Do you think that you owe your kids a good nest egg?

[donheff]

You have a link for that "greatest disparity of wealth" claim? Because off the top of my head I would've put the excesses of the 1890s or the 1930s ahead of the 2000s.

And you would be right about the Gilded Age. Here are the top dogs in current dollars. Gates and Buffet do pretty well but Rockefeller and Carnegie blow them away. In shear numbers, the gilded age barons carry the day. But, the past few decades have been a huge reversal of the mid century norms returning us to pre-depression levels of disparity:

 

[swampwiz]

I myself am saving every thin dime I can, which hopefully will provision a somewhat comfortable retirement--most likely in Malaysia or Thailand.

I am living abroad in Eastern Europe (day job - English teacher/consultant) and I figure that if I were to have children, it would be with a woman from here, so my long term plan, if I can't afford a decent life in the USA, is to just live here. My nest egg could certainly well support any children that would want to live here as well.

 

[swampwiz]

I hope that by the time we come to leave a legacy, our kids won't need it for anything other than to boost their own retirement.

If we get to activate the FIRE plan with 200K more than we need, I quite like the idea of putting 100K per kid into any home purchase which they might make. That would be on the basis of an outright purchase of a part of the property, with the idea of keeping the money safe on "our side" of the family, in case of divorce. So for example if DS marries and buys a 300K property, we would buy 1/3, and we'd structure it legally so that 51% of the partnership could force a sale. That might mean us ganging up with DDIL to screw DS, but I suspect he would accept that risk ; on the other hand, it would mean that they could sell to move up, etc. (Does this make sense ? Has anyone done it ?)

I would go a step further and try to make it so that on paper, your DS doesn't have any assets, that way if he gets into a situation like I did, of massive debt, he can go the route of Chapter 7. The only benefit of you giving him the cash now is to make it easier for you to not lose much in Chapter 7, or if your estate is so large that you would be paying an estate tax.

 

[Gumby]

My parents fed, housed and clothed me until I graduated from high school and joined the Navy. They didn't owe me a thing more than that. If I had children, I would feel precisely the same obligation (but maybe add in some financial aid for college).

I agree with REW's statement earlier -- if there was anything left when the young wife and I depart this earth, my kids would be welcome to it, but I wouldn't feel an obligation to ensure that result.

But given my lack of children, my view should be appropriately discounted..

 

[Gumby]

I would go a step further and try to make it so that on paper, your DS doesn't have any assets, that way if he gets into a situation like I did, of massive debt, he can go the route of Chapter 7. The only benefit of you giving him the cash now is to make it easier for you to not lose much in Chapter 7, or if your estate is so large that you would be paying an estate tax.

You seem sort of fixated on bankruptcy. I'm wondering why.

 

[swampwiz]

I think we owe our kids the education to create their own lovely nest egg, which we've provided.

But with all the outsourcing and artificial intelligence applications wiping away professional level jobs, aren't you afraid that an education will have little economic value, leaving the educated class in the same rotten, brutish situation as the so-called "lower classes"? Can you safely predict that your children or grandchildren will not become unemployable when they become senior level employees at the age of 35?

 

[grumpy]

Aren't you concerned that by the time your grandchild hits college, that the costs will be so high and the redistributionist welfare state so well entrenched that any cash in a 529 account would basically be cash that would be implicitly confiscated (i.e., there would be no reduction in tuition for such a well-endowed student, etc.)?



Bless you. I suspect you have been an excellent parent and will be an excellent grandparent as well.

Well, based on your reference to "the redistributionist welfare state" I suspect we will not find much common ground on our expectations for the future of our country and our children/grandchildren. There certainly are political/social trends that might impact our plan to fund our grand daughter's college education via 529 plan. But it appears to me to be the best mechanism currently available. Our daughter-in-law is a PhD scientist and our son is a software engineer. I am pretty confident that with their and our support our grand daughter will be able to afford college no matter what happens.

 

[REWahoo]

But with all the outsourcing and artificial intelligence applications wiping away professional level jobs, aren't you afraid that an education will have little economic value, leaving the education in the same rotten, brutish situation as the so-called "lower classes"? Can you safely predict that your children or grandchildren will not become unemployable when they become senior level employees at the age of 35?

I think many of us believe our children will be resilient and resourceful enough to find a way to succeed in life - without having to bail on their obligations when the road gets bumpy or 'gaming the system' to look for an easy way out.

 

[swampwiz]

I tried to stay away, but I can't help myself.

No way do I owe anybody anything, including my kids. By the logic used to justify this, each generation would be working to fund the next. If you work to give your kids a nest egg, whatever that is, don't they then owe you're grandchildren a nest egg, meaning they have to work as long and as hard as you did to pay the debt owed to the next generation? And so on and so on?

The idea is that if you were to leave a big enough nest egg, your descendants could live off of the interest (earnings) of that nest egg, and leave the nest egg to further generations, like Henry Ford and John Rockefeller did (obviously, you would not have to leave THAT big of a nest egg, but I think you get the point.) Wouldn't you feel that by living it up during your lifetime, that you would be harming them?

