Plan For Depleting Your Investments If No Heirs?

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Ckprocker
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Plan For Depleting Your Investments If No Heirs?

Post by Ckprocker »

If you have no one who will inherit your estate, and your plan is to depete your investments at say age 95 and then live off other income if your lucky enough to still be kicking, It seems the 4% rule under most senarios would produce a good chuck of leftover money in the estate after 30 years. (If you make it that far to age 95, it seems most of us will not per the statistics)
So what other methods can one use to do a ballpark calculation under these conditions?
Thanks
Mike Scott
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Re: Plan For Depeting Your Investments If No Heirs?

Post by Mike Scott »

Give it to charity? A random stranger? Your neighbor? Your caretaker?
PFInterest
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Re: Plan For Depeting Your Investments If No Heirs?

Post by PFInterest »

Ckprocker wrote: Wed Oct 03, 2018 2:26 pm If you have no one who will inherit your estate, and your plan is to depete your investments at say age 95 and then live off other income if your lucky enough to still be kicking, It seems the 4% rule under most senarios would produce a good chuck of leftover money in the estate after 30 years. (If you make it that far to age 95, it seems most of us will not per the statistics)
So what other methods can one use to do a ballpark calculation under these conditions?
Thanks
Figure out when you'll die first, then it's easier.
Case in point, you can't. Plan to leave to charity then.
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JoMoney
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Re: Plan For Depeting Your Investments If No Heirs?

Post by JoMoney »

I expect that if I live long enough (sometime into 70s), or possibly if interest rates got high enough, I would consider a SPIA to guarantee a high level of income for however long I live.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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bligh
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Re: Plan For Depeting Your Investments If No Heirs?

Post by bligh »

JoMoney wrote: Wed Oct 03, 2018 2:31 pm I expect that if I live long enough (sometime into 70s), or possibly if interest rates got high enough, I would consider a SPIA to guarantee a high level of income for however long I live.
Agreed. If I was okay with depleting all my assets upon my death, At retirement, I would setup a couple of COLA adjusted annuities and put 80%+ of my retirement assets into it to guarantee a "paycheck" for me till the rest of my days.
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JoMoney
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Re: Plan For Depeting Your Investments If No Heirs?

Post by JoMoney »

bligh wrote: Wed Oct 03, 2018 2:37 pm
JoMoney wrote: Wed Oct 03, 2018 2:31 pm I expect that if I live long enough (sometime into 70s), or possibly if interest rates got high enough, I would consider a SPIA to guarantee a high level of income for however long I live.
Agreed. If I was okay with depleting all my assets upon my death, At retirement, I would setup a couple of COLA adjusted annuities and put 80%+ of my retirement assets into it to guarantee a "paycheck" for me till the rest of my days.
At some level of wealth, I imagine it wouldn't be prudent to put it all into annuities, but if it was large enough I could imagine it being nice to be able to give away the excess income to worthy beneficiaries while I'm still alive, and know it won't hurt my unknown future needs.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
bhsince87
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Re: Plan For Depeting Your Investments If No Heirs?

Post by bhsince87 »

As others have mentioned, SPIAs are one approach.

But with that case you would never really deplete.

Another approach is to divide your nest egg by the number of years until the target depletion date, then set up a TIPS ladder for that amount and for that number of years.

As each TIP matures, spend it all that year.

For example, if you have $3 million and are 65 now with a 95 depletion target, set up a 30 year $100,000 TIPs ladder.

This also gives you the option of spending larger amounts if need be. Like maybe you can pay out of pocket for some experimental treatment, and/or if you find out yo only have a few months to live. Then blow it all!
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Chan_va
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Re: Plan For Depeting Your Investments If No Heirs?

Post by Chan_va »

Seems pretty simple. Every year, withdraw [Current portfolio]/[95-Current Age].
aristotelian
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Re: Plan For Depeting Your Investments If No Heirs?

Post by aristotelian »

Use VPW.

You should pick a charity or heir in any case because no matter what method you use, there is a chance you might die tomorrow.
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cheese_breath
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Re: Plan For Depeting Your Investments If No Heirs?

Post by cheese_breath »

Move to Vegas and play the slots until it's gone.
The surest way to know the future is when it becomes the past.
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ruralavalon
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Re: Plan For Depeting Your Investments If No Heirs?

