The problem with inheritances is that old people aren't dying quick enough. They're living longer and enjoying a greater level of health than at any time in history.

Prior to our parents generation, our grandparents saw an inheritance as a major windfall. They could finally pay off the home, travel to that exotic destination they had always dreamed of and maybe buy a new car.

But our parents are too wealthy already and most have a greater financial base than their parents. So when a grandparent finally carcs it the inheritance becomes like a ripple in the next generations finances, barely rating a mention on the Richter scale of appreciation.

This then causes an adjustment, a paradigm shift if you like, as the older generations consider what to do with their accumulated wealth. Here's the options as I see it;

1. Give it away to charity - Your children will only flitter it away as if it were pocket change anyway. It's far better to give it to those who need it than leave the family in a quandary wondering where it should go.

   More and more charitable organisations are targeting older people to include them in their will. On the surface it may appear like a scavenger circling overhead a rotting corpse but it makes common sense. This money if given to families will predominantly spend on materialistic items whereas this option gives a sense of legacy.



2. Give it to the second generation - the parents don't need it. The kids on the other hand are only just setting out in life and a sizable inheritance could be the kick start they need. Buying a piece of property, paying for their kids tuition and maybe buying a decent car are options that the lower generations will invest in.

   They realise that a holiday or new Jaguar are far too frivolous too spend someone's lifetime wealth accumulation. While an inheritance would only be a ripple in the 2nd generations pockets it would be a small Tsunami for the younger ones.



3. Spend it yourself - Well, why not? You earned it. Inheritances have far less importance these days so saving your money to pass on to future generations is less required. Better than splitting it between your kids why not selfishly enjoy it while you still have your health and wits about you?

   In Australia, we refer to them as "Grey Nomads" - the baby boomer generation that retires at 55, sells up and buys a large 4WD and caravan and traverses the nation for the next x years. They even sport bumper stickers stating "Spending the Kid's Inheritance".

Regardless, it's your money and you can do what you like with it.

Posted by Stuart at 6:11 AM | Permalink | Comments (2)

Half a million? One million? Two? What about five? How much money will it take for you to be financially independent when retirement season arrives at your door?

Most superannuation companies have a table in their prospectus' showing the difference between what your retirement savings plan would look like if you started at age 25, 35, 45 etc. encouraging you to plan earlier and put away more. But is this reality? Should I be busting my gut for a period in time where I will have the least amount of energy, possibly the worst health I've ever experienced and by far the least amount of drive and motivation.

But then retirement analysts would argue that this is exactly why we need to work hard now to reap the future benefits. To this sentiment I don't disagree. What I struggle to understand is why people save so hard for a lifestyle that can only be short at best and at worst may never actually eventuate.

Now, don't get me wrong. I'm not advocating the "live-it-up-today-for-tomorrow-may-never-come" ideology. I just struggle with accumulating as much as you can in order to feast for a short period in time. Proper planning is essential it's just the focus that I'm targeting.

So how much retirement savings is enough? By the time you retire, you should have completely paid off your house. In fact, if you took out a mortgage when you were 25 you would have paid it off by the time you're 50 giving you 15 years to supplement your wealth by purchasing another property or investing in shares or other financial instruments.

Your children will have all left home. You should have paid off your car(s). The furniture will all be owned and there are no more landscaping projects to complete. Therefore, your costs are limited to; food, utilities, rates, healthcare and insurances. How much does that cost?

Most people get this bee in their bonnet that they need more income when they retire viewing it similarly to winning the lottery. They dream of visiting Europe in the summer, driving an RV to escape the winter and being able to wine and dine at their leisure. The house they keep will need to be large enough to accommodate the grandkids and they will still need to possess two family-sized cars. What's wrong with this picture?

I understand retirement savings and the government's push for people to have some nest for life after 65. What I don't get is the desire to pass life by in the pursuit of a retirement nirvana.

How much retirement savings is enough? Enough to maintain the lifestyle that I'm currently enjoying.

Posted by Stuart at 6:44 AM | Permalink

Most of us dream of one day being able to leave our jobs and start living the life that we've always wanted. We've imagined joining our favourite golf club, seeing more plays, wining and dining and perhaps having time to sit and enjoy the grandchildren.

What if that time never came?

What if you were still working past 60 or even past 65 because you couldn't survive on the meagre savings you had accumulated? It's becoming more and more likely that this will be your reality.

Jeff Brown from the Philadephia Inquirer made this statement in his article Why we aren't saving enough;

Only seven in 10 workers are saving for retirement, and fewer than half of them have tried to figure how much they need to save.

I would hazard a guess that most of those who are saving for retirement aren't in their 20's or 30's either. As human beings our tendency is to live for the moment, assuming that retirement is an aeon away and can be dealt with the closer we get to it.

Deborah Fowles from About.com's FinancialPlan challenges our thinking on this;

If you don't start now, you'll never be able to catch up without putting away much more money later, when you'll have other demands like raising a family and funding your kids' college educations.

Continue reading "Do your retirement plans include working?" »

Posted by Stuart at 7:32 AM | Permalink | Comments (2)