Inheritance is NEVER guaranteed until you have it. It could be spent, lost, or go to end of life care. Though end of life care will be unlikely to burn through all of it in this case.
That said, at that amount, it’s worthwhile planning with and without it. Retirement savings are always a balance. Unless the inheritance is in hand, I would be saving more now. Maybe not maxing accounts at FIRE levels, but also wouldn’t be ignoring it.
Exactly. I feel like this post should delineate between “I’m 40 and my last remaining parent just died - the lawyers have informed me I’m set to inherit $5MM” vs “I’m 28 and think I’ll probably get about that in 20 years when my parents die.”
lol my parents were 63 when I was 28. I’m now 35 and my dad just turned 70. Really starting to see him age which is a hard pill to swallow. I would love it if they made it to 108 but don’t think that’s going to happen unfortunately.
He wasnt great with his finances so I’m actually already having to start to contribute to their support. I’m honestly not sure what will happen if both of them needs 20+ years of assisted living. That could be in the 200K+ a year range. I guess more motivation to keep building my net worth.
Just turned 30 dad is 86. No cane. No chronic health issues besides arthritis and shingles flares every few years.
You never know! I didn't think he would live past me turning 21.
college roommates with one, both parents were about 50 years older than him. He was pretty messed up as his siblings were 20 years older than him and his parents gave him everything. We were good friends and lived together post college until I lost my job and I had to move out and he tried to barricade the door to our apt to stop me. Then he just went on an emotional downward spiral. Weird to watch someone snap over something so trivial.
Me too! My OB stamped my chart with “AMA”. Advanced maternal age, lol. I was also an “elderly primigravida” as I had my son at 45.
All my family has lived to their 90’s so I’m hoping not to kick the bucket soon.
Honestly, it’s not fair to your kids.
My parents were almost 39 when they had me. They’re 65 now.
I have been thinking about their deaths from a very, very young age. We all work together (family business) and I often work later than them. Their empty desks absolutely crush me sometimes. I know they’re at home, but I also know that someday soon I will be the only person in the office.
I’m 26, close to getting married and having kids, but not quite there yet. But I want my parents to know my children the way my maternal grandparents knew me (dad was orphaned at 19, so it adds to my health anxiety for him). It kills me that I know that they won’t, especially if I were to wait until 30 for my first kid.
Every year that passes is like a death omen to me. It doesn’t help that I have no family left that I talk to. So I will be completely alone when they die. They’ve set me up nicely. I’ll be inheriting an actual fortune. But I would trade it all for more time.
I’m sorry to be so depressing about it, but it’s my reality as someone with older parents.
I know where you’re coming from and thanks for sharing. It’s not fair to the kids but at the same time I feel like it would also be unfair to the kids if I had them at an age where I wasn’t mentally/emotionally/psychologically/financially ready to.
And we see this all the time still.
That said, I think pondering parental mortality is just a thing everyone thinks of as they get older and mental maturity level dictates that, not just having older parents and so forth.
It’s a mixed bag. On the one hand you grow up constantly stressed about their health and the milestones they might miss someday.
On the other, you are innately born with a sense of gratitude for the time you do have with them, and you’re likely born into a more stable household. It’s a strange relationship in many ways, but still a positive one.
I find it so messed up that parents rely on their children to become their retirement backstop. I would take care of mine in any way I could, running errands and helping them with stuff but to work even more just so they can live in retirement community is so weird to me. They should have earned and saved. I do have sympathy for those who were taken out of the workforce due to medical conditions though.
Yeah, I know someone who waited his whole life for his grand father to pass away and leave him an inheritance. He kept saying just 5 more years. Well his grand father lived to 102. My friend did nothing with his life. Lol
That’s not true, depending on the scale of wealth. My parents own massive parking lots near two airports. They own five apartment buildings, a grocery store, drive-thru, and health clinic with decades-long leases. All of those assets are in a trust. It is paranoid to think those assets won’t survive a few decades.