Post by ruralavalon »

Use fund shares to make contributions to qualified charities you favor. You get a nice tax deduction.

Use most of your investments to buy a Single Premium Immediate Annuity (SPIA) joint and survivor. Spend the SPIA proceeds on whatever makes your life secure and enjoyable.

Have a will that gives whatever is leftover to some friend, neighbor, relative or colleague, or to a charity that you favor.
Last edited by ruralavalon on Wed Oct 03, 2018 3:44 pm, edited 1 time in total.
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spencer99
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Re: Plan For Depeting Your Investments If No Heirs?

Post by spencer99 »

Lots of good thoughts in this thread.

The advice that resonates most strongly for me is Taylor Larimore's choice: (I'm paraphrasing) To lock in a liability-matching income stream and then gift much of the remainder while you are alive and recipients are very likely to need/appreciate the help.

S
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Re: Plan For Depeting Your Investments If No Heirs?

Post by Wilderness Librarian »

My circumstances are pretty much the same as yours. Single no dependents (I like it that way). My brother & sister both have kids so I know family heirlooms and such will remain in the family. First I purchased long term care insurance for myself when in my mid-50s. I then annuitized a large portion of assets at retirement 2 yrs. ago (TIAA so more reasonable terms than most places). Left enough unannuitized to delay SS until 70 (4 more years), purchase at least two maybe 3 cars in retirement, an arbitrary amount for house repairs, upgrade etc a good amount of travel an arbitrary amount I might have to lose to inflation and an emergency fund. The portion already annuitized plus SS will give me more than enough for living expenses. Might annuitize further when in 70s. Doubt I would ever annuitize absolutely everything. The TIPS ladder suggested by others would work but I would rather simplify by annuitization single life with no guarentee periods
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dm200
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Re: Plan For Depeting Your Investments If No Heirs?

Post by dm200 »

Leave and/or give to charity.

Perhaps a charitable remainder trust could do the job? Check it out with an attorney.

A donor advised fund could help - AND you could name a successor to create a long stream of annual income to charities.

One thing (suggested to my late father) was to NOT leave a percentage of assets in his will for an agency of his religious denomination. His attorney said that my father should just make the donation while alive - so that some religious institution bureaucrat could not tie up the estate settlement.
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JaneyLH
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Re: Plan For Depeting Your Investments If No Heirs?

Post by JaneyLH »

Easy answer! Search Bogleheads for “Variable Percentage Withdrawal”. This is what I’m doing.
rj49
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Re: Plan For Depeting Your Investments If No Heirs?

Post by rj49 »

One way is the 1/n approach...instead of withdrawing a percentage yearly, divide your life expectancy by fund shares and sell a certain number of shares yearly (presuming you have a floor of guaranteed spending like SS and other safe investments to provide for necessities and don't have a mortgage). My approach is to keep a Roth IRA for longevity insurance, since there's no RMD and I can either use it if I live longer than expected or have late-life extreme expenses, or to pass on to heirs). Then I use different ladders of income for withdrawing until I take SS, and then I plan to use the 1/n approach to liquidate various TR funds with various maturity dates, selling 20% of the shares over each year for 5-years, and then moving on to the next TR fund. It's a variation of William Sharpe's Lockbox strategy, which he found to be a much more efficient approach than a 4% method. I have a safe spending floor of military retirement pay, no mortgage, and no kids or wife to spur spending, so I also have the challenge of how to spend down my assets without leaving too much on the table.

You might pick up a copy of "Die Broke" by Stephen Pollan, where he makes a case for gifting while alive and how to spend assets wisely (he also has a lot of thought-provoking ideas about not using credit cards, using car leasing instead of buying, and other unconventional financial planning moves).
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Re: Plan For Depeting Your Investments If No Heirs?

Post by Doohop65 »

I can send you the routing number for each of my children’s 529 plan. :twisted:

Enjoy your time on earth and be generous. What’s left over can be gifted where it is best utilized.
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Re: Plan For Depeting Your Investments If No Heirs?

Post by jclear »

If you don’t want to use annuities, buy a dog and make the dog your heir.
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cheese_breath
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Re: Plan For Depeting Your Investments If No Heirs?

