More Than Enough
Jonathan Clements | Mar 30, 2023
IF YOU’RE LIKE MANY readers of this site, you’ll reach your 60s and discover one of those nice problems to have—that you’ve over-saved for retirement.
What now? For answers, check out a new book, More Than Enough: A Brief Guide to the Questions That Arise After Realizing You Have More than You Need. Author Mike Piper is the driving force behind both the Oblivious Investor website and the free Open Social Security calculator.
His short book—it runs just 129 pages—covers topics like charitable giving, talking to your kids about their future inheritance, tax issues, getting professional help and more. Here are five insights from the book that caught my attention:
- “Most likely you’ll have decent investment returns and you won’t live to age 105 in a nursing home,” Piper writes. “And so, most likely, there will be a significant sum of money left over after you… have died. In other words, ‘enough’ ultimately turns out to be ‘more than enough,’ most of the time.”
- I’d been toying with opening a donor-advised fund. But after reading More Than Enough, I’m having second thoughts. One reason: They’re expensive. For instance, Fidelity Charitable, Schwab Charitable and Vanguard Charitable all charge a basic administrative fee of 0.6% of assets, with fund expenses layered on top of that. I wouldn’t tolerate such high investment costs in my own portfolio, so I’m not sure why I’d willingly incur such costs on money earmarked for charity.
- If you’ve researched a charity and trust it, you shouldn’t make a restricted gift, argues Piper. “And if you don’t trust the organization to use the money wisely, don’t give to that organization in the first place!” he quips.
- More Than Enough makes a compelling case that the most tax-advantaged way to donate money is with a qualified charitable distribution (QCD) from your IRA. To be sure, you must be age 70½ or older to take advantage of this provision. If you’re age 73 or older, the money disbursed this way counts toward your annual required minimum distribution and, by holding down your income, it can reduce the hit from, say, Medicare premium surcharges. But for me, Piper clinched the argument with this point: If you make a donation by, say, gifting appreciated stock, you might reduce your taxable income with the resulting hefty itemized deduction, but you also can’t make use of your standard deduction. By contrast, with a QCD, you can both reduce your income and claim the standard deduction.
- Piper also makes a compelling case for giving away money during our lifetime. Why not wait until death? One argument I especially liked: “[B]y the time the parents have died, the ‘kids’ are already retired,” Piper notes. “And at that point, the inheritance has no major effect on their happiness or standard of living…. Relatively modest gifts received early in life are often more impactful than larger inheritances received later.”
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I’m a big fan of Mike Piper’s stuff. Jonathan, your points are well taken. I believe that we have more than enough, and definitely plan on giving while we’re living.
I haven’t read the book, but I plan to, the ebook version is $4.99.
I realized a long time ago that I probably had more saved than I will require in my lifetime. I find it frustrating how many authors give numbers for how much you will need in retirement without saying how they calculated them. I get the feeling that many of the just combine a bunch of worst-case scenarios when it’s unlikely that one person will face all of them. (It may not be a good term to classify an unusually long life as “worst case”, however.
I’ve never been married and have no children. My only close relatives are my much-younger sister, who also probably has saved more than she will need, and an older brother who’s in assisted living and likely won’t survive much longer than I do, if at all. Therefore, I plan to leave most of my estate to charities. I would like to give them as much as possible while I’m still living but I’m still trying to decide how much is prudent.
I have almost always made my charitable donations unrestricted, for the reason mentioned in the article. One of my charities is my local Humane Society, which isn’t affiliated with any national organization. Many people donate cat litter for their shelter, but I doubt that anyone has ever made a donation specifically for toilet paper for their staff and volunteer rest rooms. Their programs extend far beyond the shelter most people associate them with. I’ve toured their facilities and am confident they will spend my bequest wisely. Their 150th anniversary is later this year.
The Red Cross is another of my charities, they often get a large amount of donations in response to disasters but are criticized when they don’t spend it all on that disaster. Many of their expenses for a disaster are spent before it even occurs. They have to buy and stockpile food, equipment, other supplies, train volunteers, and maintain a paid staff to coordinate it all.
The local United Way (Rochester NY) is also one of my charities. They vet the recipients, so I don’t have to. The United Way concept originated here during WWI and the local affiliate has the second largest endowment in the country.
Just put it on my Kindle, thanks!
I agree with,”Relatively modest gifts received early in life are often more impactful than larger inheritances received later.”
We inherited money after my parents died in 2018, and gave a portion to both of our children as a final (unrestricted) present from their grandparents. Our fee only financial advisor rightfully warned us to worry about our retirement first as both children were in their early thirties, and had many years of earnings ahead of them.
My response was if my wife and I are not able to live off of our combined assets at that point then there was something wrong with US.
Each child used their gifts differently (and dare I say intelligently). My son used the money for a down payment on a house (just before COVID) whereas he and his wife would have had to save for years (and pay a much higher price). My daughter used the money to pay off all of her college debt, and with my guidance has become an avid investor.
