Posted on 02/01/2018 7:31:07 AM PST by SeekAndFind
Rich people — really rich people — have an inside joke about spending in retirement: They call it “skiing.”
Not skiing as in snow skiing, but “spending our kids’ inheritance.” They use it in reference to splurges, such as pricey wines, cruises through Europe, second homes, or whatever strikes their fancy.
They don’t feel bad about spending, because there’s little chance that they’ll spend so much that their own retirement is put at risk. It is truly their kids’ money, so why not?
Here’s the crazy thing. A recent Washington Post story details how ordinary savers, folks who are comfortable, perhaps, but not rich, are starting to think the same way.
Read: People are bragging about becoming 401(k) millionaires and posting their balances on social media
This comes on the heels of the recent stock market boom SPX, -0.13% A lot of folks have crossed a threshold they once thought impossible — $1 million in their retirement plan while still working.
Fidelity Investments reports that the number of their clients with $1 million 401(k) accounts rose to 133,000 in the third quarter, up from 89,000 at the same time last year.
Overall, total retirement assets have hit $27.2 trillion, up from $11.6 trillion in 2000, according to industry data. That’s retirement plans, pension funds, everything.
Merely well-off
The surge in investment value has financial advisers answering calls day and night from clients who want to cash out some of that stock wealth to spend now — to buy vacation homes, take once-in-a-lifetime trips and so on.
Sounds a bit like skiing, doesn’t it?
Here’s the thing about acting wealthy when you’re merely well-off. It ends in tears, just about every time.
(Excerpt) Read more at marketwatch.com ...
I'd rather have Mom and Dad, than an inheritance, any day.
People are doing whatever they please with their money, how horrible!
Some of us built most of our wealth outside of retirement accounts, so we don’t have that taxing problem with withdrawals. Our plan is to take only the minimum distribution when required and the rest of our retirement accounts are for emergencies or eventual inheritance for kids, grandkids. Our net worth is about the same as when we retired, as we keep our money working and producing income. And yes, that allows nice vacations too.
What is with all these nannies worrying about people who have built some wealth? Better to worry about those who spend it from day one and never built anything.
Given current fixed income returns, if I had $2 million, my annual draw from it would not exceed $60,000.
Good point.
Also, that reminds me that one has to consider one’s own future medical bills. $40K/year might be fine .... until you develop an expensive disease or have an accident where you are seriously injured.
Yes, I think that is much more sensible.
Another factor is how long you are likely to live. Those with good health and good genes are going to have to make that money stretch a lot thinner.
I have told our daughter that I’m trying to spend it all. The only thing I want her to get is the paid for house. And if Hubby goes before I do it will be sold as I’ll be moving somewhere else.
She laughs and says good.
In preference to “skiing,” well off people should consider their kids’ struggles paying “payroll taxes” - which go into the Social Security “Trust Fund” - and thence directly into the Social Security checks of retirees nationwide. Even at that, the cash flow of SS is now negative - and tapping that “Trust Fund” is illusory since it is “invested” in IOUs the government wrote to itself. So to redeem that “fund,” the government has to get the money from the general treasury. So Social Security is just a dirty Ponzi Scheme trick played on the kids.If you’re that well off, you can afford to give your Social Security checks to the kids. And set the example that they should do the same for your grandchildren, if possible.
Good suggestion.
My only advice is the one I gave someone today—fire their financial advisor and get their money out of accounts that charge fees.
Take the annual fee money and go to the casino. Then you can have some fun while you risk your money.
spending kids’ inheritance is supposed to be humor. It’s certainly your money (assuming you didn’t merely inherit it, in which case things get a bit more subtle).
You would be amazed by the number of kids who believe their parents’ assets really belong to them. They don’t want their parents to spend money.
I know someone, a friend of a friend, who was diagnosed with cancer. Her children are trying to take over ownership of her house. They’re afraid she’ll end up in a nursing home and they won’t get *their* money.
I’d say fixed income isn’t diversified enough and doesn’t produce enough. I built some passive income through free and clear rental real estate. For example, I built a 4 unit building about 18 years ago. It’s paid off and produces about $22k annually in net income from an investment of just over $300k. I stole a little rental house in foreclosure. It paid a 9% return for 5 years until I sold it this year and more than doubled my initial investment.
I hold a private mortgage on a building that pays 5.75%. I’m in first position with only 27% of the building’s value at risk. I told the owner I’d love it if he defaulted. I’d own a $550k building for $150k plus foreclosure costs.
A little creativity and proper timing goes a long way.
That was what I got out of it too. It is YOUR money, not your kids money.
I think any “kid” that is expecting anything has a screw loose and wasn’t raised right.
I think it is okay to have the attitude that it would be nice to get something, but...to expect it? Strikes me as wrong-headed.
We have $2 million plus in various accounts, no debt, house is paid off. Not counting the value of the house as part of the $2 million. We did all the Millionaire Next Door and Dave Ramsey stuff before either became really popular. I credit Mr. Roo Roo for this, he’s been a great financial steward for us. I can’t take any credit for our success other than I draw a decent paycheck and I’ve always automatically saved whatever Mr. Roo Roo told me I should save.
We will get about $5000 per month between pensions and SS. The latter will be enough to pay monthly bills so the nest egg is basically for fun. Our paid-off house has already been updated with new HVAC, landscaping, appliances, paint, major appliances, and a new roof, so we don’t have big future home improvements looming over our heads.
We have no plans to make a huge dent in our nest egg for anything like a second home etc. We’ll continue to travel a lot, maybe spend up to $25k per year on travel. When my 10 year old van with 206,000 miles on it finally dies, I will pay cash for another slightly used nice van, I hope I don’t have to spend more than $20k on it.
We are NOT going to live like church mice, and we don’t intend to preserve our nest egg so that my only child/daughter and only grandson inherit a ton of money. They will get some money, but we intend to enjoy our retirement and not be obsessed with how large of an estate we will leave.
Or, you could help your kids learn to invest by helping them fund a 401K or fund IRA’s...that’s what we are doing.
When we signed up with our financial advisor, he asked us if we wanted to leave a legacy to our kids. My wife and I simultaneously said, “No.”
BUT, rather than leaving them a large lump at the end, we have chosen to enjoy their company by planning family events and vacations. Last year, took the whole family to Costa Rica for 10 days. Everyone had a great time.
This year the guys are going on a guided hunting trip. Girls are going “shopping” at Jackson Hole.
Too good for the people who owned them.
$100K waterfront homes in Florida in the 1980s were being seized via eminent domain after the Kelo decision, until homeowners sued to put a stop to it.
-PJ
Sounds like the writer’s parents have been “skiing”* with their money instead of leaving it for him and his siblings.
Our adult off spring have a different look at our savings:
“If all our bills are paid in full, when we leave this earth, that will be perfect estate planning.”
*“Skiing = spending our kids’ inheritance.”
A nursing home will run you $7k+ per month in typical cases.
Direct experience w/ my Dad, in a fairly low cost area part of the country.
There's the money quote.
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