Honey, I shrunk the kids (inheritance)

Maybe this has been covered (too lazy to look).

How many have planned for an SWR which includes
a timed reduction of their principal (the dying broke idea)
vs. preservation of principal right to the end? Of course
either idea is subject to change once you get started.
I would just like to know how many started out (or plan to) with which theory. My plan is to never touch my basic fixed income investments in place, and to
only replace them as they are called or mature. In my case I just decided the amount of income being thrown off was about right and (supplemented
with SS, spouse's job, and real estate related cash flow)
would suffice forever.

JG

[gratefuled]

I use preservation through age 100 (and don't model what happens thereafter, on the theory that I'll be able to score free drinks by then.)

The dying broke approach doesn't appeal. To quote Heinlein, loosely: this monkey plans on climbing around in the tree for a long, long time. Not that I have any control over it, but I'd rather not outlive my money and be thrown on the public dole.

Ed

[snowbird]

Not me man. We plan on spending it all. We'll leave the kids our primary residence unless we kick the bucket sooner. DH & I (56 & 55) are ER'ing next January and only have $700k to last a lifetime (remaining, that is).



Snowbird

[Jarhead*]

Quote:

Not me man. We plan on spending it all. We'll leave the kids our primary residence unless we kick the bucket sooner. DH & I (56 & 55) are ER'ing next January and only have $700k to last a lifetime (remaining, that is). Snowbird

You can also reverse mortgage your home if you have to.

[unclemick]

By By Dryer Sheet

At 61/62 plan to lighten up after 11 ER years and spend income streams: non cola pension plus stock dividends plus- this year IRA portfolio yield and take early SS.

No more cheap(er frugal) SOB - will miss it though - was a great run while it lasted.

Soo- income streams plus Lagniappe, i.e., maybe spend some principle when we get 'really' old - 80's

Life's events will determine estate - or not.

HI unclemick! I'll bet you'll have trouble cutting loose
of your "cheap SOB" habits. But, assuming you succeed
and become a
big spender in your old age, you'll still be my hero

JG

[Beachbumz]

Hi JG! Count me in the "die broke" group. We don't have any children, but if we did, nothing would change. We have told our parents that if they don't spend their money, we will!!! I've seen to many heirs fight over inheritances and/or squander the money. If anybody's squandering my money it's gonna be me...or at least that's the plan. (Of course we plan on living to 100 too!)

The Beachbumz

[intercst]

Quote:

Maybe this has been covered (too lazy to look). How many have planned for an SWR which includes a timed reduction of their principal (the dying broke idea) vs. preservation of principal right to the end? *Of course either idea is subject to change once you get started. I would just like to know how many started out (or plan to) with which theory. *My plan is to never touch my basic fixed income investments in place, and to only replace them as they are called or mature. *In my case I just decided the amount of income being thrown off was about right and (supplemented with SS, spouse's job, and real estate related cash flow) would suffice forever. JG

Anyone using a 4% SWR from a diversified portfolio is implicitly assuming they'll be broke in 30 years if they happened to retire on the eve of the next Great Depression.

intercst

[Nords]

Kid's inheritance? What kid's inheritance?!

[ESRBob]

I would like to spend the money, but have zero confidence in being able to finesse that. The data get so sensitive when you run these projections out over long periods of time that the only safe way to plan, I believe, is to try to keep the real value intact so that you are not slipping backwards.

Its sort of like a bottle filling up. You fill and fill and nothing seems to be happening, and then all of a sudden, whoosh, it comes flying up the neck.

My sense of these portfolio meltdowns is similar (obviously opposite!) A few high inflation years where you boost your withdrawals, a few bad years in the market, suddenly your "Safe 4% swr, adjusted up for inflation" represents 10% of your portfolio that year, but you take it anyway because the system you follow suggests it is safe. Another year or two of this and you have irreparably decimated the portfolio -- it can never recover., or at least can never pay anythying close to what you used to withdraw from it. Sure you'll get some more years out of it, there is money in the bank, but you are mostly just spending principal at that point. THe magic of SWRs that spend only the real appreciation in your portolio is long gone for you.

Then unless you have worried yourself to death during this slow-motion trainwreck, your genes keep going but you don't have anything to live off. (or if you are already elderly, you have SS.)

All this applies if you spend a lot more than SS or a pension and need your portfolio to provide you income for life. If you are happily living on the 1200 or 2000 a month you get from SS, or if you have a COLA'd pension, then you can forget all the stuff I said and just laugh at people in my predicament.

So maybe you can get to 80 years old and decide now I've only got 30 years left, it's time to start spending at an 'unsafe' SWR -- time to start pumping it up to 7 or 8%. So what do you do -- get a sportscar and start taking chicks on cruises to the Caribbean? You do that and you'll have so much fun you'll probably live to 120, with your last 10 years being in the poorhouse!

Basically anyone who is spry enough to enjoy their money is too young to really start spending down their principal. And when you aren't spry, you're not going to be able to enjoy the money anyway. Maybe save it for nursing care.