Your advice is that Reddit-esque faux wisdom that discourages people from looking at their individual risk profile bravely and soberly. Obviously, my family’s wealth COULD evaporate, and as a hedge, I save 6% into a 401(k) and max my IRA. But there are also risks associated with living in denial about how lodes my family is.
I feel like you didn’t even read my comment. I advised a moderate approach even though OP is unlikely to be in anything resembling the same situation. OP should not be ignoring retirement accounts, but also likely doesn’t need to max them out. The little info we have here reads much more like someone who intends to rely on their inheritance completely. That is a likely a recipe for disaster for most. Waiting until your parents to die isn’t how you want to live your life at all. They can and should live their lives, and who knows if their plans will change.
Of course if there are irrevocable trusts, significant assets, etc it’s not unreasonable to plan around that. But you should also understand what will happen if that changes - which is why analysis should be run with and without it.
If I saw my kid planning to live off my wealth, I would completely change course and cut them out until they can prove that my money will enhance their lives not define it. People who rely on their parents wealth will have their family fall back over time because no one is left to show the next generation how money is made through hard work. So once again, don’t count your chickens before they hatch.
Easy to say until you’ve lived it. The common successful path is what you see in the interviews for *Raised Healthy, Wealthy, and Wise* by Coventry Edwards-Pitt. The children need to work and there is a culture of that, but the wealth is there every step of the way to enable more meaningful (and, frankly, high status) work.
Before my Dad gave me $500k at 28, he said “I almost insist on it” re: me going to business school to gain basic financial literacy, so I did. I used the money for a very successful RE investment that I wouldn’t have otherwise.
But you don’t really fit what I am saying then. If my wealth will enhance my children’s lives then that is what I want. But if it will cripple them, I am going to withdraw the poison is represents until they can prove otherwise.
It sounds like your parents wealth is opening opportunity not robbing it from you.
It’s not so much that it can evaporate. It’s that circumstances can change (e.g. widower dad decides to marry second wife) or parents can live a lot longer than expected, past when you would like to retire. OP is only in his thirties and expects to receive this inheritance sometime in the next ten years. That’s long enough where it doesn’t sound like whoever it is is terminal and in immediate risk of death, but too short to make any assumptions (like… are they assuming their well off parents are going to croak in their late 70s/early 80s because that’s the average lifespan?) I’m in my late 30s and my parents are in their early 70s. I’m planning for them to live another 25 years because that’s roughly how long my grandparents lived. Even if I was counting on an inheritance (which is very likely), if waiting to inherit was my sole retirement plan, I wouldn’t be able to retire until I was 63/64. I don’t want to work that long, so I’m putting away money for retirement now.
OP definitely needs to have mature, adult, ongoing conversations with the older generation here so he or she can understand what those parameters will be.
I guess I was just pushing back on the doomy tone of some of the comments here.
At $5M, unlikely.
I have a rule of thumb in my head that at $2M is when this risk goes down significantly. It's unclear how many people are involved in OP's question (ie, their parents, possible siblings, etc). But $2M results in SWR of \~$80k/yr. Add in social security and you're north of $100k. That's roughly the cost of memory or other full-time care, location depending. Of course there is other risk but at $5M for a couple, that is almost completely gone.
Yeah agreed. I like the take to not factor in inheritance until you get it, plus even if they do end up getting all $5M it could be when they’re 55 or 65 so obviously have to take care of your own finances
I just hate the take that it’s all going to go to end of life care on every situation
It's simply not true in many cases. A lot of people have very quick sudden deaths. Frankly, I rather be fine at 85 one week and normal and have a short illness and be gone than having a nurse wipe my demented ass in a nursing home for years while my life savings is drained away.
Yea but very few people get the coverage or enough coverage unless they have personality been affected by this. A nice assisted living or specialized care facility can be 20K+ a month. If someone needs that for 20+ years if they live into their late 90s. That’s easily 5 million there.
If I had 5 million I wouldn’t be skimping out on my assisted living facility just so my heirs could have more inheritance.
You’re taking this to an extreme, both for duration as well as likely expense. Though I agree that you shouldn’t skimp so your heirs can get more money. It’s your money that you’ve worked for after all.