Post by cheese_breath »

jclear wrote: Thu Oct 04, 2018 1:03 am If you don’t want to use annuities, buy a dog and make the dog your heir.
How about a cat?
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Watty
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Re: Plan For Depeting Your Investments If No Heirs?

Post by Watty »

One thing that has not been mentioned is that many people have a significant amount of their net worth tied up in their home. In some cases using a reverse mortgage could make sense to tap that home equity.
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dm200
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Re: Plan For Depleting Your Investments If No Heirs?

Post by dm200 »

Ckprocker wrote: Wed Oct 03, 2018 2:26 pm If you have no one who will inherit your estate, and your plan is to depete your investments at say age 95 and then live off other income if your lucky enough to still be kicking, It seems the 4% rule under most senarios would produce a good chuck of leftover money in the estate after 30 years. (If you make it that far to age 95, it seems most of us will not per the statistics)
So what other methods can one use to do a ballpark calculation under these conditions?
Thanks
Of course, some (lucky or unlucky) folks live many years beyond 95. We know a woman who just turned 100 earlier this year - and still drives and is very active.

One risk is that, at some point, you become victim to some kind of scam.
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changingtimes
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Re: Plan For Depleting Your Investments If No Heirs?

Post by changingtimes »

[Post removed by admin LadyGeek]
:)

I also went to FireCalc and put in my all my data and asked it for a 95% spend rate (with a minimum $200k cushion, out to 95), and it came up with a yearly "budget" $100k higher than what I consider to be my yearly needs. And that's without selling my high-equity house.

OP, just for the fun of it, you may want to try that. Obviously nothing is guaranteed, and I'm not suddenly going to go out and start spending that number, but it is an interesting exercise.
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Re: Plan For Depleting Your Investments If No Heirs?

Post by UpperNwGuy »

The problem, of course, is that most of the extra spending you might do to deplete your investments (nice cars, nice dinners, nice vacations, etc) is best enjoyed in the first two decades following retirement (ages 65-85). Once you're past 85, it becomes more difficult.

My father was in excellent health during his late 80s and could have taken some great international trips during those years, but he was caregiver to my mother who was in failing health. When she passed away, he was 91 and soon developed some serious heart problems, so he never did the trips he talked about taking.
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Re: Plan For Depleting Your Investments If No Heirs?

Post by Call_Me_Op »

Don't know about you, but if I make it to 95, I don't thinking that the knowledge that my assets have shrunk to zero is going to bring me any pleasure - perhaps just the opposite.
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Re: Plan For Depleting Your Investments If No Heirs?

Post by gotester2000 »

If you are single then buy a SPIA after selling all assets. Blow it off every month. Also blow off SS.
You can donate/start a scholarship as well as enjoy your life. No worries. Once you reach 80 you will find that you care less about the money.
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Re: Plan For Depleting Your Investments If No Heirs?

Post by Pocanutin »

Another vote for "Die Broke" book.

P
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Re: Plan For Depleting Your Investments If No Heirs?

Post by wander »

Off topic, but one of my grandmother's brothers was thought could not live pass 70 years old, due to some medical problems at young age, is still living healthy at 107 and outlives all of his siblings. If I plan to live to 95, I think I should plan for some extra (just in case). :D
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Re: Plan For Depleting Your Investments If No Heirs?

Post by cheese_breath »

Pocanutin wrote: Sat Oct 06, 2018 7:53 am Another vote for "Die Broke" book.

P
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Re: Plan For Depleting Your Investments If No Heirs?

Post by Phineas J. Whoopee »

I have nobody I'm financially responsible for, which informs my plan. I mean to spend enough to have a reasonable, to me, lifestyle until I die. Anything that's left, which could be nothing or could be a lot, goes to selected charities with my best wishes.

I'm pretty sure that after I've died I will not feel really, really bad inside because I didn't spend more.

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Re: Plan For Depleting Your Investments If No Heirs?

Post by z3r0c00l »

Plan to leave excess to non-profits when I die.
70% Global Stocks / 30% Bonds
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Re: Plan For Depleting Your Investments If No Heirs?

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).
JaneyLH wrote: Wed Oct 03, 2018 8:04 pm Easy answer! Search Bogleheads for “Variable Percentage Withdrawal”. This is what I’m doing.
Here's the link: Variable percentage withdrawal
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dm200
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Re: Plan For Depleting Your Investments If No Heirs?

