Spending vs Leaving a Large Estate

[38Chevy454]

I look at it like this, maybe some will say I am too simplified: keep a certain base to cover long term care needs, keep a certain base to cover fixed expenses, and the rest is available for discretionary. It is easy to get too caught up in the details and the how long to live for planning question. I have a nice house paid for, numerous nice vehicles paid for, and overall good enough savings to allow for that discretionary fund to be tapped when I want. I can always get money out of the house and vehicles if needed if economic things turn to crap. So once I have the basic minimums covered, the rest I just view as spend on what I want to.


For OP marko, since you are in what I reference above as a nice amount of discretionary funds, spend some on things you can enjoy now. Go on that big vacation you have always thought about. Buy a new car, or some other large cost purchase. Give some away as gifts to people you want to help.


However you plan it, there will be some left at the end. You have the ability to make changes as needed to adjust to financial changes as they occur. Such as a big savings reduction due to market downturn or major medical issue. Could be that your savings is going up more than you thought. It can work both ways, just make adjustments.

 

[tmm99]

Definitely a good problem to have (compared to having nothing), but I completely understand the dilemma. Can you imagine getting 1M when you're, say, only 30 years old? That would ruin the lives of many young people, even if they were not lazy people to start with. It would reduce the motivation/drive to succeed for sure. Maybe the best thing to do is to leave kids money when they're in their 50s (even if we die sooner) LOL. And I think it would be better if they don't know any big money is coming their way. DH's children are still young (late teens) but they're lazy. And if they knew any $$ was coming their way, they would count on it and not try to be financially independent on their own.

Also spending the right amount of money is hard to do. We don't know how long you have left to live, we don't know how much money we may need later in life, etc, etc. My personal feeling is, no matter how much or how little money I have, I want to keep the $$ amount I had when I retired, until the day I die, as much as possible (plus the house, I guess). (I cannot imagine myself ending up with, say, 100K in my bank at Age 95.), so anything over the initial $$ when I retired, can be taken as gravy and it's eligible for splurging (for gifts, charities, house renovations, etc.) I imagine spending more will become easier when we get older...

It sounds like you'll have so much money left over... Maybe you could gift some money now to friends, charities, etc if you don't want the whole thing to end up with your nieces and nephews. If you're worried that you might run out of money, I guess you could split your money upon your death to go to different people besides your nephews and nieces?

 

[nwsteve]

Consider the high cost of long-term care, especially dementia care. That should scare anybody into hanging onto their money.

This risk along with the many other age related disorders is exactly why we opted for a Type A CCRC. It was against my grain to pay the the entry fee as well as the monthly fees BUT, we now are pretty assured our future balances will be there. While we are unlikely to have a $10 million "challenge" now, end of life balances will likely exceed our State's thresholds for being exempt from its estate taxes.
We have started to explore endowments at our university and have increased our charitable giving. We are fortunate our DD & DSIL are doing well& are unlikely to be in need of inheritances. Also boosting our 529s for grandkids.

 

[SecondCor521]

I agree that spending more won't bring more happiness, especially at OP's levels.

I also think that how and when to distribute excess is a conundrum with lots of different options to choose from.

The thing I wanted to add that hasn't been mentioned yet is to be more data driven.

It's fairly easy to go to a reliable source and get a 95th percentile life expectancy. You can also go to FIREcalc and get a 95th percentile spending level. The thing to remember is that these are independent variables, so the chance of surviving that long is 1/20 and the chance of running out of money is 1/20. Therefore, the chances of both is 1/400, which is close enough to zero in my book.

If that 95th percentile spending number is $200K for you, and you're spending $150K, then give away an additional $50K.

If you want to set aside a sum for end of life care, you can do that off the top before calculating the 95th percentile spending number. You can be data driven here too - call the local CCRC and ask them how much memory care or assisted living costs per year.

Add in the decreased boat costs (and boat sale proceeds?) in FIREcalc if you want to, although that's probably mouse nuts compared to the CCRC costs.

Rerun the analysis every few years.

...

I think it's easier to be objective when it's not your own life you're trying to manage. I run the above kind of analysis on my Dad. He's not spending enough, and I tell him that periodically, but he is at the point where he just spends whatever he wants, nearly everything is on auto-pilot, and the money just grows.