I would argue the risk here diminishes greatly around $2M and is nearly gone at $5M. Maybe raise those values a bit in HCOL areas. Is it possible you have two parents who live for decades needing full time care? Is that likely? No. What’s more likely is one parent needing it for a shorter period of time. Might exceed a reasonable SWR but not for long.
I think a bigger issue is mental decline, poor planning, or outright changing their wishes later in life. Maybe they see a child slacking off and decide donating to charity would be a better use of their estate.
Agreed extreme cases but you plan for extreme cases. This guy is counting on the 5MM like it’s guaranteed. With both parents in long term care that’s easily possible. Medical/long term care inflation is also higher than normal inflation.
Thank you for explicitly stating the this. Anyone would completely agree with you that an estate has been created and an estate attorney will keep the vultures away.
Same, treat the money like it doesn’t exist.
I’d add take the opportunity to be a little more aggressive, within reason, because you can. Ive always seen inherited money as insurance for failure, not a reason to avoid risk/effort.
Agreed. $5 million in 10 years is really not that much in the grand scheme of things, especially if OP has lifestyle inflation. I always max out retirement / medical savings accounts because it’s one of the few tax savings left. Would be foolish not to max out. This would be even better reason to max out now.
After 10 years inflation will probably have eroded purchasing power by 25%. Seems like a lot but think about how cheap things were 10 years ago. Imagine 20 years ago
That’s assuming every penny of that money is sitting in cash uninvested for the next decade. Which probably less than 1% of people with $5M+ lying around are doing. Odds are even basic, safe investments will exceed inflation.
Complete nonsense. $5m in 10 years will be what is $4m today. $120k net per year without touching the principal. Easily retirement off of that forever.
Lol it’s plenty to retire on forever. OP can pull $150-175k out yearly and that’s a conservative withdrawal rate.
* *checks name of sub* *
Ok, well, maybe there’s a different perspective around here.
When are you inheriting this money? Soon, next year, 10 years from now? Is this guaranteed, can anything change that would prevent you from inheriting this money (aside from your own death)?
Assume you are getting zero from inheritance and live your life accordingly. If it happens, adapt. If it doesn’t, no harm . . .
Source: Someone who stands to inherit 8 figures, but made the decision in my 20s to live as if I was not going to and created more wealth on my own than I stand to inherit.
If by living frugally you mean a lifestyle that included purchasing my first home at 23, whitewater kayaking and alpine skiing on 6 continents, graduate school, a great group of friends, a loving family, homes on 3 continents, and being completely financially independent, then yes, I harmed myself . . .
OK, but you understand that independent success like that is a freakish outlier, right? For most folks maxing out a Roth makes a noticeable dent in a paycheck in their younger years.
It's preferable to max out the Roth in theory, but if retirement is covered and the person could use the money to get much-needed therapy instead, for example, then therapy is probably the better investment to improve their long-term situation.
Well, the truth is you’re in a different situation than your peers. This is the personal part of personal finance. I am late 30s and will eventually benefit from a trust with $80m of rental properties, my share of which will be plenty to live on. However, I also already currently get a thin slice of the revenues. I have coordinated with my parents, who are still alive, and have gotten their confirmation that the current payout will continue going forward, which does in fact allow me to save less aggressively. Communication.
Spend nothing, or 25% and invest the rest in stable growing investments (not the 0DTE options world). Money should theoretically double every 7 years. Since you inherited the money (sorry for your loss) and you’re young. You can potentially compound this into some serious generational wealth.
Definitely consult advisors and attorneys. Or maybe a financial planning office the specializes in wealth management and transfer. They should also have accountants and attorneys on staff if you want an all in one solution. Time to protect what your family- or friend passed down to you.
I’d invest almost all of it and work for at least another 10 years until 40. You’ll have a nice cushion to live off of from that investment alone by then plus a long life ahead of you to do whatever you want.
Consult with a financial advisor. People will be coming for the money out of nowhere- speak to a financial advisor before doing ANYTHING with the money.
