Should We Try to Leave Something Behind?
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The following is a guest post by MMD from MyMoneyDesign.com, a blog about designing a plan for early retirement, endless wealth, and having a better life! If you are interested in submitting a guest post, please see our guest posting guidelines.
Did you or anyone you know ever receive any money from a loved one after they passed on? If you haven’t recently, you’re not alone. According to a recent article from the Daily Finance entitled “Die Broke — on Purpose: An Unconventional Retirement Plan”, nearly 46% of people die with less than $10,000 to their name. So even if you are able to leave something behind to your beneficiaries, you’re in the minority!
Although the article was more of a wake-up call calling our society to do a better job saving for retirement, it did also try to argue in favor of using up all your money during retirement. This poses an interesting set of questions: Why should we have any money at all when we die? After all, we can’t take it with us. Should we aim to use it all up before we move on?
Why Don’t We Leave Something Behind Anymore?
In the years past, it wasn’t that uncommon to hear about your elders leaving behind a few four, five, or even six figures to their loved ones. And that should come as no surprise. The previous generations (those from the Great Depression and surrounding eras) were much more frugal and better savers than we are. They paid cash for their cars and settled the mortgages on their modestly-increasing-in-value houses ahead of schedule. They didn’t have to worry about retirement because they had great pensions to depend upon. And above all – they got by with a lot less than we do. But that was then …
Today our society is squeezed harder than ever to make ends meet:
- The median income has been little unchanged over the past 30 years
- Gas and other commodities are much, much higher in price than anyone would have ever expected
- Healthcare costs are climbing at ridiculous rates!
- Even if you are paying off your house, it’s probably worth less (now) than what you paid for it.
- We’re on our own for retirement. Pensions are a dying and endangered species. Basically if you’re not saving on your own, you’ll have nothing to show for yourself.
When you put things in that perspective, how can we possibly afford to leave something behind?
A Poor Excuse for a Lack of Planning
Perhaps you could sum up all the above arguments by saying that we’re not getting a fair shake and that our generation has it rougher when it comes to our finances. But I’d say we’re just making excuses for a lack of planning.
I’m sure everyone has heard the maxim “When you fail to plan, you plan to fail”. Those words apply eloquently to this situation as well. Just because the rules of the game have changed doesn’t mean we have to lose. Instead of whining how bad things are, we should be taking full advantage of our IRA and 401k options. As imperfect as our retirement savings plans may be, they’re a whole lot better than doing absolutely nothing!
A plan to use every cent we have makes no sense to me for one very simple reason – none of us knows when we’re going to die. If we all had expiration dates, this would be a very easy job because we could just divide our fortune by the number of years we’ve got left to figure out our remaining income. But it doesn’t work that way.
Instead, we need to be concentrating on building assets that will generate cash flow for us after our working years have passed. And once it’s our time to move on, we can leave those assets in the hands of those we feel deserve it.
Larger Than Yourself
You want to know how some of the richest families in America got that way? By passing their money down from generation to generation. If you were able to leave anything at all behind, think of all the debt you could erase, kids you could put through college, or start-ups you’d finance by having something to leave behind to your heirs.
Okay, so what if you don’t have a family or there is bad blood? Surely there must be something else you care about in the world? Research for cancer, diseases, illnesses? A charity for animals, the poor, underprivileged children, or a cause you believe in?
My point is that the wealth you spent a lifetime building could be bigger than just funding your retirement. It could really be used to make a huge difference for someone or something you believe in. Don’t waste this chance to do something bigger than yourself. Leave a legacy of generosity!
Utilize the Power of the Roth IRA
If you are thinking about leaving something behind to your loved ones or a just cause, consider stashing it away in a Roth IRA. One of the big benefits of a Roth IRA is that if its value is under a certain threshold, it can be willed to a beneficiary without there being any estate taxes paid. So not only are you doing something good for someone else, you’re also doing it the smart way!
