Had an epiphany... I may have over saved

[Gumby]

I am not going to assume we over saved until we reach our deathbed.

A variation on Solon and Croesus - "Count no man happy until the end is known." (Herodotus, Histories, Book 1)

 

[RunningBum]

For some reason we are not concerned about this scenario.....

Quote: Even better: The IRS recently issued a ruling that it wouldn’t “claw back” those large gifts should the estate tax exemption revert back to the old threshold after 2025, giving taxpayers assurance that any planning they do today will hold up. However, if you don’t use up the full exemption amount and the threshold does get reduced in the future, you won’t be able to do so retroactively.

https://www.cnbc.com/2020/02/18/cre...w-to-take-advantage-of-big-tax-exemption.html

Wow, that's really interesting. I could see my estate, including real estate, being over the $5.5 million mark if things go right. But I can't see gifting a significant amount before 2025 since I'll only be 64. I guess since it probably won't be that much over $5.5M it's not that big of a deal, or I could donate enough to charity to cancel out the estate tax.

 

[audreyh1]

I had forgotten about the already built-in (post) 2025 sunset. Obviously this gives time to those who are in a position to make huge gifts. But yeah, we’re not old enough to do so on that massive scale.

I expect furious activity in 2025 if it looks like reversion is inevitable.

As it happens we did make fairly large gifts this year and each of us will be filing 709 against our individual estate tax exemptions.

Where did you get $5.5M? Looking at the same cumulative inflation adjustment the old threshold would be around $5.26M today. Did you mean $5M inflation adjusted?

 

[donheff]

A variation on Solon and Croesus - "Count no man happy until the end is known." (Herodotus, Histories, Book 1)

+1 We are essentially in OP's situation. We are currently at about 1-1,5% withdrawal.
When DW hits RMD age in four years we will probably start gifting s fair amount to the kids but we won't overdo it. Other than, some specific charitable giving, we plan to give the bulk of the remainder to the kids. Buffet is directing the bulk of his billions to charity but he is has designated many millions to each of his kids. I don't have billions so I want to make sure the kids are in decent shape and that will take most of our pot. They don't have the safety net of a COLA'd Federal pension like me.

 

[RunningBum]

Where did you get $5.5M? Looking at the same cumulative inflation adjustment the old threshold would be around $5.26M today. Did you mean $5M inflation adjusted?

Direct from the IRS.
https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax

A filing is required for estates with combined gross assets and prior taxable gifts exceeding $1,500,000 in 2004 - 2005; $2,000,000 in 2006 - 2008; $3,500,000 for decedents dying in 2009; and $5,000,000 or more for decedent's dying in 2010 and 2011 (note: there are special rules for decedents dying in 2010); $5,120,000 in 2012, $5,250,000 in 2013, $5,340,000 in 2014, $5,430,000 in 2015, $5,450,000 in 2016, $5,490,000 in 2017, $11,180,000 in 2018, $11,400,000 in 2019, and $11,580,000 in 2020.

It was nearly 5.5M in 2017 before it was doubled (with inflation) in 2018. Assuming they return to half in 2025, it'll be $5.79M + inflation from 2021-2025.

 

[Car-Guy]

I like the idea of dying as I spend my last dollar but I haven’t figured out how to do that just yet.

Clark Griswold being given a such a suggestion.

 

[The Cosmic Avenger]

I was starting to feel like we were running up the score, so to speak, saving more than I had any intention on spending...then work dried up, and now we're living fine a little below our projected retirement budget, just to be sure that the later years are more secure. If I go back to work, then maybe we have oversaved a bit; if I don't, then maybe we haven't. I'd rather have some left over than run out before we die!

 

[Koolau]

Interesting discussion. Mentioned elsewhere, I was FI at 51 but stayed until 58 (yeah, I know.)

Probably a couple of years past FI, I was at my desk and sauntered down to the break room to buy a soda - which was sort of my daily, afternoon ritual. It had always made me feel just a bit profligate to spend (in doz days) $.65 on a 20 oz diet Coke. After all, it's not like I couldn't have gotten water from the fountain. I was used to thinking "Every cent I spend now is MORE than a cent I won't have in FIRE."

For some reason, it suddenly hit me. How AM I ever going to spend all the money I have already saved. I would have to buy a LOT of sodas and a lot of other stuff to get rid of my stash! I wouldn't say I (usually) obsessed on my portfolio, but I checked it often to reassure myself that I COULD leave any time the BS bucket got full. So I guess it was fresh in my mind that I had this chunk of money when ever I did pull the trigger to leave Megacorp.

Now, 20 years or so later (15 retired) I have the same thoughts as OP. I may have saved too much. Alternately, maybe I just haven't ever gotten over my frugal ways. I've never flown first class, for instance, even though I could. What's up with that? So, honestly, my epiphany came even before FIRE. Now, the reality weighs on me every once in a while. I never planned to leave a big stash to kids - to charities, maybe, but not people that money might ruin.

So, I guess I'll decide not to worry about it. I'll continue to w*rk on "blowing that dough" (I'll think about that in the morning.) OR, maybe inflation will rear its ugly rear (heaven forbid.)