I also think there's an emotional component. I could run through the above analysis with my Dad, but I don't. Why not? Because it's not about the math, it's about the "what if bad thing X happens?" thought pattern of a child of the Great Depression. And nobody can guarantee that bad thing X won't happen, so one gets stuck. Until you decide that you'll make it work even if bad thing X happens, or assume it won't happen, or just ignore the possibility entirely.

One trick I've tried is to look at my own life as a dispassionate observer and ask myself what I would advise someone if they were in my exact situation. Then try to take my own advice. Generally and lately it's the same advice - try to spend more money in areas that would make a difference, which for me is charity and eliminating annoyances. And also make sure my estate plans are well thought out and in order, but that's less of a concern because I'm only 51.

 

[audreyh1]

Consider the high cost of long-term care, especially dementia care. That should scare anybody into hanging onto their money.

Yeah, we’re self funding for LTC, so I definitely plan to have a chunk in investments to cover that.

 

[explanade]

I've thought about being in a similar situation. Leaving too much $ on the table when we die. And we have no kids. Thinking about charities to leave to.

I'm considering boosting spending, but there really isn't anything that I want other than a new house. I don't want a big house- just something maintenance free. I don't want a lot of things - I want a simpler life. Maybe increase travel, but DW is an every other day care giver for her DM. And there is still a lot of frugal genes in me that are tough to shake off.

We just started taking SS. So income is up and spending is down. We are currently around a 2% WR. I never dreamed our net worth would ever get to $10m, but it could in 20 years at this rate.

The key is to use more $ to maximize our happiness. Just need to figure out what would do that.

New camera gear every year!

Sell or donate your old gear!

Actually, I have a perfectly fine D750 collecting dust since I got a Z7 a couple of years ago.

I haven't been able to use my camera much since the pandemic.

Selling is such a hassle. But maybe I will do it anyways even if I don't get good value in return.

Definitely going to upgrade my 2017 iMac to one of the Apple Silicon chips at some point sooner than later. Have an even older MacBook Pro.

Rumors of bigger screen iMac with the new Apple Silicon chips coming soon.

Maybe I will get a RAID system to replace my collection of a half dozen USB drives which store my photos and media.

Definitely more trips to take more photos!

 

[explanade]

Has the pandemic changed anyone's calculus on say when to take SS or even your spending rate overall?

Crazy thing about the pandemic is that we had a huge rise in markets.

But yeah, there is good reason to be cautious because of the high valuations we have now.

However, there are predictions of 5-6% GDP this year and still a robust GDP growth next year if we progress out of this pandemic as many are predicting.

 

[Midpack]

Mid 60's and 30 odd years to go. I love your confidence. Make it happen.

Mom lived to 93, Dad to 96...believe me I don't want to live that long, but I guess I should plan for it.

 

[Gumby]

We have the same (first world) problem at age 66/64, the money is piling up much faster than we’re spending it **, and we live a very comfortable life wanting for nothing really. We’d love to give more to charity, but with 30 odd years to go and no secure income other than Soc Sec, I can’t bring myself to spend more. DW is even less inclined to spend more. Historical odds are very good but geopolitics or other factors can screw up any plan and I don’t want us to depend on others. We had a $150K boat that cost me $15-20K/yr to race but I sold that and won’t buy another. I’ve looked at a couple six figure cars but I just can’t bring myself to buy, especially knowing how fast cars depreciate - I don’t really want one anyway, seems frivolous for me.

I’d love to know how to thread that needle now versus nearer the end. We don’t have kids, so charities and nieces/nephews are our beneficiaries.

** Not that I believe it but FIRECALC says our residual will be between $5-40M, average $20M at 100% success rate.

I find myself in almost exactly the same position, just 4 years younger. We have everything we need and probably everything we want. We already have two relatively new cars for everyday use, and an older roadster for fun. We have the house we've always wanted. We would travel more, but money is not the current constraint and never will be.

I just can't see spending money for the sake of spending money, and we are entirely on our own as far as elder care goes, so I am not inclined to give huge amounts away yet. I don't even have a firm idea of who I would like to see our projected rather large estate go to when the time comes. I'm fairly certain that will end up being the young wife's decision anyway.

