Would a $1MM inheritance change your retirement plans?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
sailaway
Posts: 2841
Joined: Fri May 12, 2017 1:11 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by sailaway »

Wanderingwheelz wrote: Tue Nov 03, 2020 12:42 pm
adamthesmythe wrote: Tue Nov 03, 2020 12:01 pm Apparently OP is into ancient history, because in Roman numerals M = 1000.

More modern people know that k = kilo = 1000 and M = mega = 1000000. So I OP is really talking about 1kk or 1M.

To the question- 1 M would have made a difference to me but not an enormous difference. It wouldn't have induced me to retire early, I don't think.
MM is 1000x1000 which is 1,000,000
MM is 2000, if we are reverting to roman numerals.
Johm221122
Posts: 5264
Joined: Fri May 13, 2011 6:27 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by Johm221122 »

This is a very specific person question, especially on this board. As someone who is a median income worker, yes it would change my plans in every way.
My goal is only 800k,so yes a extra million would change my plans every way possible after it hit my account
7eight9
Posts: 1790
Joined: Fri May 17, 2019 7:11 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by 7eight9 »

sailaway wrote: Tue Nov 03, 2020 12:55 pm
Wanderingwheelz wrote: Tue Nov 03, 2020 12:42 pm
adamthesmythe wrote: Tue Nov 03, 2020 12:01 pm Apparently OP is into ancient history, because in Roman numerals M = 1000.

More modern people know that k = kilo = 1000 and M = mega = 1000000. So I OP is really talking about 1kk or 1M.

To the question- 1 M would have made a difference to me but not an enormous difference. It wouldn't have induced me to retire early, I don't think.
MM is 1000x1000 which is 1,000,000
MM is 2000, if we are reverting to roman numerals.
I'm guessing you don't work in finance or accounting ...

In finance and accounting, MM (or lowercase “mm”) denotes that the units of figures presented are in millions. The Latin numeral M denotes thousands. Thus, MM is the same as writing “M multiplied by M,” which is equal to “1,000 times 1,000”, which equals 1,000,000 (one million).
https://corporatefinanceinstitute.com/r ... -millions/
I guess it all could be much worse. | They could be warming up my hearse.
LittleMaggieMae
Posts: 607
Joined: Mon Aug 12, 2019 9:06 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by LittleMaggieMae »

I would not let the inheritance change your "financial independence" timeframe. I would let the health and well being of your loved one effect WHAT you do in retirement and how you spend your retirement money AND time (Will you pend more time with them? Will you begin preparing to spend more time handling their affairs or providing care or being their advocate/arranger of care? Home health care is not inexpensive. )

Modern medical advancements and care can keep an elder alive for years (decade?) longer than anyone in their family might expect. And there are expenses - even if all the relatives pitch in to provide round the clock care in their own home. The time and energy commitment takes it toll - even when all the care givers are no longer working full time jobs.
Duckinator
Posts: 56
Joined: Tue Jun 30, 2020 11:16 am

Re: Would a $1MM inheritance change your retirement plans?

Post by Duckinator »

Yes it would, but I'm also in the camp of "not until its in my account". Even if its promised to you. Years ago in-laws would talk of DW and BIL getting income from heritage family farm. Even took them to meet with estate planner. We didn't really factor it heavily into our plans, but it was the basis of DW being a stay at home mom. Now we learn its being given to a grandson. We'll be fine though since we were bogleheads way back.
User avatar
Will do good
Posts: 1056
Joined: Fri Feb 24, 2012 8:23 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by Will do good »

No, it wouldn't matter to us. Just more to pass on to future generations.
NotWhoYouThink
Posts: 3334
Joined: Fri Dec 26, 2014 4:19 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by NotWhoYouThink »

I would not change any plans based on money that I might not get. It isn't your money and may never be.

Should it ever become your money, you can change any plans accordingly.
delamer
Posts: 10900
Joined: Tue Feb 08, 2011 6:13 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by delamer »

To retire pre-inheritance, you still need sufficient funds to cover your expenses until some unknown date in the future when you receive your inheritance. Unless you are willing to take on debt — and even then you need enough assets/income to service your debt until the inheritance comes through. No lender is going to give you a mortgage based on your parents’ IRA balances.

Only once you have the inheritance in hand can you plan with certainty.

Anecdotally, it seems that the biggest mistake that those anticipating an inheritance make is to reduce/eliminate their own savings — and therefore overspend — while they are still working. And then the inheritance disappears/decreases or doesn’t come in time for them to retire at their preferred date. It isn’t unusual for people not to receive their inheritance until they are in their 60’s or even 70’s (I speak from experience).
Cruise
Posts: 1297
Joined: Mon Nov 21, 2016 7:17 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by Cruise »

When we got a windfall, we didn’t retire, but used part of it to retire our mortgage. Now that was a good feeling!
Texanbybirth
Posts: 1432
Joined: Tue Apr 14, 2015 12:07 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by Texanbybirth »

Yes it would, but not a minute BEFORE it was actually in my bank account. It would change our (and our children's) lives significantly.

