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BETWEEN INVESTMENTS and our two homes, Connie and I have accumulated a respectable net worth. I don’t expect we’ll need those assets to live on. What will happen to our money?
It’s that last point that can be controversial. Is leaving a significant inheritance to children or grandchildren a valid retirement-planning goal? I say yes. In fact, if you can afford it, I view it as an obligation.
Warren Buffett once wrote in a shareholder letter that he recommends that super-wealthy families “leave the children enough so that they can do anything but not enough that they can do nothing.” He’s giving away 99% of his money to charity.
For Connie and me, we’re not talking billions or even many millions. But we have more than most folks accumulate over their lifetime.
I’ve posed the legacy question to several people, and opinions vary. Some jump to the conclusion that retirees wanting to leave behind a healthy inheritance are depriving themselves. I don’t agree. But I also wouldn’t suggest leaving a financial legacy if it means that retirees shortchange themselves.
Several people I spoke to said they’d taught their children to be responsible and to support themselves, and they don’t “deserve” anything from their parents. I think that misses the point. It’s not a matter of deserving. I wouldn’t bail out a lazy loafer or spendthrift. But that doesn’t mean responsible children don’t deserve assistance or perhaps a better start on their retirement savings than I had.
Generational wealth creates dependence and entitlement, I was told. Yeah, maybe for the Vanderbilts or others at the 0.1% level. But I disagree when it comes to us mere mortals.
A woman told me she’d be disappointed if her parents left her a large legacy. “They didn’t start out rich. They earned that money themselves. Now, their kids and grandkids have plenty, and they should be enjoying life to the fullest.”
There it is again: the idea that leaving a legacy and enjoying life are mutually exclusive. I wonder if this woman has considered that, when parents help their children, it might boost the happiness of the parents.
There’s the notion that, because the parents paid for college and the children are now doing well, it’s okay for the parents to spend down to zero. Some even claim that teaching them to stand on their own is itself a legacy, while “propping them up” is a disservice and teaches laziness and entitlement.
Meanwhile, others told me that they’d raised their children to work and to support themselves, and also to understand the importance of saving and investing. But they don’t view that as incompatible with leaving them financially secure. One man said that he couldn’t relate to the philosophy that “it’s good for them” not to receive an inheritance.
My bottom line: provide adequately for yourself and your spouse. Enjoy retirement as you define it, but also pay it forward—by pondering how your financial success can benefit others.
Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive. Follow him on X @QuinnsComments and check out his earlier articles.
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If you believe in “pay it forward,” then why not go forward beyond your family? Besides what I do for my children annually (mostly by funding their Roth IRAs), and having paid for their higher education, I will be leaving them about 25% of my current estate, which is enough to provide more generational education funds, travel, perhaps retiring a few yrs earlier, and general margin of comfort. The rest will go to well researched charities that I support now. They need it more.
This doesn’t have to be a one-and-done decision. Right now we have our estate plan set up where our daughter would receive her inheritance in increments over each decade. Our goals is that she’ll have some security for her own old age.
But in the coming years, we may do some more real-time assistance. For example, we will likely buy a modest home as an investment that she can live in. But we need to see that she’s got stable employment and is committed to the location she’s in before taking this step. Or, if she has children, we’d probably help out more while we’re still alive than just leave it all as an inheritance.
We have no pension, just SS, and we have more than enough money to live on. Our 4 kids are in their 30’s and 40’s. Three of them have children of their own, and at this point in their lives, any money we give them will help. Why wait until they are in their 50’s or older to give them money? It will be more beneficial now. They are very responsible, and they and their spouses all work. We gave them down payments for their homes, they have no college debt, and even bought them cars over many years. They will inherit 7 figures each when we are gone, and we are not worried about what they do with it. We are lucky that we have enough to take care of ourselves so they will not have to. My wife and I didn’t have this luxury when we were younger, working and raising 4 kids. Financial help would have been a positive blessing. Also, my mother was divorced and raised 3 young kids alone. We lived in a housing project and relied on welfare (AFDC) to survive. Financial assistance would have helped.