So, I don't have any good answers.

.... Generally and lately it's the same advice - try to spend more money in areas that would make a difference, which for me is charity and eliminating annoyances....

I would gladly spend money to eliminate annoyances, like replacing my shed door that blew off in a windstorm a few weeks back, taking much of the frame with it. But just try getting a craftsman to come work for you. Around here, it appears they don't need money, because it's almost impossible to get someone to call back. I have found over the years that it is far less hassle to just do things myself. So I ordered my own new pre-hung door and will install it when it is delivered next week. It's a shame, because I have the money and don't mind spending it. And it's not just carpenters. I've had the same problems occur with plumbers, electricians, tree services and more. You name it, they apparently have no real interest in doing it.

 

[finnski1]

You said, that exactly how I feel.

Well as I get older I find myself becoming more and more philosophical about things and also more nostalgic as well. Not in any kind of melancholy way but just a more content outlook. I really like it.

 

[NW-Bound]

With a WR of 2% in the last 12 months and that includes cash for a new car, my WR will be quite low when I start my SS at 70.

I have no desire to spend big money. No fast car, boat, plane. Nope, these things don't interest me.

My wife just asked me last night if we should sell our 2nd home in the high country. I don't want to do that yet, but can see not being able to maintain 2 homes in the future (I like to do things around the homes myself). So, I don't see buying any more real estate.

Is having too much money a problem? I don't think so. Is not spending money a problem? I don't see why that is true. So, I don't lose sleep over this.

Regarding donation, I guess we can increase it. Quicken tells me my Gifts/Donations category is about the same as Travel Expenses.

 

[Ronstar]

New camera gear every year!

Sell or donate your old gear!

Actually, I have a perfectly fine D750 collecting dust since I got a Z7 a couple of years ago.

I haven't been able to use my camera much since the pandemic.

Selling is such a hassle. But maybe I will do it anyways even if I don't get good value in return.

Definitely going to upgrade my 2017 iMac to one of the Apple Silicon chips at some point sooner than later. Have an even older MacBook Pro.

Rumors of bigger screen iMac with the new Apple Silicon chips coming soon.

Maybe I will get a RAID system to replace my collection of a half dozen USB drives which store my photos and media.

Definitely more trips to take more photos!

You bring up some great ideas!

I like that Raid system idea. And the Mac upgrade.

I need to swap out my Nikon D810 for a D850 and book trips to Glacier and Acadia stat!

 

[Amethyst]

This has been a great aggravation since moving to this part of Florida.

In Maryland, we had a very good contractor for house things (he was pricey, but hired his own subs, so quality control was a given) and a handyman who was really a craftsman (again, $$ but value).

Here...well, you get whomever you get, pay what they ask, and hope for the best. Or try to DIY. However, I am not getting up on my roof to wash it.

I
I would gladly spend money to eliminate annoyances, like replacing my shed door that blew off in a windstorm a few weeks back, taking much of the frame with it. But just try getting a craftsman to come work for you. Around here, it appears they don't need money, because it's almost impossible to get someone to call back. I have found over the years that it is far less hassle to just do things myself. .

 

[RobbieB]

Do what you want to do.

 

[travelover]

Consider the high cost of long-term care, especially dementia care. That should scare anybody into hanging onto their money.

Amen to that. Just having the surety that I or DW can go expensively and not leave the other destitute is worth hanging onto a pile of money and not fretting over under spending. We have everything we want as it is.

 

[Cayman]

Consider the high cost of long-term care, especially dementia care. That should scare anybody into hanging onto their money.

Close relative in their 70s is paying more than $110k/yr to live in a memory care facility. The spouse continues to live (separately) in the home they've had for years. No LTC insurance, They self fund. Thankfully it's not a financial concern for them, but it would be had they blown their dough while healthy and young.

 

[Sunset]

Consider the high cost of long-term care, especially dementia care. That should scare anybody into hanging onto their money.

I'm busy looking at nursing home options for Dad.

One we toured last week was $123K entrance fee, then around $75K/yr for assisted living, and $200K/yr for nursing care.
He might need to go straight to nursing care.
At $200K/yr that adds up in 5 yr

 

[Bamaman]

I'm busy looking at nursing home options for Dad.