(In fact, each of us in my family should expect that amount at some point in our future, but some of us are planning on it a little more than others are. :? )
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
KyleAAA
Posts: 8759
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Would a $1MM inheritance change your retirement plans?

Post by KyleAAA »

I might retire a year or two earlier, but that's about it. It would only impact my plans after I received it, not in advance. Too much can go wrong to count on an inheritance 20 years from now.
nigel_ht
Posts: 1845
Joined: Tue Jan 01, 2019 10:14 am

Re: Would a $1MM inheritance change your retirement plans?

Post by nigel_ht »

Wanderingwheelz wrote: Tue Nov 03, 2020 12:37 pm
Broken Man 1999 wrote: Tue Nov 03, 2020 11:18 am Well, I take OP at his word that he and his wife are financially independent. But I wonder, as he stated, "...The reason I ask is my wife and I are financially independent at 45/49, with plenty of investments to cover our fixed expenses..."

Fixed expenses aren't the only expenses one encounters in retirement.
We have a net worth just short of $4MM and no debt. That’s investments plus a paid for RV and a paid for home- nothing else counted including business equity. We’re careful spenders, but we like nice things.

My biggest concern for retirement is the same as most everyone else here and that’s the cost of health insurance and health care.
When I was figuring things out I used a low WR, didn't factor in SS, downsizing (home equity) or inheritance. If you're still green you can retire any time you want because there's a lot of uncounted assets to compensate for unknown expenses.

So the answer is no, the inheritance doesn't really factor into the decision making process. Neither should the RV or the house.

Seems like you have enough without the inheritance.
flyingaway
Posts: 3255
Joined: Fri Jan 17, 2014 10:19 am

Re: Would a $1MM inheritance change your retirement plans?

Post by flyingaway »

Because you are ALREADY financially independent, you can retire with the anticipation of $1MM to $3MM, or even $0 inheritance.

The question is that do you really want to retire? do you have good plans for your early retirement?

We are also financially independent, but we currently have negative inheritance, i.e., we are paying money for my parents' care. We are still working One More Year until we have a solid buffer and good retirement plans, which are usually involving overseas travels.
golf101
Posts: 47
Joined: Mon Jul 15, 2019 11:30 am

Re: Would a $1MM inheritance change your retirement plans?

Post by golf101 »

Given that I’m working towards a specific number, adding $1M to that would absolutely change our retirement plans but only once the money is in my account. I’m saving as much as I can to get to my number even though I think I’ll get something from my parents and my in-laws because there’s no guarantee. I hope they all live to 100 and I don’t see a dime of it.
Topic Author
Wanderingwheelz
Posts: 1065
Joined: Mon Mar 04, 2019 9:52 am

Re: Would a $1MM inheritance change your retirement plans?

Post by Wanderingwheelz »

flyingaway wrote: Tue Nov 03, 2020 3:03 pm Because you are ALREADY financially independent, you can retire with the anticipation of $1MM to $3MM, or even $0 inheritance.

The question is that do you really want to retire? do you have good plans for your early retirement?

We are also financially independent, but we currently have negative inheritance, i.e., we are paying money for my parents' care. We are still working One More Year until we have a solid buffer and good retirement plans, which are usually involving overseas travels.
I’m ready to retire, yes. And I am at the end of the year. My wife has 4 years left on the lease for her business and she plans to work that long, for sure, and then see how she feels about things. We allow for a lot of free time as it is, with both of us working, having just gotten back from a month long RV trip. Our businesses are heavily summertime seasonal.

Her dad could be an expense for us but for now he has a steady companion who is reasonably well to do, and they’ve made arrangements for him to live out his remaining days in her home if she predeceases him. He’s never asked for any help from us, and a number of years ago we paid off my wife’s college for him since we were in far better shape than he was by that point.
3 Fund Portfolio. 70%/30% AA. No mortgage. Simple.
IowaFarmBoy
Posts: 892
Joined: Fri Jan 22, 2010 8:19 am

Re: Would a $1MM inheritance change your retirement plans?

Post by IowaFarmBoy »

We were proceeding well on the retirement savings path when we inherited a significant sum (but not close to $1MM) at about age 56. It didn't immediately change our plans, we just added it to our retirement savings. I had been planning on retiring at 65 but having this additional amount allowed us to make the decision to retire at 62. This was really nice as my workplace was changing a lot and it was a good time to get out. I don't think I would have gone at 62 had we not had the extra money.
afan
Posts: 5572
Joined: Sun Jul 25, 2010 4:01 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by afan »

It would not change our retirement plans. Those are not finance limited at this point.
Depending on how the inheritance came to us, we might have to revise our estate plan. If it were an outright bequest, we would probably give it away, in an irrevocable trust, to our heirs now.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
User avatar
Sandi_k
Posts: 1587
Joined: Sat May 16, 2015 11:55 am
Location: SF Bay Area

Re: Would a $1MM inheritance change your retirement plans?