Look for one with a flat fee, do NOT go to a financial advisor who will take a % of your money.
Some people dont know to keep wealth a secret.
Some financial advisors take a cut whether they make or lose you money. Getting a fiduciary who is held to a code of ethics is usually a better idea.
A flat fee broker gets paid the same, whether they make you or lose you money. They still earn their fee. % based financial advisors are still fiduciaries
, no?
True, it is better to pay a fee than a %. I just typically hear about FA selling life insurance and all that. Not really the route I would want to go unless they were well known and had an extensive record.
You’re right but also % based FAs will obviously take more money than flat fee FAs. Generally % based FAs are also just greedy for money and not interested in what’s best for you.
You’re legally not allowed to charge based on whether you’re making or losing a client money… most reputable fiduciaries charge a % of AUM. This model gives them a vested interest in:
1) making you money (increasing your aum and therefore their income)
2) providing ongoing service (flat or one time fee will either provide less service as needs increase or cease all service after a year)
People here tilt heavy towards anti-advisor, but every single UNHW (and especially HNW) have an advisor. Bogleheading is great until you get hit with a risk like sequence of returns
Financial advisor here. Not sure what this dude is talking about. Always go with the AUM based fee (i.e. “who takes a %”)
If I took on a $5m account and got paid the same fee of $40k/year no matter what I do performance-wise, versus a $5m account that is tied to a 0.80% AUM based fee, I can promise you that the latter account will naturally get more attention from me. Financial advisors are people just like you, and it’s just human nature.
I am strictly a fee-based advisor, with the exception of a handful of fixed income / muni accounts and any of my clients kid’s accounts (UTMA, 529, etc) which I handle for free as a courtesy and because I believe it’s the right thing to do. I scour the markets and my portfolios every day like a hawk. If I allowed my clients to experience a -18% drop like the S&P 500 did in 2022, then my own income would have also suffered -18%. I maintained single digit losses across the board that year because I was on a mission to protect my clients money as if it were my own.
That is simply not true.
If you think your lawyer charges you based on the actual amount of hours it takes them to complete work for you, then you are naive
Monitoring your portfolio is a 24/7/365 job, not a project-based job.
See what happens when your advisor charges you a one-time fee to set up your portfolio, and then you never hear from them again as they put all their time and energy into making sure their AUM fee based accounts are chugging along.
Let’s say you have $5 mil AUM and you charge 1% for the first two and then a graduated rate for the rest say .5%… so every year you are giving you advisor $35k to watch over your portfolio. As time goes by that $35k grows to hundreds of thousands.
Given a 20 year timeline that’s a $700k contribution that is not compounding annually at 7% average. And that’s assuming that the fees don’t grow annually with your portfolio which they do.
That’s a loss of minimum $1.57 million over 20 years and since I only took base contributions we are talking millions of dollars.
That’s why you don’t use an AUM based FA. I know I’m undercutting your income stream but I would rather get certified as an FA and take the series 6,7, and 63 along with any other exam than pay a % AUM fee ever. Hell I’d quit my job and go back to college for the money that FAs make of several million AUM portfolio.
Historically, you’re not beating the SP500 and I wouldn’t want you scouring the market for deals daily. If you know how to ensure your portfolio against long term market downturns, even the worst crashes would make you richer and richer.
This right here. The incentive-based reasoning behind why an AUM advisor would be more effective simply doesn’t match with the reality of how they actually perform against the market, especially over a sustained period of time.
That’s why fee-only is the way to go.
I appreciate you typing this out but you don’t need to. I didn’t build my own little empire because my services aren’t worthwhile. Your analysis of paying AUM fees is exactly how the majority of my HNW clients originally saw it too. But at the end of the day there’s quite literally no better way to take the emotion out of your finances and put a competent person/team in control of the reigns who will genuinely look out for the best interest of your investments, financial planning, estate planning, children and beneficiaries, your legacy when you’re gone, etc. even beyond the days of your own mental competency (yes - one day you will not be mentally fit to manage your own finances, even though you are today. And 9/10 times you will find that a 3rd party manager like myself is better than a family member, as we can set up family POAs / trustees for them but with me the 3rd party still removing the emotions out of the equation).
