How are you planning for retirement?
I have met my share of parents who lived for their children without ever considering their own needs at retirement. Sacrifice for their education, sacrifice for their well-being, sacrifice for their future and rescue them when they get into trouble. By the time they reach 60, these mothers and fathers often struggle to survive or, even worse, they hoard a lot of resources thinking that their heirs will inherit and be comfortable. But this is the wrong philosophy! Let the kids struggle and be successful on their own. After all, we deserve to enjoy life once they have left the nest. Selfish? You bet, I deserve it.
There is of course nothing wrong with making a will and leaving some wealth to your kids; but if I did this while losing the opportunity to live my retirement to the fullest, I know I’d regret it. I once consorted with a family of 8 grandchildren who had a very wealthy grandmother; most of them never tried to succeed in life on their own; they were just waiting to inherit. When the matriarch finally passed away, they rushed to the nearest bank to collect. Talk about greed! Half of them had lost everything after 4 years. If the grandparents had at least conditioned their inheritance to specific achievements, some good would have been obtained.
Don’t Retire: Die Broke!
I am not sure I want to retire….because leisure is lethal. My wife and I are both 78. Age is a matter of what’s between your ears. Stephen Pollan, the author of the excellent book “Die Broke” says that most of age is created by attitude; he also recommends that we never stop working. If you are over 65 and you have some cash stashed away, spend it, says Pollan; don’t worry whether it’s going to last or whether there’ll be something for your kids.
Those with adult kids should perhaps think this way: if your kids haven’t found a way to succeed in life, leaving them money will only make them more dependent. It’s of course different when you leave disabled children who need constant care; in that case, your hard-earned retirement savings will play an important role.
Estate Taxes and Giving Your Money Away
If you are worried about estate taxes, there is good news (so far): Congress approved a schedule that increases the amount you can leave your heirs tax-free from $1.5 million in 2005 to $3.5 million in 2009. But Congress may change the law in 2010, though experts believe that legislators will simply freeze the exemption at the 2009 level. Also, the annual exclusion of $11,000 is still in effect without causing a tax (so you can still make annual gifts of up to $11,000 to as many people as you wish without triggering the tax).
Work On Your Estate Plan
If you have some goodies left over when you transit to a better world, make sure you mention them in your will. It will save your children a lot of grief, who may get into a family feud or tend to quarrel when parents die intestate. I guess we all have a bit of vulture inside our genes because families can split asunder sometimes, over muddled estate plans and convoluted trust funds. So let your heirs know very clearly what your intentions are and put it in writing. Add a clause that says that anything not mentioned in the will will (pardon the pun) be divided so and so. But before you go, make sure that you enjoy life to the fullest without any guilt: you earned that money so enjoy spending it!