Wealth Flow Diagram

[Htown Harry]

This short article is built around a chart that makes good sense and illustrates concepts discussed here many times.
Picturing your retirement plan - MarketWatch

The author, a financial planner, links to her longer piece in the JFP:
Financial Planning: A Look from the Outside In

Quote:

The ideas represented by this diagram have been rigorously developed and vetted in the economic literature for many decades. Plus, most consumers nod their head and are not surprised when they see this picture. Yet you probably have not seen it before or been keenly aware of the planning ideas it illustrates... Much of our industry is still operating from a different planning paradigm, one that draws mainly from the pension world. Much of what you read and hear rests on the notion that retirement planning is mainly about building the biggest portfolio possible and then hoping an assumed withdrawal rate will keep you safe. The diagram in this post summarizes a different point of view, one that addresses your actual planning challenges — and matches your gut instincts about how the financial world really works. In the academic world, it is referenced as the theory of life cycle savings and investing. In the real world, it works!

[chris2008]

Maybe I am slow, but what is the new thing in it?
To me it reads like: "You can only spend what you have gained before...."

[Midpack]

It's a good conceptual diagram, I don't see anything missing. Thanks!

[growing_older]

Quote:

Much of what you read and hear rests on the notion that retirement planning is mainly about building the biggest portfolio possible and then hoping an assumed withdrawal rate will keep you safe.

Using that idea of a portfolio lets me plan and measure whether I have saved enough to retire. How do I use the new diagram to accomplish something similar? Maybe it's saying I count inflow from all those sources against outflow from all those expenses. Seems awfully similar to what we do already, but maybe the point is all those inflows and outflows are part of the process.

Oh, nevermind. I read the articles and it's another argument for consumption smoothing.

[obgyn65]

Interesting. Thanks for sharing. I would be curious to know what forum participants here do about bequests.

[chris2008]

As a couple without children we do not plan to leave any bequests.
First, the survivor gets it all.
Then there is a will spelling out who gets what after the survivor is gone, too, but only if there is something left behind and if the survivor does not have other plans.

[Htown Harry]

DW and I, 53 and married a long time with no children outside the marriage, have relatively simple wills that mirror one another.

When spouse #1 dies, the "estate" i.e. what's left after paying any individual debts due at the time of death, goes to spouse #2. Life insurance and IRA asset transfers would both be handled the same way, as we have named each other as primary beneficiaries. If spouse #2 then dies with no subsequent change to his / her will, the assets go to our two children in equal shares.

There are no mentions of any specific assets, just "the estate".

The longer part of the wills deal with naming executors and guardians. Issues of asset management in the event spouse #2 passes before the youger child has not passed age 21 (22? - I don't remember for sure) at the TOD are also covered.

With one DD out of the nest, the second approaching college and a new health issue facing one of us, we are due for an update. The basic principals won't change, though.

If you don't have a will, obgyn, you need one.

[Meadbh]

As another single, I have a couple of specific bequests, but the majority of my estate will go to a charitable fund that I have already set up. This will minimize taxes too (not that I'll worry, as I will be dead). There may also be opportunities to donate to the charitable fund in a tax efficient manner before I kick the bucket.