US News Article: Socking Too Much Away

[larry]

I still like the old saying, "rich people plan for 20 years from now, poor people plan for Saturday night."

I'd always rather err on the side of being too conservative when it comes to savings.

 

[d]

The ones that are truly 'free spending' won't be able to retire

... they'll be the ones who do in fact end-up spending less as the age ...

 

[Texas Proud]

I was thinking about that, too! I was, in fact, thinking beyond family and imagining setting up a local scholarship fund (worthy graduates of the local high school, something like that).  See, the only barrier to college for my family members is desire, really.  But if a kid has all the academic qualification to go to a top 20 school, but couldn't get enough grants to cover the dorm room, I'd love to help be that critical piece that lets them reach their dream.  Like you, I haven't fleshed out this plan, my portfolio is too small for me to get ahead of myself!

I agree... but if I am able to live 40 plus more years I hope to have a big bag of cash at that time... and I would do the same as you.. set it up at the two colleges I graduated for scholorships if family members were not there to utilize the funds... a lot of my thinking is how to have the principal protected from somebody in the future saying "lets spend more now as it will help more people now"... I want it to LAST... since I was a trustee for a few years, I know how to put some instructions on the accounting so they can not go hog wild...

 

[heyyou]

Trust Fund for Education: Mom had one for the decendents of employees of Dad's business. The trust fund industry assumes you have so much money that expenses don't matter. Significant legal fees for set-up, ongoing banking and professional accounting fees for complying with IRS regulations, even mutual fund fees similar to variable annuities. No, it was not at Vanguard.
The trust was eventually folded due to the carrying expenses. It was just easier to write checks to deserving kids than to report amounts and SS numbers to accountants to file tax returns on the trust. Those kids were mostly living at home while attending the local junior college. This was in the late 1970's.

 

[gstander1]

Of course, it's easy to spend less. Just don't take inflation into account! Doing that will drop your spending by about 3% per year (the inflation amount) - hardly noticable year to year. This allows you to take a 7% withdrawal rate (well, at 90+% survival according to firecalc) starting now...

If you assume that inflation stays at 3%, the 7% (non-inflation adjusted) withdrawal will be higher than a 4.2% inflation adjusted amount for the first 16 years so you get more now with a gradual decrease in spending as time goes on.

Greg

 

[mountaintosea]

I like the last line in the article. "You don't want to be the richest man in the graveyard."

 

[spideyrdpd]

Maybe the confusion here is that these people had a financial planner and there portfolios went up?
If your following yer rules and you shoot for an 8 % return and your spending 4 % of your portfolio you actually have the ability to increase spending as the portfolio rises. The I assume you guys will live long enuff to get ss . These guys did. Then I am guessing that somehow medicaid will lower your health costs ?
So then using the rule of 72 if you retire with 2 million and your spending 4% you would only need 3.6% above that to double your money in 20 yrs.

 

[Jay_Gatsby]

I guess I don't understand what's wrong with dying and leaving an estate worth far more than when you retired. If you allocate your money properly so as to avoid taxes and spendthrifts, your money can continue to benefit generations of your family. This is how one provides opportunities to one's family that aren't possible to achieve during one lifetime. Sure, you learn a great deal about money by working your way through high school and college, but wouldn't it be better in some ways for your kids to never worry about paying for an education?

 

[rs0460a]

I guess I don't understand what's wrong with dying and leaving an estate worth far more than when you retired. 

An answer to that is the situation that I/DW have, in which we have no "generations of your family" to consider.

We plan to leave the "remainder" to charity, but don't want to leave a lot (sorry, I don't trust others with "our money", and where it will go...)

I know that we are the minority in this situation, but please consider it in your "equation"...

- Ron

 

[Jay_Gatsby]

An answer to that is the situation that I/DW have, in which we have no "generations of your family" to consider.

We plan to leave the "remainder" to charity, but don't want to leave a lot (sorry, I don't trust others with "our money", and where it will go...)

I know that we are the minority in this situation, but please consider it in your "equation"...

- Ron

You have no nieces, nephews, cousins, etc... to whom you could leave some of your money? Even if you chose not to have kids, I'd like to think that you might want to ensure that future generations of your family (not necessarily your direct descendants) might have better opportunities than their parents or even you enjoyed.

On the other hand, spending your hard earned money on things you want, rather than saving it for future generations isn't something of which you should be ashamed or have a need to explain. It's your money. You earned it, you can spend all of it if you choose.

 

[Nords]

I guess I don't understand what's wrong with dying and leaving an estate worth far more than when you retired.  If you allocate your money properly so as to avoid taxes and spendthrifts, your money can continue to benefit generations of your family.  This is how one provides opportunities to one's family that aren't possible to achieve during one lifetime.  Sure, you learn a great deal about money by working your way through high school and college, but wouldn't it be better in some ways for your kids to never worry about paying for an education?

I'd rather benefit my kids the Buffett & Gates way.

If my kid never had to worry about paying for an education then it wouldn't be worth anything to her. She wouldn't learn anything, either.

Military academies are free too, but she'll pay dearly for that education!

 

[rs0460a]

You have no nieces, nephews, cousins, etc... to whom you could leave some of your money? 

True...

We have one son (disabled) who cannot have more than $2K in resources (else he would lose his SSD/Medicare.

Not everybody has "blood relatives"....

- Ron

 

[Martha]

True...

