Overfunded Retirement Strategies

[Car-Guy]

- Go relatively conservative and put it in fixed investments to minimize loss/volatility since you "won the game"?

I'm just scratching an itch here...

I feel I have won the game and have 2m invested in extremely conservative (fixed income) investments.... The rest is for everything else... e.g. Investing/gambling, hobbies, life, etc...

Hope that helps your itch a little....

 

[Animorph]

We have everything invested in our normal AA, 75/25 except for 100% equities in taxable, and plan to stay that way. Just because that seems to be a nice balance for us. I'd hate to leave money on the table, even if that means leaving a ton to our kids or charities.

We'll try to spend some of the extra, particularly if it gets to ridiculous levels. I don't want to give it all away at the end, and we can think of a few things to do with it. Right now we're on the high side of my realistic planning, but we're having a hard time spending on travel. Might have to find some other hobby.

We'll also try to save some of the extra (lower withdrawal rate), because a higher portfolio will mean more options in the future if we run into problems. Hopefully a good balance.

 

[RetireBy90]

We saved to have enough for worst case and it hasn’t happened. Only been retired for little over 2 years so too soon to really make any judgements. In 5 years when I’m planning on SS we should be living on monthly income and not have to draw from the pile. Without knowing what will happen, not sure we have “over saved” but we have 7 figure savings that we don’t plan to spend, unless you can give me something I just didn’t know I needed

 

[iloveyoga]

Also overfunded here, with nice pensions. 35% in equities and I have no desire to have a larger allocation. I have been trying to loosen up spending a bit and will keep this mindset with Christmas coming. Old habits are hard to change.

 

[Koolau]

Yeah, I've struggled with this question many times. I could see blowing everything at a care home if we both become demented. Other than that, it seems we have too much. We're doing our best to fund our favorite charities and help out the kids. Oddly, we still can't seem to "blow that dough" on ourselves (like fly 1st class instead of coach or buy a new instead of used car.) YMMV

 

[RobbieB]

Yeah, what is overfunded?

I should be overfunded, but I'm planning a short time in the nursing home.

If I end up with a long time in the nursing home I'll die broke.

 

[Green Papaya]

I think that we are overfunded as well but will continue with our current AA for legacy reasons.

 

[jollystomper]

I deliberate worked longer to be overfunded (based on various calculators and financial advisor). I have reduced the stock component of my AA to to be in the 30-35% range. I do not keep the amount separate, though some could say that much it the "overfunding" is in cash since I have a large cash allocation. For our needs it is a good balance.

 

[daylatedollarshort]

We just keep saving and investing conservatively. We've talked about helping the kids buy houses, which are expensive here, and want to have enough to cover possibility of needing long term care for us, which can run over $100K a year. Other than that, we're into sustainable living and low consumption, so we just keep living below our means and invest the rest.

 

[CyclingInvestor]

- Let it ride in equities for legacy reasons or just to run up the score because you can?

As I enjoy this game of investing and it is stress-free for me (like a decades long wargame), I will continue in 100% individual stocks just to see what kind of score I can end up with. If I ever grow weary of analyzing companies then I will retreat to a few equity ETFs and 10% cash.

 

[audreyh1]

It wouldn't surprise me that once we are collecting SS if there is still a significant redundancy that we might be more aggressive investing for their sake. Also, it is likely that I'll receive a significant inheritance sometime and I have given some thought about perhaps disclaiming part of it if it would result in what I would otherwise receive going to my kids (and not my siblings).

No, I don’t think disclaiming an inheritance lets it go directly to your heirs. It would go to the other listed beneficiaries AFAIK.
https://www.jhwfs.com/disclaiming/

 

[Gumby]

I'll let you know when we die whether we were overfunded. Until then, given that the young wife and I can rely on ourselves alone, we'll keep our money. If there is any left, someone else can have it then.

 

[Dtail]

I'll let you know when we die whether we were overfunded. Until then, given that the young wife and I can rely on ourselves alone, we'll keep our money. If there is any left, someone else can have it then.

You will reach us from the beyond. Cool...

 

[Lewis Clark]

I'll let you know when we die whether we were overfunded. Until then, given that the young wife and I can rely on ourselves alone, we'll keep our money. If there is any left, someone else can have it then.

+1

We have no children and cannot expect any relatives to take care of us if/when the need arises. Self-insuring for long term care needs. No need to leave a legacy, but expect a few favored charities will get a nice bundle when we pass.

We did not retire until we expected we were well over-funded out of caution.

We continue to donate as we always have. I've always been a good tipper but have started tipping even more due to the plague. Additionally, my wife made nearly six hundred masks which we gave away to friends, family, and several medical facilities.