One we toured last week was $123K entrance fee, then around $75K/yr for assisted living, and $200K/yr for nursing care.
He might need to go straight to nursing care.
At $200K/yr that adds up in 5 yr

We paid $177K security deposit to put my mother in a very plush CCRC apartment. It was $2,050 a month including 20 meals prepared by a Dutch chef. She ended up needing 24/7 private help @ $12 per hour, when she really needed to be in a nursing home setting. We got back 90% of the $177K at her passing.

Local nursing homes are about $7K a month. It doesn't take long to draw down pretty substantial savings of middle class people. Mom was down to her last $5k cash when she passed.

 

[Closet_Gamer]

DW had a great aunt who wound up in this spot.

When she was about 90, checks to the whole family started flying fast and furious.
She sent at $5000 to every extended family member down through great nephews/nieces. First gen nephews/nieces got more than that.

Fluctated each year from there, but she burned down the stash in a way that really made her happy and I can tell you really helped a lot of young families (like us). When she passed away there was a tidy final dispursement handled in the same way.

Each check came with a note typed on an old-fashioned type writer.

I think its a great thing to aspire to.

 

[savory]

Much can happen in the next 20-25 years.
We most likely will not have that much, but more than our kids probably ever imagined.
WE plan to continue spending as we wish, and as we feel comfortable, gifting to our kids, and charities as we go.
I don't care if our kids inherit more than they think, they have been raised well, I believe, and are pretty good budgeting. If it makes their lives more comfortable, great.
You never know what the future holds.

If you have concerns about beneficiaries and "lottery syndrome", then give them less percentage and more to charities. Charities can always put money to use, no matter how much or how little.

This is consistent with our approach.

 

[donheff]

LOL. It is hard to blow that dough. Like Audrey, I take a 3% SWR each year and keep the unspent portion in a pseudo account for gifting and other blow that dough activities. I have tapped it for largish house down payments for DS and DD. Still, we have more than doubled our portfolio in the last 10 years. I'm approaching 73 and DW is 68 so our horizon is shortening. I still find it hard to spend "frivolously." Our oldest grandson is 7 years from college, three more grandkids will follow in the years after that. As long as the market keeps delivering until then, I expect to ramp up gifting significantly to help the kids with those expenses.

 

[jollystomper]

What we leave to our children is secondary to spending and enjoying life today, as well as setting aside for expenses to minimize the impact on our children (such as LTC costs).

We are 63 so we *might* have 25-30 years, but tomorrow is guaranteed for no one. So we spend to enjoy and make comfortable whatever time we have. Part of that enjoyment will be "small" gifting to children (as well as to charity) as needed and as we desire.

I understand that past performance is not indicative of future results, but my almost 3 years of retirement has increased our view that, despite the ups and downs, on our path, even with a few surprises, we are not going to run out of money.

 

[kcowan]

We have been at it for 19 years with perhaps another 19 to go. We have achieved a balance with more emphasis on blowing the dough. It has surprised some people but the charities and heirs keep quiet about it. Some of the charities have plaques or tiles but they are inconspicuous.

We are still accumulating because of an 85/15 allocation. We think The Fed rate will stay low because of post-pandemic inflation and that should continue to fuel the markets?

 

[Chuckanut]

It's a shame, because I have the money and don't mind spending it. And it's not just carpenters. I've had the same problems occur with plumbers, electricians, tree services and more. You name it, they apparently have no real interest in doing it.

It's the over emphasis on college in the school systems that is part of the problem. People who can make things and fix things are in high demand and often earn more than many college graduates. But, thanks to many state legislatures that demanded 'higher standards' the schools have to assume everybody is college bound. So, we will teach our children all about quadratic equations in high school, but nothing about how to hook up two switches to the same light fixture. Or repair a cracked pipe that froze. Or hang a new door onto your old shed.

 

[RunningBum]

You're a trusts & estates specialist attorney? I'm not. All I know is that there can be some flexibility in CRTs. It is not for me to say that a CRT is suitable or not suitable to a particular situation. That's the "seek competent advice" piece.

Then why did you suggest looking into it when you clearly don't understand it? The link you provided reinforced my understanding of how they work, and there's not one thing I read that makes me think it helps the OP's dilemma.