 06:55 PM   #64
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......... I wonder what is going to happen to them.
Well, one possibility is that you will be means tested when you draw SS and they will give your excess to them.
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Old 03-26-2011, 08:37 PM   #65
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The key to living cheap is having a roommate.

When I got my first job out of college, I started making $24k/year in 1996.

I think I got a raise to 26.5 about 6 months into the job.

I remember starting my 401k at 10% at that time, because I figured I could just keep living on what I was already making and just save the raise.

I lived with another guy in a reasonably upscale 2-bedroom 2 bath apartment and was living what I thought was the high life (Stoli's instead of Philips). I think my share of the rent was about $400/month (it would be about $650 now). It was pretty sweet having an in-unit washer/dryer and a shared pool.

Living in the luxury apartment with someone else was still cheaper than living in a dive by myself.

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And, while $30K might not be considered poverty, a lot of it depends on where you live. I'm in Maryland, near DC, and most of the people I know who make $30K per year fall into three categories:
1) still living with relatives, or at least getting some major help from them.
2) renting a room or sharing a house
3) retirees who have a paid-off home and no major expenses.
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Old 03-27-2011, 09:27 AM   #66
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Nosiree, ...I did have one question though. What should I do with my extra money ?

Should I pay down the house or should I invest it ?
I think you should tear down the house.
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Old 03-27-2011, 09:35 AM   #67
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The key to living cheap is having a roommate.
Agreed. That's why we were married ...
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Old 03-27-2011, 10:31 AM   #68
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One thing that I think makes these polls inaccurate is they never ask if the people will get a government pension as well and maybe a quarter of people get a government pension of some kind in a married arrangement.

Considering a quarter million dollars invested at 4.5% (30 yr treasury yields) creates a perpetual cash stream of $937 a month, a pension paying $2,000 a month is somewhat equivalent of having a half million put away.

So does a pension recipient need as much savings? It would not seem necessary to me, especially if they get free health insurance or care
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Old 03-27-2011, 11:46 AM   #69
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That seems to true in all the calculation websites, that they count the value of a pension when considering the savings you need. In our case, we will have a govt pension which will continue on to me if I outlive him. That will really help.
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Old 03-27-2011, 02:27 PM   #70
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And in a related story, here's an article about boomers inheritances on today's Yahoo Finance page:

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The Center for Retirement Research at Boston College estimates that 70% of baby boomer households will receive inheritances. These will total $8.4 trillion — an average of nearly $300,000 per inheriting household, with the wealthiest 10% receiving an average of $1.5 million.
http://finance.yahoo.com/focus-retirement/article/112418/handling-the-boomer-inheritance?mod=fidelity-managingwealth&cat=fidelity_2010_managing_wealth
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Old 03-27-2011, 03:31 PM   #71
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And in a related story, here's an article about boomers inheritances on today's Yahoo Finance page:
I'll bet this is America's "high water mark" of generational wealth passing.

So this $8.4 trillion is coming from the parents of baby boomers, right ? Assuming the average baby boomer is about 60 - means that half of boomers have already had their parents pass.

Article said $300k per household - so each spouse assumed gets $150k from their parents. If each parent unit had 2-3 kids, that would be each household passing around $300k-400k, on average.

I see these "huge inheritance articles" and I just don't think inheritances will replace the shortcomings of today's baby boomer financial position.
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Old 03-27-2011, 03:36 PM   #72
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...I see these "huge inheritance articles" and I just don't think inheritances will replace the shortcomings of today's baby boomer financial position.
I completely agree.
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Old 03-27-2011, 04:20 PM   #73
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Should we receive any inheritance I plan to pass at least half of it to the kids immediately.

Better they have use of it when it matters to them getting started and established, than us just putting it on the money pile since it won't likely change or enhance our lifestyle which is pretty set by now.
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Old 03-27-2011, 04:31 PM   #74
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That hasn't been the case for my husband or me. He received $7000 after his mom died and I will probably receive no more than $35000 when my dad's estate is settled since he had a reverse mortgage. However, I inherited many pieces of art work and antiques that are of great sentimental value. And his beloved 12 year old dog.
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Old 03-28-2011, 08:01 AM   #75
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My grandmother's estate is fairly sizeable. Roughly $250K in savings/investments (could be more than that by now, for all I know...I haven't checked lately as my Mom handles that). Her house is paid off. Needs a lot of work to get it fixed up really nice, but I imagine it would fetch around $200K, as is.

Right now, her estate is set up to go 40% to my Mom, 40% to my uncle, and 20% to me. I'm the only grandkid.

I don't even consider the house as part of it though, because my uncle will probably live in it. I doubt it would get sold anytime soon.

As for the $250K in savings and such, well if I got $50K, it's a pretty sizeable sum, nothing to thumb my nose at. But that $50K wouldn't be a life changing event. At a 3% SWR, that's an extra $1500 per year of cushioning. If I put it towards my 3.5% mortgage, it would save me about $1750 in interest that first year. Now, I have been saving/investing around $25000 per year lately, so I guess one way of looking at it is that it would put me ahead roughly two years.

My Mom's retired, and stepdad is about to retire. Combined, they'll get a decent pension, even though my stepdad's worried about not having enough money. The $100K they're getting won't be life changing to them, either.

As for my uncle, well, he'll probably use it to help stay in Grandmom's house, and draw it down when needed. So, it would help him to stay afloat. That would be a big deal for him. But, even if it got to be too much for him, my Mom and I would help him out. And even if Grandmom's house had to be sold one day, we'd still make sure he had a place to live.