Post by dm200 »

z3r0c00l wrote: Sat Oct 06, 2018 1:57 pm Plan to leave excess to non-profits when I die.
A very good "plan" - in my opinion.
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Re: Plan For Depleting Your Investments If No Heirs?

Post by willthrill81 »

gotester2000 wrote: Sat Oct 06, 2018 7:39 am If you are single then buy a SPIA after selling all assets. Blow it off every month. Also blow off SS.
A married couple could do this as well. Just buy a SPIA that will last through both spouse's lives.
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GerryL
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Re: Plan For Depleting Your Investments If No Heirs?

Post by GerryL »

My plan is to devote an increasing portion of my RMDs each year to QCDs to keep my annual income below the threshold for increased Medicare premiums (IRMAA) and to do more of my giving while I'm still around to enjoy it. I have no scheme to die clenching my last nickel in my fist (as my dad said he was intending to do, but didn't).
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Re: Plan For Depleting Your Investments If No Heirs?

Post by gotester2000 »

willthrill81 wrote: Sun Oct 07, 2018 3:47 pm
gotester2000 wrote: Sat Oct 06, 2018 7:39 am If you are single then buy a SPIA after selling all assets. Blow it off every month. Also blow off SS.
A married couple could do this as well. Just buy a SPIA that will last through both spouse's lives.
Right...only if the spouse agrees😯
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Re: Plan For Depleting Your Investments If No Heirs?

Post by Limoncello402 »

Same situation. I created a trust with my estate going to a charity at my death. But I hope to spend it down and am not sure the best way. I will look into SPIAs. I plan to retire in about 4 years. Don't interest rates have to be high to consider a SPIA? And what would be the advantage of buying one over, say, (as someone wrote here) just dividing your life expectancy with your current wealth each year and withdrawing that amount annually? Of course, I know it is a "guaranteed" stream with the SPIA but worth it in the end, money-wise?
Thanks!
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Re: Plan For Depleting Your Investments If No Heirs?

Post by moehoward »

Ckprocker wrote: Wed Oct 03, 2018 2:26 pm If you have no one who will inherit your estate, and your plan is to depete your investments at say age 95 and then live off other income if your lucky enough to still be kicking, It seems the 4% rule under most senarios would produce a good chuck of leftover money in the estate after 30 years. (If you make it that far to age 95, it seems most of us will not per the statistics)
So what other methods can one use to do a ballpark calculation under these conditions?
Thanks
Are you familiar with the phrase "Spend like a drunken sailor"?
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Re: Plan For Depleting Your Investments If No Heirs?

Post by samsoes »

Leave it all to the 4th person who signed page 3 of the guest book at your wake.
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Re: Plan For Depeting Your Investments If No Heirs?

Post by inbox788 »

bhsince87 wrote: Wed Oct 03, 2018 2:53 pm As others have mentioned, SPIAs are one approach.

But with that case you would never really deplete.

Another approach is to divide your nest egg by the number of years until the target depletion date, then set up a TIPS ladder for that amount and for that number of years.

As each TIP matures, spend it all that year.

For example, if you have $3 million and are 65 now with a 95 depletion target, set up a 30 year $100,000 TIPs ladder.

This also gives you the option of spending larger amounts if need be. Like maybe you can pay out of pocket for some experimental treatment, and/or if you find out yo only have a few months to live. Then blow it all!
The challenging part is predicting the depletion date and the issue of longevity beyond that still exists. You don't know if you need half the funds for medical care and other LTC in the last few years or you could have spent it early in retirement. You can plan to 95, but what if you need that experimental treatment when you're 105 and can make 110? SPIA can take care of living expenses till then, but there isn't some kind of insurance product that I'm aware of that optimizes for that small chance of needing a big lump sump very late in life.

If you can find an insurer, you can use an annuity to pay for LTC, but matching income stream to cost is difficult.
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dm200
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Re: Plan For Depleting Your Investments If No Heirs?

Post by dm200 »

If you leave (in will) assets of the estate to more than one charity or religious entity, I suggest (ask attorney) taking steps to make sure the designated beneficiaries do not tie things up with fights over what each gets. Maybe(?) cut out any entity that contests anything?

Some such "entities" (I know some) can be very greedy indeed.
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