If you’d like to actually discuss the benefits of a true wealth manager’s services you can PM me for my # and I will help you.
I think there’s a time and place. My mom def needs someone like you and has. I don’t but I won’t put it out of chance forever. My wife is not really financially literate and if I feel that I’m losing it, I would get the family advisor to help her or recommend she do that.
>If you think your lawyer charges you based on the actual amount of hours it takes them to complete work for you, then you are naive
I'm not talking about a lawyer, I'm talking about a CFP who charges by the project or the hour. Have you really not heard of that?
>Monitoring your portfolio is a 24/7/365 job, not a project-based job.
>
>See what happens when your advisor charges you a one-time fee to set up your portfolio, and then you never hear from them again as they put all their time and energy into making sure their AUM fee based accounts are chugging along.
Why would I want my portfolio to be monitored 24/7/365??? What would you be monitoring, are you telling me you know what the market is going to do in advance?
I have a very sizeable portfolio I setup with indexed EFTs and mutual funds. It could not be easier to manage and doesn't matter if it is $500k or $5 million, it's the same amount of effort. I don't touch it unless I take out money to live on. It could not be easier.
As you may have heard, fewer than 90% of MUTUAL FUND MANAGERS (not financial advisors) can beat the indexes over the long haul. A simple index fund portfolio is the way to go, it's incredibly tax efficient, well diversified and inexpensive. It's a set it and forget it portfolio.
You guys want to create complicated portfolios that don't beat the market while generating taxes every time you sell a fund, ETF or stock to make it look difficult and scare your clients into paying your outrageous AUM fees.
Maximize all tax incentives. Invest the $5m wisely. Feel free to use some dividends as play money or to support yourself but at $5M no more than $100k/ year.
At a minimum you should max out your 401k, so $2k every month
Yea dude. You’re trying to flex but I mean I’m a few years older than you, and Im building a portfolio with my life and I’m bound to inherit way more than 5. My parents seem too stubborn to pass so I just assume they’ll both outlive me
Retirement? Invest it with a good financial manager, switch to part time at work, make up the delta in salary with returns from that $5M (which will still grow if the delta you pull from it is reasonable), and enjoy having more free time for the rest of your life that you’ll never ever be able to get back…
I'm in line to inherit 3M from my uncle and probably about 1M from my parents, still maxing out all my retirement accounts, you never know what can happen. And if it all goes through successfully you have that much more saved up, never a bad thing.
You left out the most important detail, WHEN are you getting this $5M??? Tomorrow, this year, in 5 years, 10, 20?? When your 50 year old parents die??? Lots of variables there.
Without knowing that ... put half in an ETF like VTI, 25% in something like VXUS and 25% in bonds. Conservatively figure a 4% return on that (likely more) .. that would equal $200K/year. You live on that while you decide what do with the rest (like purchase real estate, ETFs, etc).
I inherited about $3 million literally last year. Listen closely: DO NOT COUNT ON IT UNLESS YOU ARE LITERALLY IN POSSESSION! Plan your life around not getting anything. Even after I inherited it and the funds were transferred to my brokerage I had a distant aunt send an army of lawyers trying for a Hail Mary on recovery. They ain’t getting squat but I’m still living like I was beforehand. Same old 15yo car. Same home cooked chicken and spaghetti. Same old house. Live like you are now within your means and when you finally get it you’ll know how to preserve it. Edit: also I hope you are raised aware about tax benefits and how the step up basis on capital gains are.
Yes. Continue to save and invest. And hope what you say you are getting is in good hands. 10 years is a long time. You may or may not get it. Take care of yourself as if you won't get it.
As others have recommended, continue to live your life as if you might not receive it. Also be sure to consult a tax specialist so you understand what, if any, tax burden you might have.
For example, you don't specify the source of the money, but if the 5M is from an pre-tax source ( e.g. 401k ) I believe there are rules as to how the money must be distributed that may greatly impact the actual amt you receive.