 

[SecondCor521]

I'm 51, been FIREd about 5 years, and have a net WR of 0.62% at the moment, which may drop further - at least for a while - as my kids are in the process of launching themselves but not yet at the point of me creating the "Grandkids" spending category in Quicken.

While I don't separate things in the accounting sense, conceptually I figure the portion of my portfolio I need by working backwards - essentially it's current actual expenses times 25. The portion I need is allocated according to what I think is the safest long term AA for my situation, which is 90/10.

The remainder, I realized a while ago, will go to my kids. And with my age and health, statistically it's likely to go to them in 30 years or so. Due to that time horizon, this portion is invested 100% in low cost, broadly diversified, high quality index funds in a LTBH fashion.

I've got my Excel spreadsheet that calculates what the above numbers are and gives me what the overall mix should be that I should be aiming for. It's approximately 98/2. Obviously as my spending changes up or down that overall mix changes, but since I don't spend much and the excess is growing, the 98/2 doesn't seem to change much in practice.

I'm also warming to the idea of spending some more of that excess now on things that will help them have better lives. So I'm probably going to continue the idea of "special trips" where me and each kid go on trips where ever to do whatever they want - last trip was to Las Vegas for my son to drive supercars, next will probably be scuba diving in Iceland and Norway with my daughter.

No wallpaper yet in the kids' bedrooms. My parents kept our bedrooms as they were for a while after we left, and I think that was a good call so I'm doing the same.

There is also a potential inheritance of some size which I am also considering disclaiming part of because it will go to my kids in that scenario (the beneficiary designation is "secondcor521 per stirpes" and that is my understanding of how the law would be applied in my case - check with your attorney). This will give them more money sooner for things that they might like and will be a practice run for when they inherit from me - hopefully they don't blow two inheritances. Finally, with what I have now plus the part I would inherit should be multiples of what I will ever need or can imagine what to do with (it's not a large fortune; I just have a poor imagination).

 

[SecondCor521]

No, I don’t think disclaiming an inheritance lets it go directly to your heirs. It would go to the other listed beneficiaries AFAIK.
https://www.jhwfs.com/disclaiming/

My understanding (from my research about my situation in my state) is that disclaiming has the effect legally as though you had predeceased the benefactor, and the asset would flow according to the rules which apply in that case, whether they be beneficiary designations, POD/TOD, intestacy laws, or trust language.

So if grandpa has an IRA and lists his three kids as equal primary beneficiaries and one disclaims, then that portion would go to the other two kids. If grandpa had listed his four kids "per stirpes", then that portion would go to that kid's grandkids if they existed. If grandpa died intestate, then that portion would flow according to the state's intestacy laws.

Also something worth mentioning is that there are partial disclaimers (assuming your state allows them; they're allowed at the federal level). So you can disclaim $100K out of $1M, or the TSLA stock, or whatever, and keep the rest.

IANAL, etc.

 

[flyingaway]

You just don't know what will happen in your life. My younger son just lost his job last week and will be moving back next week.
It was a shock to all of us, as we never had any family member lost jobs. Although money is not a problem for us, we have to be prepared for anything.

 

[Time2]

Can't a guy just enjoy the moment!

I hear ya... there is no telling if they are ever really off the payroll. I have knocked out 2 weddings, but have 2 more girls to go. Plus, we have 1 granddaughter and 2 more grandkids due in Jan/Mar so my wife has created a new expense category for us!

Ya, sorry I told my daughter in her teens, don't have a big wedding, just elope and I'll give $20k for a house down payment. Well the elope part kind off happened, but her hubby was military and had a zero down mortgage. So that $20K didn't happen. The marriage didn't last either, so glad I didn't share $20K with him. But, she got more than the $20k when she decided to go to dental school and we are paying the tuition. Only $90k of tuition left!
Glad we are over funded.

She got married again to a guy we think is great, they paid for that wedding.

 

[pb4uski]

No, I don’t think disclaiming an inheritance lets it go directly to your heirs. It would go to the other listed beneficiaries AFAIK.
https://www.jhwfs.com/disclaiming/

Actually, now that I think of it, most of my mom's stuff is in trusts. And myself, my mom and one of my sisters are the co-trustees, and upon my mom's passing the co-trustees will just be myself and my sister. So while the terms of the trust indicate that the assets are to be distributed to myself and my four siblings, I think as one of the co-trustees I could just convince my sister to allow me to substitute my two kids for me.