We definitely plan on leaving something behind, but that is a far way off. I have heard of reverse mortgages that allow retired folks to live it up a bit, but I’m not sure how I feel about them. Thankfully I have about 40 years to decide.
Isn’t it crazy to think like that? We are only 32/33 and it’s insane to think that retirement may e another 30 years away! I guess it’s good we are planning so far ahead!
Thankfully, you’ll have 40 years to build up your retirement and not have to worry about a thing! From everything I’ve read about reverse mortgages, they are to be avoided. They seem to be just another gimmic to trick the elderly out of what rightfully belongs to them.
We plan on leaving something behind, hopefully a good amount to our family.
I hope that it works out for you! It would be nice to leave something behind.
Same here, Michelle! I’m hoping to create a Dynasty for the MMD family!
My wife and I definitely plan and hope to leave something behind for our kids. Of course, we don’t know when that’s going to happen, but we expect to do so. I think it’s a part of helping prepare them for life and passing on a legacy. Of course we plan on enjoying our retirement, that does not mean we’re going to live in crazy luxury just so we spend every last dime. I sort of view passing money on as a final way to provide for our children.
It would be nice to leave at least something behind as long as you don’t have to sacrifice living your life in order to do it. It sure is hard to plan very specifically though wince none of us know how long we are going to live!
“I sort of view passing money on as a final way to provide for our children.”
Well said, John! HOPEFULLY, none of us pass on before our “kids” are grown adults with their own families and lives to care for. To some degree, an inheritance would be a great thing to leave them that they don’t necessarily need, but would warmly welcome.
i don’t expect any money to be handed my way when my folks pass on.. and similarly, i don’t know how much we will leave behind for our kids (it depends on how successful we are between now and then)..
while i certainly have invested in life insurance and want my kids to be taken care of if I happen to die early.. leaving an inheritance is not a priority.. hopefully by that point, my kids will have learned to live on their own and support themselves entirely.. if they are waiting on me to die to get their finances in order, than we have messed up at some point along the road..
-j-
I am not making a definite plan to leave anything to my kids. If it happens then that would be fine. We are planning on paying for their college though.
Uh, I agree Jefferson. Like a gift, I certainly don’t think anyone is entitled or obligated to give someone else money when they die. And I also hope all of our kids are responsible enough to take care of themselves.
I was looking at this more from a perspective of 1) Is my retirement plan strong enough that I wouldn’t cut it close and die penniless? and 2) Why NOT build a pile of cash so big that I can use it to truly do something incredible for someone else?
I don’t know… the people that we know that have inherited the most monetarily are some of the most financially irresponsible people that we know. I’d rather leave good financial values and lessons behind rather than focus on leaving a big inheritance. But at the same time, I never want to be a burden and cost people when I am old or sick… so there’s a balance, too.
I totally agree!!!!! I actually know a few people who will be getting an inheritance who live responsibly now because they plan on using the windfall to fix their situation later. I don’t think that’s a very good plan!
There may be some truth there … Like lottery winners, some people have no idea how to handle a large sum of money.
I’ll leave something behind. At the very least my coin collection should still be around (it also has my grandfather’s coin collection). So maybe that will be worth something more than just the silver and gold content.
The trick to leaving behind money is to not let your heirs know it is coming until after they have figured out their paths on their own.
I think that is a good idea. Then, in the off chance that the inheritance gets spent, they weren’t expecting it.
That is a tragedy that coins that old are still not worth anything! My father in law is a collector also, and he always complains that he barely breaks even…
I can totally identify with the “not knowing” strategy! Not only would it be one hell of a surprise when they finally got it, it would force them to make their own magic.
My parents could have left a lot behind for me and my brother, OR they could have financed our college education. I prefer the latter as it has already saved me so much money!
That is awesome that they paid for your college. That is such a huge blessing.
Lauren, I think I would have taken the college to at the rate it keeps increasing! As a parent, I’m saving for both my children’s college and retirement. If I play my cards right, I hopefully won’t have to make a choice!