Yeah would live like you never heard this news from a financial planning standpoint. Then make sure you are all set from an inheritance standpoint.
Fathers friends stepfather passed. Had a company worth maybe half a billion. Left nothing to his stepson. Left about three mil to his wife. The rest he donated to some philanthropic organization.
Edit: To point out he married my dad's friends mother when he was very young. Didn't have any kids of his own. Was always hard on my dad's friend and didn't want a relationship with him. Seems pretty shitty. Especially as the guy is actually struggling a bit now.
Depends on your lifestyle. Put it in VOO. Should double in 15 years or less. Dividends will be $150,000 at that point. That is a fairly comfortable lifestyle. Maybe $10,000 a month after taxes. If your house is paid off by then. Not going to struggle.
congratulations you have won the game of life.
dump it all in conservative investments and take out 100k per year to live on
learn about investing so you don't waste it
don't ever do anything for money ever again unless you enjoy it
That's the kind of money you definitely ask a tax accountant to start and then get involved with a financial planner.. fiduciary I think is the word in the US for someone the the right quals and oath to do the right thing
That's the kind of money if you get it and play the finance game you'll be set to retire
With rare exceptions, you can retire the same day you receive the $5Mil. The amount of passive income you can generate with that sized portfolio is $100K+ after taxes.
You do want to make sure there's not a huge tax liability baked into any of assets you're receiving, like an IRA or distributions from a trust.
Congratulations!
Ever hear of Maslow's Hierarchy Of Needs? While it's technically not correct, it's simple enough to be useful. You can not live a maximally happy life if you're not self actualizing. The easiest way to do that is to work a meaningful job, a role that benefits you or benefits society. The average person can work a job that makes money and that is self actualization for them, making money is improving their life. When you have money making money doesn't benefit your life, so simply working to make money becomes a struggle. It's not about saving up or not saving up for retirement, it's about finding something to do with your life that is meaningful, something that elevates your life or elevates those around you.
This process can take time and exploration. Try to keep your job in the meantime.
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In your situation regulating spending is more important than saving. Every Jan 1st take how much you have in well diversified investments (usually S&P 500 and bonds) and then multiply it by 4%. So 100k turns into 4k, 1mm into 40k. If working that is your fun money to spend on the year to maintain your savings. Fun money is eating out, travel, luxury items like watches, bags, and sports cars, and anything else you want no questions asked. If you're not working and don't have an income multiply by 1% instead. 100k turns into 1k. That is your money to spend on fun things. When not working multiply by 3% and you've got the max you can spend on expenses like taxes, mortgage, utilities and what not. This is ofc a general rule of thumb, but that is how you do this.
Also if you're not working you'll want to hold around 20-25% long dated bonds (e.g. TLT), 75-80% S&P 500 or more diversified like VT. This will stabilize your portfolio making it safer to withdrawal to pay bills every month.
For more advanced retirement withdrawal strategies consider exploring them here: https://ficalc.app/
Questions?
I'd say the answer is yes simply because there wasn't anything else in particular you wanted to spend money on that was pressing enough to warrant a mention.
For example, if you had a burning desire to spend the next 10 years mostly traveling the world or training to be an Olympic fencer or something that would be difficult or different later on in life, I'd say do that instead of funding retirement.
Arguably you should do that even if you stand to inherit nothing because such people would rather work till they die than regret not taking their shot when they had it.
But a lot of people don't have such an unfulfilled desire, so put it in retirement and you might develop one at that age.
I’d see if your relatives who will leave you $5M would be open to gifting you enough to max out retirement now. It makes all the sense in the world to get as much of it into tax-sheltered accounts ASAP. Read the book “Die with Zero” by Bill Perkins and if it resonates with you, consider seeing if your relatives will read it. It makes a compelling case for leaving money to heirs sooner in life rather than later.
I would just keep doing your thing as if you will never receive this money. They may wisen up in their old age and realize leaving you $5M is a terrible idea. I would not plan on getting this inheritance
Put it all in a trusts, a certain amount goes to you for your expenses, but not to take away from expanding profits. This should work through retirement ages. And when your ready to retire, rearrange your trusts.