 

[Jerry1]

I’m only overfunded if things go as planned. Since they rarely do, I’m just treating everything the same. If things are going well later in life, I’m thinking of spiking the ball for my daughters. I’ll let my stock percentage increase and try to give them a bigger inheritance. But with me and DW being 60 and 65, that kind of thinking will need to wait for at least ten more years. Scariest thing is the Alzheimer’s runs in DW’s family. That’s the type of thing that can ruin a plan. If we have extra at that time, if it comes, then the level of dollars spent on care will increase. We don’t have a goal to leave an inheritance but it would be nice if it works out that way.

 

[gauss]

First, let me acknowledge I know none of us really know if we are/were overfunded until we hit the dirt nap. That said, I am curious if/how/what those of you who may have some confidence in being overfunded do as it relates to managing the designated excess? If as an example all the calculators say $1M at a 60/40 AA gives you 100% probability of funding your desired retirement and you have $2M, do any of you separate the extra $1M and run it as a separate portfolio doing any of the following?

- Go extremely conservative and put in cash to just "blow the dough" or pump up the early giving/charity?
- Go relatively conservative and put it in fixed investments to minimize loss/volatility since you "won the game"?
- Let it ride in equities for legacy reasons or just to run up the score because you can?
- Just keep it in the mix with your first $1M, same AA, just pulling a lower WR?
- Some hybrid of the above, other?

Again, I know it's a personal and "depends" and I can see all scenarios being a valid way to approach any excess. I'm just scratching an itch here...

This

- Just keep it in the mix with your first $1M, same AA, just pulling a lower WR?

It helps me sleep at night. I also separate my equity investments from my fixed income ones. Seeing a significant balance in fixed income that I could live on for quite some time if we get a really bad sustained stock market crash is reassuring.

-gauss

 

[audreyh1]

Per Stirpes sets it up so that you can disclaim an inheritance in favor of your children?

I also noticed the partial disclaimer option.

 

[SecondCor521]

Per Stirpes sets it up so that you can disclaim an inheritance in favor of your children?

I also noticed the partial disclaimer option.

Again, I'm no expert, but in my case I believe it does have that effect.

It is very important to note that you can't disclaim an inheritance in favor of anyone. In other words, it's not up to you to say "I don't want it, give it to so-and-so instead". All you can say is "I don't want it", and then it goes to whomever the benefactor listed as next in line. And of course, with partial disclaimers you can say "I don't want this but I do want that" or "I don't want all of this, just some of it".

"per stirpes" - as I'm sure you know - means by branch. So in the case of a grandparent with multiple children and grandchildren, if the grandparent lists beneficiaries as each child per stirpes and one of the children predeceases the grandparent, then that predeceased children's portion of that grandparent's asset would go to that predeceased children's children instead of to the grandparent's other children.

Since I'm one of the multiple children in the preceding example, and I might want part of my inheritance to go to my children, a partial disclaimer acts as though I predeceased my Dad, and since he has it listed as "secondcor521 per stirpes" on the applicable assets, it would end up with that effect.

I am fortunate in that my Dad's wishes happen to line up with what I want. If he wanted to, he could remove the "per stirpes" and if I were to either predecease him or disclaim, then my portion would flow to my two sisters and not my kids. Or he could list a contingent beneficiary which would also change things. But he in fact wants everything to be divided equally among his three kids, and if one of us actually did predecease him, he would want that portion to flow to those grandkids (rather than to his surviving children or someone else).

I think it goes without saying, but I have done the research now to figure out how I'm fairly certain it will work, but before actually disclaiming I will confirm with an attorney that it will work the way I expect it to. I have also advised my sister who is my Dad's executrix that this is an option that I may want to do so she does not distribute the assets to me before I have a chance to disclaim. Finally, there are requirements that each state has regarding disclaimers that must be followed.

...

As a final note, I would add that I'm beginning to think that disclaiming is a good strategy for me to avoid estate taxes on my estate. If I don't need the money and disclaim it to my kids, then that money doesn't have a chance to grow in my hands for a few decades and cause my estate to go over whatever the limit is when I die.

 

[daylatedollarshort]

You just don't know what will happen in your life. My younger son just lost his job last week and will be moving back next week.
It was a shock to all of us, as we never had any family member lost jobs. Although money is not a problem for us, we have to be prepared for anything.

+1. We have friends who help out with a special needs great grandchild who wasn't even born when they retired. I also feel it is good to hope for the best, plan for the worst. Who knows what the future might bring.

 

[DrRoy]

We are pretty much overfunded. Over the last 4 years I have taken 5% out of the equity AA. We are remodeling the house a bunch and splurging on travel. Blow that dough!