And honestly, I'm not counting on getting anything. Grandmom's 87 now, and still fairly healthy, but she could always have some condition that runs up a huge medical bill that drains everything away. I'd rather consider it an unexpected windfall if it does happen, than plan for it and have it not happen.

My Granddad on my Dad's side of the family is still alive at 96. I have no idea how much he has saved and invested over the years. He gets a pension from working on the railroad, and they always lived below their means. That side of the family really doesn't talk about money though. On that side of the family there are three sons, and six grandsons. I've heard that us grandkids are included in the will, so it's not just going to my Dad and two uncles. But, again, I have no idea how much it is, so I don't plan for it.
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Old 03-28-2011, 05:20 PM   #76
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Should we receive any inheritance I plan to pass at least half of it to the kids immediately.
Better they have use of it when it matters to them getting started and established, than us just putting it on the money pile since it won't likely change or enhance our lifestyle which is pretty set by now.
I have a multi-generational perspective on this plan from having been a part of it as a recipient, and possibly watching it bypass me via another generation, and considering it as a grantor. I think a significant issue is how one minimizes the risk that "the kids" will just piss it away-- even if it's for whatever they consider to be the most well-intentioned and most thoughtful of the best of reasons. And if they get "enough money to be able to do nothing" then it'll definitely stunt their personal growth.

I'm beginning to think that no amount of inheritance will benefit anyone who's not already properly educated and experienced at handling that sum of money. Taking the inheritance before they get their hands on it at least gives me the opportunity to gift it over a period of years instead of dumping it on their heads all at once.
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Old 03-28-2011, 06:32 PM   #77
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Good points Nords, especially about considering the person who will be recipient and how they will likely use the money.

Two of my kids seem very financially astute, one is getting there, and the last prefers to make the mistakes himself.

All of them have been exposed to teachings of Richest Man in Babylon, and the cash flow ideas of Kiyosaki.

Anyhow 1/4th of 1/2 is not such a huge sum anyway. At least if I am still living I can request that they use 1/2 of what I give them for long term plans.
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Old 03-28-2011, 08:45 PM   #78
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I have a friend who was really counting on an inheritance from his parents as a part of his retirement planning. Unfortunately, things didn't work out the way he figured and he will delay his retirement, but he is putting on a happy face saying that he enjoys his new job (which I think is true to some extent).

While I think it is likely that I will ultimately receive an inheritance, I have zero in my planning - if it happens it is gravy and the bulk of it will likely pass to the next generation in some form.
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Old 03-28-2011, 09:03 PM   #79
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Nords, when your family bypasses a generation in wealth, is this done with say the intent of a will or is it as simple as declining an inheritance such that it flows to the next of kin? Or both? ; ) " I want enough for a big mac but give my kids the rest!" lol.
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Old 03-29-2011, 12:17 AM   #80
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Nords, when your family bypasses a generation in wealth, is this done with say the intent of a will or is it as simple as declining an inheritance such that it flows to the next of kin? Or both? ; ) " I want enough for a big mac but give my kids the rest!" lol.
When my grandfather prepared his will (after his spouse died), my father (his only child) asked Gramps to make sure that his inheritance could pass through my father to my brother & me. Dad said it was in case he predeceased "us kids". My grandfather had his lawyer put the appropriate language into his will and it included a disclaimer provision. When Gramps died then Dad was able to disclaim and have the inheritance bypass him to be split between my brother and me.

I frankly don't understand my father's will. (He just entered a skilled nursing facility with a preliminary diagnosis of Alzheimer's and will spend the rest of his life in a full-care facility.) His will is short but it's mostly boilerplate and doesn't clearly explain what happens with disclaimers. My father's estate (whatever may be left of it, if any) will be divided between my brother and me. I'm not sure, but I suspect that if I disclaimed my portion then the will would redirect it to my brother. However it's also possible that if I disclaimed my portion then it could go to my only child. If we ever get to the point of probating an actual estate then I need to get my own lawyer's opinion on that question.

I don't think an inheritance would change my lifestyle, unless I could find a nice plug-in hybrid pick-up truck to haul a stand-up paddlesurfing board. However a big inheritance to my brother (say at least $100K) would let him ER as soon as he deposited the check, sold his business, and bought a used RV. I think he'd be able to handle his plan without catching affluenza.

Based on what I've seen so far, an inheritance of any amount to my 18-year-old daughter would pretty much be pissed away and cripple her financial development. (I was the same at that age.) She's doing a lot better in the last three months so she probably learned an important lifestyle lesson last semester, but she has a way to go. (She could also just be too busy with 22 credit hours & academic probation to actually have a chance to spend anything...) I think she'll make great strides in money maturity over the next few years, and we're going to ramp up the gifting to help her learn to handle larger sums of money. But I don't think she'll truly appreciate the value of deferred gratification (and tax-deferred compound interest) until she gets a deployment or two under her belt... say by age 25 or so.

My cynical suspicion is that the cost of my father's long-term care will render inheritance questions moot.

Spouse and I have noted that during bull markets our net worth tends to rise faster than we can get around to spending it. (Even despite the wisdom & advice proffered by the "Can you spend $300K/year?" thread.) If this keeps up for another 40 or 50 years then it's possible that we'll have a sizable estate, and by then we expect our daughter would also be financially independent. One option would be to dump our estate into some sort of charitable foundation and then hire a grandkid to run it for 20 years (on a small salary) and then shut it down.

But we haven't put much thought into that. One generation at a time is hard enough.
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