By the time you are ready to pass it on, your kids will be in their 70s or maybe even their 80s anyway. My point is not about an obligation to pass your $ to your kids, just the fallacy of willfully thinking you can hedonistically spend it down in some sort of controlled descent and run out just as you are crawling off to your grave.

Who knows the hour of their death? Even the actualrial charts are just taking the median: half the people live longer than the 'life expectancy' they are publishing.

[Roger_R]

Not having kids, it's pretty much a non-issue with me. The dowside of this however is the lack of extended family care in the later years. In the perfect world I'd like to have a perpetual nest egg or long term care to cover in-home health care or assisted living. Having seen the type of care and living conditions in the medicaid qualified nursing homes, I'd like to prolong some form of semi-independant living as long as possible. Somehow I see a perpetual nest egg as a hedge against some of the more unpleasant old age eventualities.

[cute fuzzy bunny]

I dont plan to eat principal, but when I get closer to my late 50's (say 14-17 years from now), I might play a little faster and looser with the money.

Given my good sized rollover IRA, my wifes 403b, her pension, and both of our Roths that I've been maxing out since last year, plus the possibility of social security, PLUS the majority of my taxable account still being intact, little Gabe can probably count on suddenly becoming an ER capable millionaire sometime in his 40's or 50's.

I really, really dont like the idea of eating principal on a planned route with a fixed end date, or counting on government 'inflation protected' bonds based on funny numbers to give me the same lifestyle 30 years from now that I enjoy today. You never know when all of a sudden people start living to 100 or 110 and a lot of those years are fairly pleasant. Medical science is really improving, and I think the improvements will be geometric.

When you consider that when social security was conceived, not very many people made it to 70. Now if you dont break 80 you must have been doing something to yourself to shorten your life.

I suspect social security is a mess thats going to get messier.

Beware any little green food pellets provided by the government in about 20 years

[kayelem]

Agree with ESR Bob...generally would like to spend it, but since I don't think I am smart enough to work that out...we have series of "course corrections" that we would hit before deciding to dip into the nest egg.

sell home and move to less expensive place
sell farm (inheritance) keeping now for sentimental reasons
reduce spending from current levels

I hope we'll be giving it away at the end, but can't count on it. But the plan is only to spend dividends and earnings and keep the egg intact as long as possible

Hello kayelem. I too had some property that had been
used by my family at least since 1940. I was keeping it
mostly for sentimental reasons (like your farm).
But, it produced no income and although I was getting
along okay, I could see that financially the smart move was to sell, which I did over the past 4 years. With hindsight it was the right strategic maneuver. I still
get a little twinge about selling though.

JG

[kayelem]

Yes, John. We'll probably eventually do that also, but it's my husband's call and he is more sentimental about it than I. (He grew up there and grandfather was a sodbuster) For now it does provide us a small income as well as his cousin who actively farms it. Maybe when the cousin retires DH will decide to sell.

Anyway, it it the one financial decision I will leave completely up to DH.

Well, as I said, it was the right thing to do financially.
But, whenever I am there (often) I suffer a bit of
angst laden nostalgia. A great deal of my youth
as well as adult good times took place there. If I wasn't
living so near to the edge of ER trouble, I would buy a new "spread"
(Texas?) and start some new traditions. My DW would love that.

JG

[indymom]

I helped sell my Dad's house last summer when it became clear he was not coming back this time. It was emotionally draining, and I haven't been back on that street since. Dad moved there when he was 14, and lived there 80 years. It was the best thing to do, tho, and that is a good feeling.

[BUM]

Quote:

I helped sell my Dad's house last summer when it became clear he was not coming back this time. It was emotionally draining, and I haven't been back on that street since. Dad moved there when he was 14, and lived there 80 years. It was the best thing to do, tho, and that is a good feeling.

indymom,

We are going thru that right now. DW can hardly walk in the place. Im there almost daily refurbbing...since last August! Getting it ship shape for sale in March/April.

Anyway, the ole' man always said he wanted to die at the MacDonald's counter buying a senior coffee with his last buck. Didn't work out that way. He was eating in to his principal and living the way he wanted. Died at 85 in his own bed.

The ole' man was also very generous. His view on inheritance was, "Give with a warm hand."


BUM

Hello BUM and indymom.........."Give with a warm hand",
that's a good one. I never heard that one either.
I have known some folks who took that view to an extreme, and when I was younger (and perhaps less
wise) I might have had a twinge of envy. No more though. My folks are comfortable for now, but with a
relatively small net worth and no LTC coverage, they are
taking some risks for sure. In our case, we obviously can't "give with a warm hand" as much as that appeals to me since I retired on a wing and a prayer and have a long way to go (I hope ).

An aside. When I was single I dated a woman whose
mother (widow) gave her and one sister $10,000 each
every year, faithfully. The sister said she didn't need it
and gave hers to my lady friend. I was quite impressed
by the generosity of both generations.

JG

[mark]

Heres my spending plan -

Divide portfolio and after tax pensions annually over remaining IRS joint life expectancy
Unspent pension is invested into portfolio. Portfolio withdrawal will vary with value.
Surviving spouse switches to single life expectancy withdrawal after lesser SS ends.