Post by Sandi_k »

Sort of. It would advance retirement, but it wouldn't change our plans.

We're DINKs, planning for 2025. An inheritance of that nature would mean that we would finish paying off the house, and then put the remainder into investment accounts to throw off income, to counteract what I'd forego in pension income by retiring before age 60.
goos_news
Posts: 105
Joined: Mon Jun 10, 2019 7:14 pm
Location: Northern California/French Riviera

Re: Would a $1MM inheritance change your retirement plans?

Post by goos_news »

I did, quite unexpectedly, and it did not change a thing, as I was already doing pretty well. As others said, don't count on it and just treat it as upside. For me, I did not expect anything and let me keep things in perspective. Don't even think about the upside number, it will be counterproductive. I told them to spend it and that I was doing OK. So instead, I will treat it as upside and keep it in reserve in case I want to help out by sister later on. I think that is what they would have wanted.
pasadena
Posts: 1037
Joined: Sat Jul 02, 2016 1:23 am
Location: PNW

Re: Would a $1MM inheritance change your retirement plans?

Post by pasadena »

Wanderingwheelz wrote: Tue Nov 03, 2020 12:37 pm We have a net worth just short of $4MM and no debt. That’s investments plus a paid for RV and a paid for home- nothing else counted including business equity. We’re careful spenders, but we like nice things.
If I had $4M in investments and a paid-off home, at 45 y-o, I would retire. So I guess inheritance wouldn't change that.

If I got $1M in inheritance on top of my current net worth, at 45-49 y-o, it would change my plans and I would plan retirement at ~50. But only if I actually received the money now, not if it were a "someday" thing.
Whakamole
Posts: 1217
Joined: Wed Jan 13, 2016 9:59 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by Whakamole »

On one hand, it could mean that I could retire now.

On the other hand, due to world circumstances, I couldn't enjoy activities I would look forward to (travel/sightseeing/etc.) Even moving to a lower COL area would be difficult.
bwalling
Posts: 164
Joined: Thu Nov 25, 2010 1:04 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by bwalling »

As has been alluded to above, it's not yours until it's yours. I've watched otherwise decent families do some shady stuff to get their hands on inheritance money. And all of them said it would never happen to their family.

Related: make a will. If you set up a trust, have a bank or institutional trustee. Don't let a friend or family member do it. Even if you 100% trust them, don't put them in the position of others manipulating them or accusing them.
UncleLongHair
Posts: 65
Joined: Fri Nov 17, 2017 5:51 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by UncleLongHair »

I honestly don't understand these answers that an extra $1M would not change your plans.

I am 50 and just figuring out how to pay for college and will start to phase into part time work soon after and hopefully mostly retire within 10 years. The prospect of a $1M windfall during that time would accelerate everything by a few years, it would completely pay every conceivable college expense and give plenty extra to invest. In fact I'd probably retire the day that it happened.

How can $1M not affect your plans? Are you saying that you can't count on it because it hasn't happened yet? I would certainly not want to be in a position of hoping that a family member died so I could get their inheritance, but I don't understand how a large windfall does not affect your financial plans.
Topic Author
Wanderingwheelz
Posts: 1065
Joined: Mon Mar 04, 2019 9:52 am

Re: Would a $1MM inheritance change your retirement plans?

Post by Wanderingwheelz »

UncleLongHair wrote: Wed Nov 04, 2020 8:59 am I honestly don't understand these answers that an extra $1M would not change your plans.

I am 50 and just figuring out how to pay for college and will start to phase into part time work soon after and hopefully mostly retire within 10 years. The prospect of a $1M windfall during that time would accelerate everything by a few years, it would completely pay every conceivable college expense and give plenty extra to invest. In fact I'd probably retire the day that it happened.

How can $1M not affect your plans? Are you saying that you can't count on it because it hasn't happened yet? I would certainly not want to be in a position of hoping that a family member died so I could get their inheritance, but I don't understand how a large windfall does not affect your financial plans.
I think $1MM would definitely affect every single person who’s commented, but some of those people have said it wouldn’t change their planning. There’s no way to receive a quick and easy $1MM and no notice, after all. I don’t think it would change my planning either, since most of us at 50 are pretty set in our ways.

Also, there is sort of a darkness to some of the replies as it pertains to a wealthy persons ability to plan for the later years, particularly as it pertains to nursing care. There are a lot of medium-wealthy people (Say a net worth between $5-10 million) who have gone to great lengths to ensure that a protracted end of life event does not wipe out all that they built during their productive years. That’s just how it is.