So I don't have an answer. I just feel blessed that THIS is an issue rather than thinking about going back to w*rk. Okay, I feel much better now though YMMV.

 

[Hopeful]

Every once in a while I get the thought in my head that we have over saved, then the stock market will have a day that pushes those thought to the back of my mind.

 

[ugeauxgirl]

I think we oversaved as well but time will tell. In our case, I wanted to retire and my DH kept saying he'd feel safer if we had just a little more. When we do finally start drawing, it'll probably be less than 2.5%. Yup, saved too much.

 

[whatnot]

We have only been retired a little over 2 years.
DH pension began mid 2018. DH IS 63 and I’m 59.. We have not collected SS yet.
Our WD rate for 2019 and 2020 was 3.5% of 12/31/2018 portfolio. Of this amount I move 20k annually to Ally savings account for future major home project or car replacement.
In my opinion, it is way too early to determine if we have over saved. A lot can happen in 30+ years. Luckily we do have non essential items we can reduce if necessary.
My hope is we do have $ at the end for our children and grandkids. I don’t understand the comments that inheritance can ruin them. I truly believe that our generation has been very fortunate. For example, DH has a pension- that is rare today. So i will be very happy if there’s a little $ at the end to make their lives a bit better.

 

[Exchme]

I had done all the on-line calculators and even built my own spreadsheets that looked at average returns and historical returns. Everything said we're OK, but I couldn't convince myself, let alone DW, so we are still working.

Then I did the simplest possible analysis of a "no return on investment", "no inflation", "no change in spending", "no change in laws" world. Assumed both of us lived to 90.

Found that we would never spend more than 42% of what we have. So I think we have over-saved!

 

[EastWest Gal]

Having inherited some of my portfolio, I don’t mind at all if I’ve over saved. Until Medicare age, my only fear is not hiring able to get health insurance then having a million dollar health problem.

DS is struggling to find a decent wage career path that makes him happy, but he has a number of activities that give him joy. If he inherits his retirement, that’s fine with me.

Career achievement is overrated. Too many people who were department chairs and medical leaders have abruptly quit and moved to other career paths with greater life satisfaction. 18 months after retiring, I’m still struggling to deal with the damage done by chronic burnout.

I’d rather see my offspring have a joyful life than have to worry about food, clothing, and housing in the event of a job loss.

Having over-saved is a very good problem to have.

 

[npage]

Until Medicare age, my only fear is not hiring able to get health insurance then having a million dollar health problem.

.

My biggest fear there too, no matter how many FIRE calculators I run. I retire at 47, long about 54 or pick a number before Medicare, there is no healthcare available for political or other reasons yet to be determined. You get really sick at that moment with million dollar bills. Not hard to do.

It's really a shame you can do everything right financially and that always hangs over us US citizens at least. That stress alone is killing me

 

[RobbieB]

The only number I care about is "max out of pocket"

 

[Koolau]

My hope is we do have $ at the end for our children and grandkids. I don’t understand the comments that inheritance can ruin them. I truly believe that our generation has been very fortunate. For example, DH has a pension- that is rare today. So i will be very happy if there’s a little $ at the end to make their lives a bit better.

I guess we all know our kids better than anyone here on the forum. It's always been my opinion that way too much money is worse than a bit too little money. Kids learn more from struggling than they do from sudden wealth. We have consistently helped each of the kids. We've helped with down payments on houses, funded Roth IRAs (now worth 50K), often given unsolicited gifts (10K) and been available as a financial back up. In short OUR plan has been to help our kids get established while we are still living.

With that in mind, we do not feel a need to leave our kids all our wealth when we die. We'll leave a nice "chunk" that will be something nice to remember us by, but we won't dump half a mil on each one. The kids know that our priorities through our life times (and theirs) has been to our favorite charities. We've always seen that the kids had everything they need and we'll continue to do that as long as we live. However, our charities - who have no way to w*rk for money - will get the lion's share of the remainder of our wealth - should we continue to maintain and/or grow it. If illness or inflation destroys our wealth, all bets are off in any case. May that never happen to any of us!

I don't expect anyone else to do what we are doing or maybe even understand it. However, no one else knows us or our kids like we do. I think each family needs to have their own plan and execute that plan to the best of their ability. As always, YMMV.

 

[tb001]

Having inherited some of my portfolio, I don’t mind at all if I’ve over saved. Until Medicare age, my only fear is not hiring able to get health insurance then having a million dollar health problem.

DS is struggling to find a decent wage career path that makes him happy, but he has a number of activities that give him joy. If he inherits his retirement, that’s fine with me.

Career achievement is overrated. Too many people who were department chairs and medical leaders have abruptly quit and moved to other career paths with greater life satisfaction. 18 months after retiring, I’m still struggling to deal with the damage done by chronic burnout.

I’d rather see my offspring have a joyful life than have to worry about food, clothing, and housing in the event of a job loss.

Having over-saved is a very good problem to have.

I could not agree more with everything you said about your DS. I just don’t understand the idea that money will ruin kids. IME, the ruining usually happens far earlier than an inheritance. I’ve seen wealthy kids who are amazing citizens and spoiled brats who contribute nothing. How parents handle issues of money make a huge difference, as does temperament of course.