So glad to hear your comment, as spouse and I got our kids thru college debt-free (at some expense to our retirement funding). I think we’re pretty frugal, but if things keep going the way they are, we’re going to be lucky to fully fund our retirement.
As we’re extremely young, I really have no idea how much we may or may not accumulate over the course of our lives. If we’re able to build wealth though, it’s always been mine intention to leave the majority of it behind to various charities.
We are pretty young yet too. I think that our major focus right now will be to get ouselves to retirement and our kids through college.
Quite a noble act Jason! And very much to my point – leaving something behind doesn’t necessarily have to be your family. At the rate your net income reports keep rising and you guys keep working at it, I’m sure you’ll get there much faster than you think!
Great post! I think you hit the nail on the head when you say that older generations have a more frugal mindset. That said, with the right discipline we all have NO excuse. The UK have recently started schemes where pensions will be deducted against the equity of your house.. i.e. the older you get the less of your house you own. I can’t help but feel I have a duty to leave something behind to my children / grandchildren!
Thanks for visiting Scott. I think MMD was right too. Older generations have seen times when they had very little. For my parents generation and – especially – our generation, most of us have never really been through difficult times. I think that may be why they tend to be more frugal.
Thanks Scot! It’s amazing how financially sound many elder members of my family were. Yet, they were just the simplest, small-house, used car, frugal living people you’d ever meet. I think there’s something to that that our generation is losing sight of.
Too bad for the UK! That sounds like some kind of weird, forced reverse mortgage! Guess you better fund that ISA!
What? Pensions being deducted from the equity in your home? And how can it be that the older you get, the less of your house you own? I totally can not comprehend what you’re saying. Please explain. Thanks.
I like the thought process of MMD: don’t just try to leave something behind, but think about how. Often the tax implications of leaving money behind in an IRA can crush an estate.
I plan on leaving my beer can collection and maybe my baseball cards.
Ha! I don’t know if I’ll ever see my baseball cards again. They are still at my parents’ house. Hopefully, Holly will let me have them back someday:-)
Thanks Joe! I thought you’d notice that tip on the Roth IRA at the end. It’s just another one of those sneaky things you need to know that can really make a difference in how your money is handled!
I’ve still got all my baseball cards too. About once a year I look in a price guide to see what they’re going for these days. Then I cry at how little they’re selling for …
No one in our life that would leave us money has passed on yet. I know that we will get money and assets from both of our parents because they have already told us we will. As far as what we will do with our children, it will probably be something similar. I will want to leave some to charity too.
Thank goodness, we are in the same situation as you Miss T. I expect that both of our parents will end up leaving something to us, although I certainly am not expecting it. Yet, that is how wealthy families become perpetually wealthy – by leaving an estate to thier heirs.
It has been said that the wealthiest people in the world got there over generations of accumulation! I’m hoping that I can start that Dynasty within my own family. And if that doesn’t work out, there’s plenty of noble causes where I wouldn’t mind making their dreams come true …
We have no kids, so our focus on leaving behind is more on the intangibles. If you think about it, the only difference between societies we called civilized and those we don’t is the systematic accumulation of knowledge that’s passed on to the next generation.
It’s the “leaving behind” version of the fish story: leaving behind the knowledge of how to fish is better than leaving a fish. Wait, that doesn’t sound right. But you get the picture… 🙂
I think that fish would start to smell pretty rotten after a while William! 😉
I see your point and agree with the benefit! Even though it would be awesome to leave my kids (say) a million dollars, wouldn’t it be even more incredible to teach them how to make ten million? However, that is a job for me to accomplish here and now while I’m still alive.
Leaving something behind for my future kids is not part of my overall plan, but since I will want to save more than I spend in retirement, it should be inevitable. I’m with Jefferson on this matter that I would hope to have taught my children how to be independent and properly manage their finances. So ideally they wouldn’t really need any financial help from me at that point.