And also there are lots of grown children who are financially independent and are also quite cordial and friendly towards one another and are level headed enough to realize that doing what’s best for the family far outweighs the outcome if things were allowed to get selfish and nasty. Lawyers and outside trustees are major incinerators of cash. Bogleheads are a lot of things, but one is not being predisposed to lighting cash on fire.
3 Fund Portfolio. 70%/30% AA. No mortgage. Simple.
tibbitts
Posts: 12864
Joined: Tue Feb 27, 2007 6:50 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by tibbitts »

UncleLongHair wrote: Wed Nov 04, 2020 8:59 am I honestly don't understand these answers that an extra $1M would not change your plans.

I am 50 and just figuring out how to pay for college and will start to phase into part time work soon after and hopefully mostly retire within 10 years. The prospect of a $1M windfall during that time would accelerate everything by a few years, it would completely pay every conceivable college expense and give plenty extra to invest. In fact I'd probably retire the day that it happened.

How can $1M not affect your plans? Are you saying that you can't count on it because it hasn't happened yet? I would certainly not want to be in a position of hoping that a family member died so I could get their inheritance, but I don't understand how a large windfall does not affect your financial plans.
It would be very beneficial for almost anyone, but let's say you have to take the $1M as taxable income over the next 10 years (not an unreasonable assumption), so unless you're on the verge of retiring now, that will somewhat dilute the effects. It will still matter but it's like looking at your net worth and thinking you have $x, without remembering that actually the government has $y, leaving you with $z.
sailaway
Posts: 2841
Joined: Fri May 12, 2017 1:11 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by sailaway »

UncleLongHair wrote: Wed Nov 04, 2020 8:59 am I honestly don't understand these answers that an extra $1M would not change your plans.

I am 50 and just figuring out how to pay for college and will start to phase into part time work soon after and hopefully mostly retire within 10 years. The prospect of a $1M windfall during that time would accelerate everything by a few years, it would completely pay every conceivable college expense and give plenty extra to invest. In fact I'd probably retire the day that it happened.

How can $1M not affect your plans? Are you saying that you can't count on it because it hasn't happened yet? I would certainly not want to be in a position of hoping that a family member died so I could get their inheritance, but I don't understand how a large windfall does not affect your financial plans.
Almost everyone has said that a potential inheritance doesn't affect plans, not that receiving an inheritance wouldn't change anything.
jerrysmith
Posts: 32
Joined: Sat Feb 16, 2019 2:20 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by jerrysmith »

We're not high earners and are working pension jobs so 1mil would change everything.
Having said that, I'd probably work a few more years to get vested in my pension (wife is 20yrs into hers) then retire.
Great scenario to be in OP.
bwalling
Posts: 164
Joined: Thu Nov 25, 2010 1:04 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by bwalling »

Wanderingwheelz wrote: Wed Nov 04, 2020 9:43 amAlso, there is sort of a darkness to some of the replies as it pertains to a wealthy persons ability to plan for the later years, particularly as it pertains to nursing care. There are a lot of medium-wealthy people (Say a net worth between $5-10 million) who have gone to great lengths to ensure that a protracted end of life event does not wipe out all that they built during their productive years. That’s just how it is.
I watched someone spend 10 years in a nursing facility with 24/7 1:1 care. It's very expensive, and will pretty quickly drain money.
And also there are lots of grown children who are financially independent and are also quite cordial and friendly towards one another and are level headed enough to realize that doing what’s best for the family far outweighs the outcome if things were allowed to get selfish and nasty. Lawyers and outside trustees are major incinerators of cash. Bogleheads are a lot of things, but one is not being predisposed to lighting cash on fire.
Trustees can legally be paid whether they're outside or family. Paying a family member, or a family member deciding to take a legally "reasonable" fee can piss a lot of family members off.

Grandfather in law was an estate attorney for 60 years. Endless parade of horror stories from families that thought they liked each other and would all be reasonable. Money changes people.
User avatar
wander
Posts: 3580
Joined: Sat Oct 04, 2008 9:10 am

Re: Would a $1MM inheritance change your retirement plans?

Post by wander »

Yes, partially, if it happened, we would increase our expenses accordingly and enjoy more with our money but the retirement day would still be unchanged.
Topic Author
Wanderingwheelz
Posts: 1065
Joined: Mon Mar 04, 2019 9:52 am

Re: Would a $1MM inheritance change your retirement plans?