As someone who put a lot into my career and had a lot of stress around financial security, I would love nothing more than to have my kids grow up and be able to choose a career they love, irrespective of the dollars involved.

 

[npage]

The only number I care about is "max out of pocket"

A good approach, it still assumes some plan will be available with a premium one can afford to have a "max out of pocket" to begin with.

I hear ya though. In essence if your premiums are $12,000 a year and max out of pocket is $18,000 the two combined could be budgeted at $30,000 a year assuming a policy remains available for purchase.

The way the rules are always being challenged by politicians, insurance industry, doctors and all sorts of other interested parties; it is still a bit of a crapshoot at best.

 

[jollystomper]

Part of the reason we may have "over saved" are two unexpected items:
1) An inheritance from our parents estate that we did not plan on, that due to patience became even larger.

2) Planning for a worst case medical costs before medicare that did not materialize. In sum, based on ACA non-subsidized rates in 2016 (due to my pension we would not be eligible for any subsidy) and advice from our Megacorp financial planner, we planned for close to $150K in medical premiums/expenses before Medicare. My retirement method and Megacorp retiree insurance plans will make actual costs less than $50K.

We have no need to raise our other spending. While we do not know what the future holds, for now the difference will just go into the "over saved" pot.

 

[DrRoy]

Have to admit being in the over save camp. We spent $60K on renovations this year, and only needed 2.6% WR for that. Since so much travel was cancelled this year, we have $10K of our $30K travel budget left over. I figured that if we had no renos, and normal travel, we would only need 1.6% WR (plus the modest pension). I'm planning now to redo the home office like an English Tudor library with lots of oak.

 

[Golden sunsets]

I can't be all alone here. Like most on this site (I would assume), long time big % saver, always LBYMs, "relative" frugality in my genes, worked the plan with an designed exit at 55 (when kid 4 was out of the nest/independent). I moved the goal posts many times as I dialed in my desired retirement spend (FatFire growing by inflation annually), ran (what now appears to be ridiculously) conservative assumptions (i.e. no SS, all my withdrawals taxable as income despites having 50% in after tax accounts). Fast forward to today, I'm 56, decided on a phase out (still earning income mainly because my biz is still very lucrative even on a very part time/Covid world basis and I need to fill some idle time). None the less, I have started running real calculators that take into account a "real" withdrawal strategy, which includes plugging in my basis on my after tax accounts, tax implications based on our current known taxes, a conservative 75% of SS at age 70, a 6% annual return on a 60/40 AA, and all the models say I will easily double my NW by age 94! Yes, 1st world problems that can be solved thru charity and gifting to kids. None the less, funny how we play Jedi mind tricks on ourselves to motivate us to "get to the number" and then you get there and wonder why you worked like a dog to hit some magical number that was overkill. Anyone else wakeup to this?

Dawgman; If you had it to do over again would you really do things differently? I think not. I think you love the belt and suspenders position you are in. I think you loved your business and had no reason to cut the cord sooner. I think you've led the life you wanted too, with very little if any deprivation and still managed to pile up a bundle. Good for you.

I say this because that is exactly what we did. Heck our withdrawal rate has never even approached 1% and probably never will. I recognize your mindset and through your posts over the last few years know that you spend a bundle and can continue to in your retirement. I don't know why you are second guessing your path to wealth.

 

[tenant13]

It's been more than a year since I stopped working and only now I'm fully grasping that for years I've been too focused on making and saving money and neglecting what's really important to me: time. An unusual resource in that it can’t be saved. Your life is passing by every second regardless of what you are doing.

It turns out that being fearful about money, working at a ridiculous job and oversaving robbed me of enjoying my time.

 

[Jerseytunahunter]

I find myself in the same situation, although I'm still working. The plan is to sell my company in three years @60. At that point our income will be triple our expenses (with a heavy travel budget). I have a new a new concern that didn't even exist a year ago-a huge increase in taxes. Considering the 3 trillion spent in COVID relief and an election who knows where we end up tax wise? NJ Gov. Murphy has already instituted new taxes and/or increased taxes on "the rich". I saw on TV someone said there are approx 3,000 counties in the U.S. If so the relief fund equates to $1 Billion per county...might be working for a while.

 

[kgtest]

Recognized that some years ago! The DW and I started gifting the annual no tax maximums to the DD a few years ago.... Other than that, I've been practicing blowing that dough on an accelerated schedule.

Phenomenal. My ole man uttered the words 'jeez I might need to start giving some of this to my kids I cant spend it fast enough'

A good problem to have. But so far no gifts hehehe.

 

[HI Bill]

We were all savers before our retirement, so even after our retirement, I think we still enjoy seeing our numbers grow. Hard to break the habit.

Take a lesson from Robbie- blow that dough! I saved and scrimped and lived below my means until 3 months ago. Just bought our dream house, and are in the process of buying furniture, garage workstation/cabinets, and doing improvements. I'm having a hard time coming up with enough $ to spend that don't require paying more taxes this year!