The Oddity of Inheritance

As some of you may know from my various posts over the years that I haven’t included any inheritance in my early retirement plans except as a back up plan. Why? Well on the surface a windfall of money later on in your life could be very helpful for your funding your own retirement but it sucks from a planning perspective.

Why? Well in short you can’t control the amount of money you will end up with and you also have no control on when you might ever get it.  So both of those uncertainties makes an inheritance nearly useless for you to be able to depend on for planning your retirement. As an example for discussion let’s say I may end up inheriting $100,000 when I turn 50 or $25,000 when I turn 60. In either case that would have vastly different effects on the math of your withdrawal rates (if you feel so inclined you can play with your own retirement numbers to see what I mean).  Yet you really can’t know when or how much you will end up with the inheritance as there are too many variables involved.   So in short I really don’t recommended including it at all when you are doing your planning for your early retirement.

Yet now we have a bit of an oddity. Depending on how good your own parents or your spouses parents are with money you might end up with a significant amount of money one day out of the blue.  After all a $100,000 dollars (or what ever amount you get) is nice regardless of when you get it. But what should you do with it if you are already financially independent and don’t need the money for day to day expenses. Now there is two main options that spring to mind: enjoy the money or use it for the next generation.

The first option of enjoying it is, of course, the easiest. You can invest the money and use the extra funds to take a few extra trips or do a renovation on your house because you want to. In effect it becomes fun money to do what every you like.

The second option of using the money for the next generation also has interesting potential because if you invest the money and you can either hand it over in lump sums at key points in their lives or gift the entire portfolio to them when you feel they are ready for it. This has some significant advantages depending on the amount of money per child.  For example, they could graduate post secondary with no debt and have some seed money to have them save towards a house down payment. Or you can boost your own children’s retirement savings when they are young they could give them a leg up on working towards being financially independent or using it to fund their own business or further their education or what ever you deem important.

Or another option, if you prefer, is you can save the money and play the really long game of investing your your actual or future grandchildren’s education and seed money for their retirement savings.  Thus building the capacity of your family line to continue to be ahead of the curve of most people when it comes to student debt and retirement savings.  The major problem of planning this long game is there is no guarantees that your grandchildren will continue the tradition to their kids.

For me personally I sort of hate to choose and might end up doing a bit of everything.  It all depends on the circumstances of how old I am and where my kids are at in their lives when my parents die (not that I’m looking forward to this but as I turned 40 this year I’m aware it will happen at some point regardless of when I’m ready for it).

So have you given any thoughts to your legacy?  What would you like to see your children do with their inheritance? Or what would you do if you received an inheritance?

The Early Retirement Spring

Well folks I feel a bit bad that I haven’t been writing much here this month but in all honestly I’ve been rather busy in my yard for a good lot of this month.

Classic retirement advice is to leave work in the spring or summer and I now understand that advice…it is really easy to stay busy in your yard and not feel remotely bored.  We planted the garden and the flowers, then did some lawn maintenance (racking and fertilizing),  getting the lawn mower ready for the season and I fixed some settling in my backyard patio and I’m trying to stay on top of the weeds that seem to be growing faster than I can pull them.  And I still have a few other projects to do in the yard which I haven’t even bought materials for yet.  Rather than cramming this into my weekends I’ve been able to just keep working a bit on these items each day which is a lot more of a relaxed pace.

I also have spent so much time outside this month I actually have a tan that is better than I usually have at the end of summer. My brother even got me back in the habit of running again so I’ve also been doing that three times a week which again gets me outside even more.  It’s really nice to be able to wear shorts almost ever day and enjoy a drink on the patio in the afternoon with my wife.

So overall I am loving the entire concept of the early retirement spring perhaps the only downside of it has been the fact that a lot of writing projects have suffered because of it.  After all who wants to spend time in doors on a computer when I can be outside either working in the yard, reading a book, having a coffee or going for a walk while doing an errand?

So how about you?  Do you spend way more time outside in spring?  If so, what do you enjoy doing?

In the Globe and Mail

Hi everyone,

Well it took a while but the Globe and Mail just had a recent article on me and the entire idea of switching from saving for retirement to spending in retirement.  It turned out really nice so go have a read.

And to any new people on the site, please feel free to ask any questions on this post I will do my best to answer.

Take care,

Tim

A blog about early retirement and happiness