Post by Wanderingwheelz »

bwalling wrote: Wed Nov 04, 2020 11:37 am
Wanderingwheelz wrote: Wed Nov 04, 2020 9:43 amAlso, there is sort of a darkness to some of the replies as it pertains to a wealthy persons ability to plan for the later years, particularly as it pertains to nursing care. There are a lot of medium-wealthy people (Say a net worth between $5-10 million) who have gone to great lengths to ensure that a protracted end of life event does not wipe out all that they built during their productive years. That’s just how it is.
I watched someone spend 10 years in a nursing facility with 24/7 1:1 care. It's very expensive, and will pretty quickly drain money.
And also there are lots of grown children who are financially independent and are also quite cordial and friendly towards one another and are level headed enough to realize that doing what’s best for the family far outweighs the outcome if things were allowed to get selfish and nasty. Lawyers and outside trustees are major incinerators of cash. Bogleheads are a lot of things, but one is not being predisposed to lighting cash on fire.
Trustees can legally be paid whether they're outside or family. Paying a family member, or a family member deciding to take a legally "reasonable" fee can piss a lot of family members off.

Grandfather in law was an estate attorney for 60 years. Endless parade of horror stories from families that thought they liked each other and would all be reasonable. Money changes people.
That’s true. My dad is trustee for my grandmothers nephews “fortune”, and he does it for no pay, since he has no need for the money.

My wife and I own businesses where we become well acquainted with well to do families and there are definitely situations where money creates problems. It’s definitely not uncommon. What I’ve come to find out is the more financially independent the grown children are, the more likely there is to be a family that doesn’t have problems with wealth. My parents saw early on that my brother and I would be better situated to deal with money as we grew older, so they made the arrangement to have my brother and I be co-trustees on everything, and my sister nothing. Whatever he and I decide my sister shares in equally, but it’s ultimately up to he and I to come to an agreement.

There’s no right or wrong way to do things. Each family is unique.
3 Fund Portfolio. 70%/30% AA. No mortgage. Simple.
UncleLongHair
Posts: 65
Joined: Fri Nov 17, 2017 5:51 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by UncleLongHair »

Warren Buffett said to give your kids enough so that they can do anything but not so much that they can do nothing. I think that sums it up.

I understand that everyone here has a heavy dose of skepticism about everything but to assume that a $1M inheritance would either evaporate or be taxable or meaningless kind of stretches the imagination. My in-laws' parents both had to go to assisted care for 1-2 years it was expensive on the order of $5k/mo but unless something really goes sideways that is not going to burn up $1M. Inheritance of this size is usually not taxable unless held in IRA/401k accounts and any assets get a stepped-up basis before going to heirs and unless the whole estate is a lot larger would not be taxed.
Last edited by UncleLongHair on Wed Nov 04, 2020 5:15 pm, edited 1 time in total.
mak1277
Posts: 1762
Joined: Fri Jan 09, 2015 4:26 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by mak1277 »

UncleLongHair wrote: Wed Nov 04, 2020 8:59 am I honestly don't understand these answers that an extra $1M would not change your plans.

I am 50 and just figuring out how to pay for college and will start to phase into part time work soon after and hopefully mostly retire within 10 years. The prospect of a $1M windfall during that time would accelerate everything by a few years, it would completely pay every conceivable college expense and give plenty extra to invest. In fact I'd probably retire the day that it happened.

How can $1M not affect your plans? Are you saying that you can't count on it because it hasn't happened yet? I would certainly not want to be in a position of hoping that a family member died so I could get their inheritance, but I don't understand how a large windfall does not affect your financial plans.
For me, I already have more than $1 million above my "number" for early retirement. For a variety of reasons, I am still working. So adding $1 million wouldn't change my retirement timing. If I inherited $1 million right now, I would most likely just spend it all on a new house and enough land so that I couldn't see any other people.
UncleLongHair
Posts: 65
Joined: Fri Nov 17, 2017 5:51 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by UncleLongHair »

mak1277 wrote: Wed Nov 04, 2020 5:04 pmFor a variety of reasons, I am still working. So adding $1 million wouldn't change my retirement timing.
Ok well yeah if you are working for non-financial reasons then yeah obviously no amount of money would change your plans but I don't really think that is what this conversation is about?
Trev H
Posts: 1896
Joined: Fri Mar 02, 2007 10:47 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by Trev H »

I am 59 yo and have already reached my goal... but plan to wait until 63 to retire... and until 67 to take SS.

YES.. another 1 Mil now... and I would retire now at 59.

Trev H
Exchme
Posts: 225
Joined: Sun Sep 06, 2020 3:00 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by Exchme »

I'm in the "don't count your chickens" camp. My dad spent his time worrying about getting around the estate tax and then spent a decade in the Alzheimer's unit while his portfolio suffered through the 2000 and 2008 crashes and exorbitant fees of the trustee managing the money. The big portfolio was by then quite small and then split several ways among the heirs. No complaints as I didn't have to work for it, but by the end it certainly wasn't going to change anyone's life.
tibbitts
Posts: 12864
Joined: Tue Feb 27, 2007 6:50 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by tibbitts »

UncleLongHair wrote: Wed Nov 04, 2020 4:59 pm Warren Buffett said to give your kids enough so that they can do anything but not so much that they can do nothing. I think that sums it up.