All this talk about the lack of jobs and future prospects is nothing but doom and gloom. The vast majority of people have jobs and aren't going to lose them. The vast majority of young people entering the job market will get a job, though it may not be the glamorous, high paying one they were promised. Despite the economy, many will begin businesses and actually succeed eventually.

I live in Nevada. Worst unemployment in the nation. We went to the movies today. Amazingly, the theater was still open. We ate breakfast at a casino, still open. I noticed many people out and about shopping, engaging in business, even, *gasp*, going to their jobs. We need to get a grip. Life goes on. This is a blip on the radar. Things will correct, one way or another. If the government doesn't do something, the market will. I'm sure all the people that lived through the Great Depression are snickering at us right now.

I am much more pessimistic that you. I feel that the rubicon has been passed and that the economic value of labor is on an unstoppable decline. The only question is whether the future is one of a dystopian "Soylent Green" or a utopian socialist one (the only good future I can see as possible.) Either way, having a family nest egg will help your legacy feel good enough about itself to reproduce, thereby allowing your genes a better chance at winning.

 

[swampwiz]

You seem sort of fixated on bankruptcy. I'm wondering why.

Because the ability to file Chapter 7 was the most extraordinary financial move I have ever been able to do.

 

[swampwiz]

Our daughter-in-law is a PhD scientist and our son is a software engineer. I am pretty confident that with their and our support our grand daughter will be able to afford college no matter what happens.

Aren't you concerned that with outsourcing to the low wage countries of Brazil, Russia, India & China (and their similar counterparts) and the massive importation of workers from there into the USA via the H1B & L1 visas as well as the artificial intelligence applications I had discussed earlier, that they will become unemployable at some time before their expected retirement age of 67? (OK, around here, at age 57 or even 47!)

BTW, I am a multiply degreed - and now utterly unemployable - engineer (aero & computer.)

 

[swampwiz]

I think many of us believe our children will be resilient and resourceful enough to find a way to succeed in life - without having to bail on their obligations when the road gets bumpy or 'gaming the system' to look for an easy way out.

Hmm ...are you trying to say that hope is better than prudence? Or are you trying to say that everyone here feels that their children - who they believe will have the same economic survival skills as themselves - will be able to make it in the future because they have made it in the last few decades?

I'm afraid that the fundamental rules of the game have changed, and that most of us here if transported into the future would be stuck in the brutish economic situation that is to come.

 

[RunningBum]

How are you guys paying for your kids' educations? Did you use 529s, UTMAs, or some other means? I've got a newborn so I'm looking for some tips.

I did a UTMA, only because 529s weren't around when I started it. I think a 529 has more advantages but do your own research.

 

[Moemg]

I hope to leave my daughter an inheritance but the best thing I can give her is freedom from having to worry about her Mother financially .

 

[harley]

My plan has always been to leave our inflation adjusted principal as an inheritance for my DD. However, as I've often told her, I plan for her to be so old when she gets it that she won't be able to enjoy it too much. So if she wants to have fun, FIRE or whatever, she'll need to do it on her own. Hopefully when she gets the inheritance she'll hold it and pass it on to her daughter. If she ends up having more kids, it could get diluted over a few generations. Of course, if circumstances change, DW and I might just spend it all. No way to know for sure.

 

[naggz]

Do you mean being in the position of the DDIL ? The only way the rug would be pulled out would be if DS and we both decided to sell, which would require DS to screw over DDIL anyway. I don't see how that is materially different to if the couple owned 100% of the house (or at least, of the part which the bank doesn't own) and then had a break-up.

I would also add a clause allowing DS and DDIL to buy us out at any time. The point of the exercise is to get them a head start in the housing market, should they be living in a country where this is important. (Right now, DW and I are happy renting, but there's a lot more choice in the market for that in France or Germany than in the UK or the US, as far as I can tell.)

I don't know anything about the housing market in Europe (although I wish I did), but I can appreciate the necessity of a helping hand to get into the housing market.

For me, it's more of the dividing lines, like there is a lack of trust right out of the gate. If I was in those shoes, and my spouse agreed with the arrangement, then I would question the marriage in the first place.

An easier arrangement might be a loan to each of them $50,000 (legally written of course) then if there is a split, you can forgive your child's loan.
(edit: I see KingB has beat me to the loan idea)

 

[FlowGirl]

This is something my husband and I have been discussing recently. Not so much providing a nest egg but perhaps outstanding educational and other opportunities at least through college. It's something we are considering working a few extra years for.

 

[HFWR]

I feel an iggy coming on...

 

[flyfishnevada]

The idea is that if you were to leave a big enough nest egg, your descendants could live off of the interest (earnings) of that nest egg, and leave the nest egg to further generations, like Henry Ford and John Rockefeller did (obviously, you would not have to leave THAT big of a nest egg, but I think you get the point.) Wouldn't you feel that by living it up during your lifetime, that you would be harming them?