Our benevolence of a small amount of our inheritance years ago as expected has likely changed the course of their financial lives. What kind of effect it would have 35 years from now when we are both gone? We’ll never know. All I know now is how good it feels to have helped while we’re are alive!
This should be a reminder to all of us that holding tightly onto our purse strings until death may deny both parents and children an opportunity to benefit from a lifetime gift. If you can afford to give away assets, A gift now may benefit your children more than having to wait until your death. And, there can be real pleasure for parents by helping their children while they are still living.
I have read Mike Piper’s book after seeing it mentioned on HD. I have used donor advised funds for quite a few years to separate the tax deduction from the charitable support element of gifting. Gifts of appreciated stock and bunching gifts create some unique opportunities that I am willing to pay 60bps for. Also, most charities can’t deal with appreciated stock. QCD’s may be an opportunity when I’m 70 1/2 and have RMD issues that have not been addressed with Roth conversions.
I have enjoyed reading Mike Piper’s blog and look forward to reading his new book.
I would note a tax trap and a tax headache I have seen regarding charitable contributions when using a QCDs and non-cash charitable contributions –
Tax trap – If you have made deductible IRA contributions on or after reaching age 70 1/2 there is a cumulative recapture feature that keeps QCDs from being excluded from your taxable income until those previously deducted IRA contributions are recaptured.
From IRS Pub 590-B – Offset of QCDs by amounts contributed after age 70½.
Beginning in tax years after December 31, 2019, the amount of QCDs that you can exclude from income is reduced by the excess of the aggregate amount of IRA contributions you deducted for the taxable year and any prior year that you were age 70½ or older over the amount of such IRA contributions that were used to reduce the excludable amount of QCDs in all earlier years.
Tax headache – If you make non cash charitable contributions and plan to deduct the contributions in your tax return you likely will have to include IRS form 8283 with your return which is detailed compliance paperwork that includes among other things the security description & quantity, date acquired, date gifted, cost and fair market value on the date of gift for each security donated. If you are gifting a single appreciated stock that you acquired on one date the compliance headache is small. I have seen where some brokers use programs where the selected stocks are picked for donation are based on highest unrealized long term gain percentage compared with cost. If you have agreed to allow your broker’s computer to trade in your account by purchasing small numbers of shares then their selection process of which shares to gift can result in large numbers, maybe hundreds, of translations that must be individually input into the form(s) 8283. Likely neither you or your tax preparer will find this compliance work enjoyable. Don’t forget to get a qualified acknowledgement of your charitable gift from the DAF on or before the filing of your return.
I agree that QCDs are generally better tax wise than non cash gifts to a donor advised fund (DAF) for many taxpayers. A common exception to the general rule is where the taxpayer is making huge non cash gifts to a DAF to bunch the multiple years of planned charitable contributions into a single year when they are itemizing and then spread the funding from the DAF to the ultimate charity over multiple year when the taxpayer is using the standard deduction.
Jonathan, thank you for this—very helpful. The case for QCDs does seem strong, especially at and after age 73 when you can reduce your RMD amounts.
I am not convinced that I do have enough, and I am perfectly comfortable with waiting until my death for any actual excess to be passed on, although I am making QCDs. I would make the contributions in question anyway, so the QCD option is welcome.
I don’t have kids, so my priorities are different from those who do.
Certainly we will gift to our 2 kids and grandkids throughout their lives so we can see the impact and joy our gifts will bring.
Like you, I was skeptical of donor-advised funds. Unlike you, I now sing their praises, for the following reasons. First, donating appreciated assets is a simple transfer into the donor-advised account. Second, funds can be given anonymously, lessening the potential for unwanted solicitations. Third, record keeping is streamlined. Lastly, funds are delivered as directed, often on the same day, in full to the charity. Unlike online donations, no fees are deducted from the amount the charity receives.
The management costs of such services seem modest to me. That is partly because I don’t leave large amounts in the account to be managed — they are directed out almost immediately to charity. Other factors are the time savings achieved in giving this way, the fees that otherwise would be associated with giving online directly to the charity, or the cost of postage and checks.
Good points all around. I bought the book within minutes of reading this article. Mr. Piper’s books on Social Security and what to do after the death of a spouse are terrific.
The latter book is actually in my file folder downstairs, in my “When Steve is Dead” file. It’s there for my wife and kids, to accompany all my final instructions.
+1 re Piper’s Death of a Spouse book. We’ve been through death of a spouse twice after my father-in-law and then my father passed, helping my mum and MIL through getting settled. But even with that experience, the book is a worthy read to pre-flight your own final instructions and checklists for what your partner should do in the first month, the first quarter, the first year after you leave this vale of tears.
Ha! I have a similar folder labeled “When I Croak”
mine says final instructions 😎