I understand that everyone here has a heavy dose of skepticism about everything but to assume that a $1M inheritance would either evaporate or be taxable or meaningless kind of stretches the imagination. My in-laws' parents both had to go to assisted care for 1-2 years it was expensive on the order of $5k/mo but unless something really goes sideways that is not going to burn up $1M. Inheritance of this size is usually not taxable unless held in IRA/401k accounts and any assets get a stepped-up basis before going to heirs and unless the whole estate is a lot larger would not be taxed.
Increasingly as pensions are no longer offered and employees start being enrolled in employer plans by default, I don't think it will be a stretch to say that a good percentage will be taxable within the now-shrunken RMD window. Now at what rate is another story of course, as it depends on what other income the recipient may have.
User avatar
Quirkz
Posts: 485
Joined: Mon Jan 14, 2019 5:32 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by Quirkz »

I am with the many who say "I wouldn't count on a single penny of inheritance until I had cashed the check."

But yes, if I did actually inherit a million dollars, it would change my plans, though only by moving up my time-table. I'm not retired yet, and still have more than a million to go to reach my number. That much could easily shave a decade off my anticipated retirement date. Other than that, it wouldn't really change my investment AA or other retirement goals all that much.
delamer
Posts: 10900
Joined: Tue Feb 08, 2011 6:13 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by delamer »

UncleLongHair wrote: Wed Nov 04, 2020 4:59 pm Warren Buffett said to give your kids enough so that they can do anything but not so much that they can do nothing. I think that sums it up.

I understand that everyone here has a heavy dose of skepticism about everything but to assume that a $1M inheritance would either evaporate or be taxable or meaningless kind of stretches the imagination. My in-laws' parents both had to go to assisted care for 1-2 years it was expensive on the order of $5k/mo but unless something really goes sideways that is not going to burn up $1M. Inheritance of this size is usually not taxable unless held in IRA/401k accounts and any assets get a stepped-up basis before going to heirs and unless the whole estate is a lot larger would not be taxed.
While I agree with your overall point — that a $1 million inheritance is unlikely to evaporate — be careful about assuming that a taxable account always will get a stepped up cost basis. Assets held in a credit shelter trust, for example, do not get a step up at the death of the second spouse. This can result in substantial taxes when assets are sold. In my case, the trust was created at my father’s death which was 15 years before my mother died, and the gains for me in the trust assets were large.
Topic Author
Wanderingwheelz
Posts: 1065
Joined: Mon Mar 04, 2019 9:52 am

Re: Would a $1MM inheritance change your retirement plans?

Post by Wanderingwheelz »

delamer wrote: Wed Nov 04, 2020 6:56 pm
UncleLongHair wrote: Wed Nov 04, 2020 4:59 pm Warren Buffett said to give your kids enough so that they can do anything but not so much that they can do nothing. I think that sums it up.

I understand that everyone here has a heavy dose of skepticism about everything but to assume that a $1M inheritance would either evaporate or be taxable or meaningless kind of stretches the imagination. My in-laws' parents both had to go to assisted care for 1-2 years it was expensive on the order of $5k/mo but unless something really goes sideways that is not going to burn up $1M. Inheritance of this size is usually not taxable unless held in IRA/401k accounts and any assets get a stepped-up basis before going to heirs and unless the whole estate is a lot larger would not be taxed.
While I agree with your overall point — that a $1 million inheritance is unlikely to evaporate — be careful about assuming that a taxable account always will get a stepped up cost basis. Assets held in a credit shelter trust, for example, do not get a step up at the death of the second spouse. This can result in substantial taxes when assets are sold. In my case, the trust was created at my father’s death which was 15 years before my mother died, and the gains for me in the trust assets were large.
It is true that tax laws do change, which means some trusts were can come back to cause a problem later- with the benefit of hindsight. This happened to my parents since my mother predeceased my dad by many years. I haven’t paid all that close of attention to it, but I recall it had to go with tax law changes as it pertains to real estate held within a trust. But there’s not anything that can be done about it after the death. Those things happen since there’s been significant changes to how wealth is taxed over the last 25 years. I guess most people would say those are the good types of problems to have.
3 Fund Portfolio. 70%/30% AA. No mortgage. Simple.
nigel_ht
Posts: 1845
Joined: Tue Jan 01, 2019 10:14 am

Re: Would a $1MM inheritance change your retirement plans?