Not sure what you mean by living it up. If you mean spending the money I've earned and saved, then no I won't be harming them. If you mean in the larger sense that our generation has been living it up on SS, Medicare and big government hand outs, maybe.

And how would I go about getting such a large nest egg my family could benefit in perpetuity? How much would I personally have to sacrifice to ensure future generations do not? I believe that sacrifice is an important part of life. We must sacrifice to understand the value of what we have. But why must I be the only one? Why can't my children and their children make it on there own? Heck, most of us struggle to save enough to fund our retirements, but we must also fund a life of luxury for our progeny? I don't think so. People have made a life for themselves in times much, much harder than we face today.

And while those men you reference did great things, how many of their kept and coddled offspring have contributed anything near what they did? How many have contributed half of what you have? Running a foundation, giving away great-great-grandpa's money doesn't really count.

I am much more pessimistic that you. I feel that the rubicon has been passed and that the economic value of labor is on an unstoppable decline. The only question is whether the future is one of a dystopian "Soylent Green" or a utopian socialist one (the only good future I can see as possible.) Either way, having a family nest egg will help your legacy feel good enough about itself to reproduce, thereby allowing your genes a better chance at winning.

I am not sure how to respond to that. A socialist "utopia" may be the best outcome, but it is surely not a good one. If that were to come to pass my savings and the next egg I leave won't matter one bit. The socialist will confiscate it long before they ever get to enjoy it.

As for my children's reproductive choices, I am not financing that either. They want kids, they better be ready to pay for them. My money will not be available to sooth their guilt.

I must say, you have a rather dark outlook on things. This country struggled to free itself from England, fought a bloody war amongst ourselves, suffered through the great depression and defeated the Nazis, but this recession is the end of times? I suspect we all have things a little too easy and need a little perspective.

 

[grumpy]

Aren't you concerned that with outsourcing to the low wage countries of Brazil, Russia, India & China (and their similar counterparts) and the massive importation of workers from there into the USA via the H1B & L1 visas as well as the artificial intelligence applications I had discussed earlier, that they will become unemployable at some time before their expected retirement age of 67? (OK, around here, at age 57 or even 47!)

BTW, I am a multiply degreed - and now utterly unemployable - engineer (aero & computer.)

Funny you should mention Brazil. Our daughter in law is from Brazil and came here on an H1B visa to do postdoc research in pharmacology. She now has her green card. Our grand daughter has dual US - Brazilian citizenship. In light of this, your arguments are probably not going to gain much traction with me.

 

[stoutboy]

Funny you should mention Brazil. Our daughter in law is from Brazil and came here on an H1B visa to do postdoc research in pharmacology. She now has her green card. Our grand daughter has dual US - Brazilian citizenship. In light of this, your arguments are probably not going to gain much traction with me.

H1Bs are a major reason for falling wages among high skilled professionals. So in a way your D-i-L will have played a role in the decline of living standards here that will confront her daughter (your granddaughter) when she becomes of age.

 

[traineeinvestor]

Having chosen to have children, we have an obligation to give them the "best" upbringing we can ("best" being both a subjective and a relative term).

Once they become adults, the obligations end. Anything else is gratuitous. That said, I hope/expect that there will be money left at the end of the day and, unless they behave in a manner which I find unacceptable, I would much rather it went to my children (or grandchildren if any) than anywhere else.

 

[jayc]

I have set up Roth accounts for my kids and try to fund these accounts to the max allowed each year. I hate to leave any money on the table for tax advantaged events that expire yearly. My oldest son minored in finance at my request so he would have an understanding how to handle money and make it work for future needs. I will also help with 10-20K for home downpayment if asked. My general theory is pro 'family' wealth. Everyone under my umbrella should benefit from my plan and assets should be structured or passed down to maximize returns/income and minimize taxes and expenses.

 

[donheff]

I have a feeling this entire thread is a:

 

[BigNick]

I don't know anything about the housing market in Europe (although I wish I did), but I can appreciate the necessity of a helping hand to get into the housing market.

For me, it's more of the dividing lines, like there is a lack of trust right out of the gate. If I was in those shoes, and my spouse agreed with the arrangement, then I would question the marriage in the first place.

I don't think it's up to parents to question their children's choice of marriage partners, other than perhaps in conversation between themselves.

When we got married, DW's parents told her, "You have to put your husband first now, ahead of us". It was a good piece of advice, which I also applied to my relationship with my parents. However, even for my FIL/MIL, the corollary does not apply: DIL/SIL will almost never be equal to DS/DD. If the marriage fails - which can happen for all kinds of reasons, many of which are simply not predictable on the wedding day (although I agree that plenty are) - then parental sympathy is rarely split 50-50.

I would hope that anybody whom DS/DD married would be able to appreciate that. But I don't want to come across like Robert de Niro in "Meet the Parents"...

An easier arrangement might be a loan to each of them $50,000 (legally written of course) then if there is a split, you can forgive your child's loan.
(edit: I see KingB has beat me to the loan idea)

Ah, but I was also hoping to pick up a part of any gain in the value of the house. But the loan idea probably has other advantages too.