I think that personally, we look at it in the same way. In the above comment, William said something very similar as well. We are hoping to teach them how to manage their money as opposed to leaving a bunch for them. However, I suppose if we manage ours well, it will be ineveitable that they will receive some too.
You’ve got it – save more than you spend in retirement. That’s really all it should take. Yes, ideally, if I’ve done my job right, my kids should not need my help. But then again, if I’ve also done my job right of saving for retirement, than they’re going to get it anyways with all my extra dough!
When I was a kid, my grandparents used to take us on big family holidays. 20 persons, going for a full week of fun abroad, eating in great restaurants, and sleeping in awesome hotels. They also took just the cousins on days out during the year. On top of that, they left something behind. But the memories I kept of those trips and the time we shared as a family are far more valuable to me. I wouldn’t like to receive a fat check from a penny pinching grandma who barely enjoyed her time on earth and with her family. I plan to help my kids and have happy moments with them, if something is left it is icing on the cake.
I absolutely agree. If it works out, this is exactly what we would like to do – spend money on travel that is. However, we hope to have a little bit left over at the end.
I think your last sentence says it all! No one is going to have fond memories of grandma cruella deville, even if she does leave you six figures when she dies! All this talk about money aside, life is meant to be lived and make memories with the ones you love. Anything you do above and beyond that just makes it that much more sweet!
“Leave a legacy of generosity!”
We WILL teach our children this of utmost importance! I want my kids to pass on the generous legacy that we hope to leave behind. I want to build the biggest nut possible to pass along so my kids and their kids can continue to build wealth and bless others with it.
That wold be awesome, wouldn’t it? You seem like your’re on the right track Jacob, so keep at it my friend!
Thanks Jacob! You got the main point of my post! Besides just protecting yourself from going broke and having a great retirement, what if there was something MORE you could do – something bigger with that money than you would have ever imagined? I too want to see how large of a mountain of cash I can build, and then hopefully pass that along to benefit generations of MMD to come!
Hopefully we will have a rental property empire to leave to our daughter! I actually have plans in our will for pets we might have when we die and money to be given to the charity to take care of them. It’s not much now, but I would like to be able to leave more to charity as the years go on.
Awesome, we love rental properties as well:) Actually, owning rentals is going to be a big part of our retirement plan.
You even thought about your pets in your will? Kim, you guys really have your stuff together!
All I will be receiving from my parents is an insolvent estate and calls from their debt holders.
My wife and I do plan on leaving some money behind, but nothing huge. Probably enough to help pay for our grandkids’ college.
Zoinks! That is a bummer, but at least you are changing the tradition of poor money management in your own home. Wouldn’t it be awesome to pay for your kids AND your grandkids college? That would be sweet! Good luck!
At the rate that college prices are increasing, that may end up being the greatest gift of all!
I love this post! Yes, we intend to leave a legacy (including a financial one).
Keeping wealth and well being for generations to come is what my site is all about!
Indeed! If anybody read my post yesterday, leaving money to your heirs is really the way to become as rich as a Lannister;)
I’m glad to have written something that aligns with your niche! You are very wise to have already made this a part of your family’s plan for ongoing future fortune!
I think the reason we don’t leave $$ behind like we use to is two fold. On one hand, we don’t plan like we should and instead live for today instead of tomorrow, therefore leaving nothing for our kids. On the other hand, inflation has exceeded the rise in incomes making it harder to “pay the bills”. Both are a factor, although I think it is more to do with a lack of planning than anything.
I think inflation will always be a thorn, as it has for hundreds of years. But lack of planning – that seems to be the more alarming and disturbing trend! Why people refuse to be learn about their finances and educate themselves on money matters is beyond me.
I’m hearing that the cost of living has gone up significantly but income hasn’t since the 50’s (adjusted cost of living). It’s terrible to have to worry about retirement or leaving something behind, but unless something gets going for me soon I may be in the same boat as the folks who die with less than 10k to their name.