Post by nigel_ht »

mak1277 wrote: Wed Nov 04, 2020 5:04 pm
For me, I already have more than $1 million above my "number" for early retirement. For a variety of reasons, I am still working. So adding $1 million wouldn't change my retirement timing. If I inherited $1 million right now, I would most likely just spend it all on a new house and enough land so that I couldn't see any other people.
Lol...that usually doesn’t cost $1mm if you don’t mind driving a bit...
kayakprof
Posts: 68
Joined: Thu Jul 26, 2018 2:46 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by kayakprof »

I also would never count on that inheritance before it was in my account. But yes, $1 million would significantly change my retirement planning. At the moment I expect to have $2 million in my accounts by age 62 (about 14 years from now), and that should be enough to fund what I consider a good retirement (although it is so difficult to predict healthcare costs). If necessary, I can continue working until at least 70. An inheritance of that magnitude would allow me to either retire earlier or take smaller withdrawals until SS or live a larger lifestyle during retirement. I also think it would allow us to offer more support to our children for college, graduate school and or home downpayments. My parents have "promised" a quarter million dollar inheritance but we do not count those towards our retirement plans, and do not expect to actually receive the inheritance. They are nearly in their 80s and living wonderful active lifestyles and I hope that continues for as long as possible.

I had one friend in college who was counting on inheriting his parent's rental income business (20-30 rental units). His mom passed away, his dad remarried, his dad passed away, and the 2nd wife decided that my friend wasn't responsible enough to handle the projected inheritance. He was so bitter he started screwing up at work and eventually ended up losing his job, his house, and largely became homeless. What a terrible thing to watch and a powerful lesson learned.
SQRT
Posts: 1478
Joined: Sat Feb 05, 2011 9:44 am

Re: Would a $1MM inheritance change your retirement plans?

Post by SQRT »

Trader Joe wrote: Mon Nov 02, 2020 10:26 pm
Wanderingwheelz wrote: Mon Nov 02, 2020 5:15 pm The reason I ask is my wife and I are financially independent at 45/49, with plenty of investments to cover our fixed expenses, but we are considering retiring early. I will inherit at least $1MM, and it could be as much as $3MM, sometime down the road which I do no factor into any of my retirement calculations.

Would this windfall affect your retirement plans, all else being equal?
No, not at all. This would never move the needle.
Likewise. It would have had to be an order of magnitude bigger to make an impact prior to retirement. However, now that I’ve been retired for about 14 years, an inheritance of this size (I’m actually expecting one a little bigger than this) adds a small degree of flexibility to our future spending plans. Not really significant but still nice to have.
mak1277
Posts: 1762
Joined: Fri Jan 09, 2015 4:26 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by mak1277 »

nigel_ht wrote: Thu Nov 05, 2020 8:22 am
mak1277 wrote: Wed Nov 04, 2020 5:04 pm
For me, I already have more than $1 million above my "number" for early retirement. For a variety of reasons, I am still working. So adding $1 million wouldn't change my retirement timing. If I inherited $1 million right now, I would most likely just spend it all on a new house and enough land so that I couldn't see any other people.
Lol...that usually doesn’t cost $1mm if you don’t mind driving a bit...
For the ones I want, I'd have to add to the $1 million from my own stash. I'm talking 50+ acres.
mak1277
Posts: 1762
Joined: Fri Jan 09, 2015 4:26 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by mak1277 »

UncleLongHair wrote: Wed Nov 04, 2020 5:13 pm
mak1277 wrote: Wed Nov 04, 2020 5:04 pmFor a variety of reasons, I am still working. So adding $1 million wouldn't change my retirement timing.
Ok well yeah if you are working for non-financial reasons then yeah obviously no amount of money would change your plans but I don't really think that is what this conversation is about?
The question was "Would $1MM inheritance change your retirement plans?". Also, the OP said they're already financially independent. So they too are ostensibly working for non-financial reasons. I think my answer is perfectly relevant to the question.
azanon
Posts: 2996
Joined: Mon Nov 07, 2011 10:34 am

Re: Would a $1MM inheritance change your retirement plans?

Post by azanon »

Mine? Definitely not. That's good for 35K/year for life (or thereabouts), but sadly, my annual cost of living is at least twice that, and that's counting my employer benefits which aren't locked in until I can officially retire. As a FED, and despite my own savings, prudence would still demand that I wait until I'm FERS eligible to retire.

Now it would allow me to take an "early-out" if offered - but where I work, those are rare.
nigel_ht
Posts: 1845
Joined: Tue Jan 01, 2019 10:14 am

Re: Would a $1MM inheritance change your retirement plans?

Post by nigel_ht »

azanon wrote: Thu Nov 05, 2020 10:32 am Mine? Definitely not. That's good for 35K/year for life (or thereabouts), but sadly, my annual cost of living is at least twice that, and that's counting my employer benefits which aren't locked in until I can officially retire. As a FED, and despite my own savings, prudence would still demand that I wait until I'm FERS eligible to retire.