We have one son (disabled) who cannot have more than $2K in resources (else he would lose his SSD/Medicare.

Not everybody has "blood relatives"....

- Ron

Have you looked at a special needs trust for him?

 

[rs0460a]

Have you looked at a special needs trust for him?

Already have.  Our forecast residual estate is estimated to be in the multiple of 1000 of what he can have, under the "rules" (for those of you that don't know, a SNT is only to be used for "incidentials" for disabled folks - like clothes, burial, and other things.  Not "normal lifestyle" things).  He will never be married, have kids, home, car, etc, but he will have enough under his government benefits (plus our supplemental through the SNT) to live in the manner in which he remains "safe & secure".

- Ron

 

[haha]

I guess I don't understand what's wrong with dying and leaving an estate worth far more than when you retired.  If you allocate your money properly so as to avoid taxes and spendthrifts, your money can continue to benefit generations of your family.  This is how one provides opportunities to one's family that aren't possible to achieve during one lifetime.  Sure, you learn a great deal about money by working your way through high school and college, but wouldn't it be better in some ways for your kids to never worry about paying for an education?

Couldn't agree more. In America we are so Puritanical about work. Remember all the great scientific discoveries of the 17th and 18 centuries?  Many of them were made by "gentlemen" who had no need to keep food on the table, so they could follow wherever their excellent imaginations took them. Same story with the British and French adventurer/explorers who mapped Africa.

Work may help a dull person avoid alcoholism or total dissipation, but it also keeps many interesting and inventive people busy with stuff that mostly doesn’t interest them, and which won’t have much long term effect on the world.

Ha

 

[Martha]

Couldn't agree more. In America we are so Puritanical about work. Remember all the great scientific discoveries of the 17th and 18 centuries?  Many of them were made by "gentlemen" who had no need to keep food on the table, so they could follow wherever their excellent imaginations took them. Same story with the British and French adventurer/explorers who mapped Africa.

Unfortunately, only those who were born to money got to do this. At least today, if you can write up grant requests you may have the chance even if you don't come from money.

One of our attorneys is a fabulous writer. He has had short stories and poetry published. He gets up in the wee hours of the day to write. But he has to work to make a living. Who knows what he could write if he had more time.

 

[Jay_Gatsby]

I'd rather benefit my kids the Buffett & Gates way.

If my kid never had to worry about paying for an education then it wouldn't be worth anything to her. She wouldn't learn anything, either.

Military academies are free too, but she'll pay dearly for that education!

Too simplistic of an answer, although it might apply in your particular case. Were this the case for the majority of people, we might as well throw out all of the 529 Plans that litter the educational saving landscape. Obviously since it isn't, the best way to ensure that an education actually means something to a child who doesn't have to pay for school is to condition tuition payment on the pursuit of particular courses of study. Alternatively, you could have a trustee (or series of trustees) possessing the requisite wisdom to guide your future generations in selecting majors and careers. There are all sorts of mechanisms you can design to ensure your money is not taken for granted or abused.

 

[Jay_Gatsby]

Couldn't agree more. In America we are so Puritanical about work. Remember all the great scientific discoveries of the 17th and 18 centuries? Many of them were made by "gentlemen" who had no need to keep food on the table, so they could follow wherever their excellent imaginations took them. Same story with the British and French adventurer/explorers who mapped Africa.

Work may help a dull person avoid alcoholism or total dissipation, but it also keeps many interesting and inventive people busy with stuff that mostly doesn’t interest them, and which won’t have much long term effect on the world.

Ha

Although we're not in the 17th and 18th centuries anymore, the idea of the wealthy advancing the Arts and Sciences is still quite relevant today. True, there are numerous spendthrifts who change majors (and even colleges) like underwear, but there are quite a few who show an aptitude in an area for which nobody wants to pay very much money.

 

[haha]

Although we're not in the 17th and 18th centuries anymore...

Well Damn! Now you tell me.

Ha

 

[Nords]

Too simplistic of an answer, although it might apply in your particular case.

Yeah, I see that word a lot around my name...

Were this the case for the majority of people, we might as well throw out all of the 529 Plans that litter the educational saving landscape. Obviously since it isn't...

The word "obviously" always makes my antennae twitch, almost as much as the phrase "government studies prove". I think 529s reflect their "tax-free!" marketing more than they reflect their financial worth.

But we don't use a 529 either. Too expensive & too restrictive for the putative benefits. Flexibility is more important to us.

... the best way to ensure that an education actually means something to a child who doesn't have to pay for school is to condition tuition payment on the pursuit of particular courses of study. Alternatively, you could have a trustee (or series of trustees) possessing the requisite wisdom to guide your future generations in selecting majors and careers. There are all sorts of mechanisms you can design to ensure your money is not taken for granted or abused.

Gosh, that sounds harsh. I thought we'd just save money to pay for the state tuition to a bachelor's. If the kid wants a "better" school, or to pursue a graduate degree, then she's welcome to figure out a way to fund her higher aspirations. That'll certainly help her determine how meaningful they are to her. And if the "easy" way out (student loans) becomes a crippling burden down the road, well, I suppose we could step in with the gifting. But I'd rather not be the deus ex machina reaching out to touch my kid's life.

If our kid goes to a military academy, rendering most of our college savings moot, then I'm not sure what we'll do with the windfall. I doubt we'll do what the other Academy parents seem to have been doing for their young 'uns in the form of turbocharged Audis.