Now it would allow me to take an "early-out" if offered - but where I work, those are rare.
Well, MRA + 20 is a few years earlier than 30 for my wife. That would be a no brainer to push withdrawal to age 60 and leave early with an extra million even if it's "only" a couple years difference.
User avatar
Quirkz
Posts: 485
Joined: Mon Jan 14, 2019 5:32 pm

Re: Would a $1MM inheritance change your retirement plans?

Post by Quirkz »

UncleLongHair wrote: Wed Nov 04, 2020 4:59 pm I understand that everyone here has a heavy dose of skepticism about everything but to assume that a $1M inheritance would either evaporate or be taxable or meaningless kind of stretches the imagination.
There are a number of ways that I've heard of an anticipated inheritance disappearing.
- One spouse dies. Surviving spouse remarries, then dies leaving the money to their widow(er) instead of the kids.
- Dispute leads to disinheritance.
- Funds lost due to scam, predatory advisors, or extremely bad/unlucky investments.
- Onset of dementia leads to mismanagement and disappearance of funds.
- Gambling addition develops. I've heard of this coming up due to dementia, and also odd things like a reaction to Parkinson's medication, along with the regular reasons someone might gamble.
- The inheritance wasn't actually there in the first place. Hidden debts, exaggerated holdings, etc.
Carefreeap
Posts: 2974
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Would a $1MM inheritance change your retirement plans?

Post by Carefreeap »

Well it certainly gave us some options! :D

DH inherited about $1M nearly 20 years ago shortly after 9/11 and the dot bomb. He was 43 in Tech and the company he worked for wanted him to relocate. He was able to negotiate a better package and I was able to quit a job I no longer loved.

We spent about $50k on a down payment for a nice house in the greater Phoenix area and were able to keep our Bay Area house. The rest we kept invested. That and our own savings allowed DH to retire in 2012 during the worst of the 08 recession when his job became untenable.

He's likely to inherit another chunk of money if his mother doesn't dis-own him. :annoyed

Not counting those chickens!

FWIW I never expected an inheritance and I was darn lucky to not get stuck supporting my father in a nursing home. Thank you US taxpayers for Medicaid.
Every day I can hike is a good day.
Carefreeap
Posts: 2974
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Would a $1MM inheritance change your retirement plans?

Post by Carefreeap »

Quirkz wrote: Thu Nov 05, 2020 11:13 am
UncleLongHair wrote: Wed Nov 04, 2020 4:59 pm I understand that everyone here has a heavy dose of skepticism about everything but to assume that a $1M inheritance would either evaporate or be taxable or meaningless kind of stretches the imagination.
There are a number of ways that I've heard of an anticipated inheritance disappearing.
- One spouse dies. Surviving spouse remarries, then dies leaving the money to their widow(er) instead of the kids.
- Dispute leads to disinheritance.
- Funds lost due to scam, predatory advisors, or extremely bad/unlucky investments.
- Onset of dementia leads to mismanagement and disappearance of funds.
- Gambling addition develops. I've heard of this coming up due to dementia, and also odd things like a reaction to Parkinson's medication, along with the regular reasons someone might gamble.
- The inheritance wasn't actually there in the first place. Hidden debts, exaggerated holdings, etc.
This is what we are dealing with. MIL has always weaponized money but her paranoia has gotten really bad. She's revoked our DPOAs and we're currently unable to help with her health issues or watch out for her money. It's a really sad and difficult situation to be in.
Every day I can hike is a good day.
BigMoneyNoWhammies
Posts: 300
Joined: Tue Jul 11, 2017 11:58 am

Re: Would a $1MM inheritance change your retirement plans?

Post by BigMoneyNoWhammies »

Wanderingwheelz wrote: Mon Nov 02, 2020 5:15 pm The reason I ask is my wife and I are financially independent at 45/49, with plenty of investments to cover our fixed expenses, but we are considering retiring early. I will inherit at least $1MM, and it could be as much as $3MM, sometime down the road which I do no factor into any of my retirement calculations.

Would this windfall affect your retirement plans, all else being equal?
I'm about a decade younger than you both but I'm actually in a similar situation in that I reasonably stand to inherit low to mid 7 figures down the line. For me, it does not change my retirement planning one iota. Like you, I don't factor it into my retirement planning and act as though the inheritance won't there, because one day it very well might not be, or may be significantly diminished, you never know. You don't list a breakdown of your assets so it's hard to accurately gauge, but given that you've noted a $4million portfolio and that existing investments would cover your current fixed expenses I could see a shortly forthcoming inheritance prompting retirement, but only if you know you'll be receiving it in the near term. I'd keep working if immediacy isn't realistic. As you noted above, my big worry in your position would be health coverage. Mid 40's to Medicare eligibility is a long time to be paying out of pocket for an insurance plan, and who knows what health concerns may arise for you in the coming years.
Last edited by BigMoneyNoWhammies on Thu Nov 05, 2020 12:10 pm, edited 3 times in total.
Post Reply