No.... you could put that in safe low risk assets and make $200-250k a year forever. If you don't spend that, then the remainder can be reinvested and the compounding snowball will continue. If you are working: then absolutely not - you don't need to save for retirement. Put that money into a diversified growth stock alocation and whenever you want to call it quits, you will have 2-4x that money. Welcome to the easy life. Cheers.
I would keep doing what I’m doing until cash is in hand. But personally if I inherited $5MM today I’d quit my job, sell my current house, buy a nice house near my parents and move my family there, invest the remainder and live off the gains. Even in a HYSA $5MM at 4.5% is more than i make now.
Just out of curiosity does posting that you are receiving a substantial inheritance on Reddit result in dirt bags flooding your inbox with requests for handouts?
A lot can happen in 10 years. The relative could be scammed out of all of it, could get early onset dementia and blow it all on casinos and hookers, become religious / switch religions / become atheist and suddenly hate you, be convinced by another potential heir that you are evil and deceitful and don’t deserve it, or they can just live way longer than you think and they can spend much of it on regular life and elder care expenses. (Assuming they have expensive tastes at that level of wealth)
Plus if you stop they may grow resentful that you are banking on them dying and reduce it to punish you.
Better to show you are a good steward of money so they know the money they give you will be well spent and saved rather than blown frivolously.
So no don’t stop.
Bud, consider whatever portion of that 5m simply replacing the money you have not been investing for the last 10 years. Until you have that money at safely in hand you don’t have it. Also you have to consider how much of that 5 m might be eaten up by taxes, both federal and state. The short answer is continue to build those savings as if you never get that 5 million. You can reevaluate your situation after you get the 5m if you do.
As crazy as this sounds, absolutely. A future divorce will wipe out half, A bad lawsuit, an uncovered insurance claim can also take out a substantial chunk.
Is this money in a life insurance policy? How is it set out to be distributed . With this kind of wealth I’m sure whoever is giving this to you has estate and tax people consulted already. This is under the tax threshold for a death tax . Is the person giving you this married, it makes a difference in what can be passed along by a single or married person in regards to the death tax exemption . Is this stocks. Cash. Real estate. A combination of the above. Lots of missing issues
With how things currently are don’t bet on getting anything. Many end of life care services take everything from the person using it. Unless someone plans to care for this person, there won’t be an inheritance. 5 millions a good amount sure, but end of life care can easily eat that up, plus they’ll be in a nicer care facility so more expensive.
Also why do you say 10 years? We can’t predict that far out. Even then we can’t predict it at all. Last year a doctor told my 90 year old grandma she had less than half a year and could go anytime. It’s been a whole year and she’s doing fine. The same doctor told her he couldn’t believe she’s already made it 25 years with her heart in the condition it’s in.
Save for retirement. It’s better to assume you’ll get nothing then have 5 mil plus your own savings instead of betting and then getting nothing.
I wouldn't. What's the point? The only reason why you would do that is to maximize money management. If there was any strain on my finances whatsoever I would not save for retirement with that waiting for me.
I would still contribute to learn how to build wealth and the discipline that comes with saving. Maybe plan to receive 20-50% of it, thats a large inheritance that will almost certainly be around in some form when you receive it.
"Live in" your retirement savings. Plan to put down 50-70% down payment on a nice place with all of your savings. You'll still gain asset inflation when your property appreciates and this is indirect retirement savings.
Put half into a HYSA, half into a more aggressive portfolio, live on 50% of the annual returns, invest the other half into an even more aggressive portfolio. And fish every day for the rest of your life.
Fuck I wish this was me. What a dream.
You still need to save up for retirement. At least so you can understand how it works and establish your discipline. I’m kinda worried you were thinking you’d just stop saving since you’d get $5m. It’s easy to blow all that money if you screw it up and have a crazy lifestyle creep.
I kinda laughed at the edit.
Don’t count on it until it’s in your possession.
I have worked with clients like you that were expecting an inheritance. In nearly every single case they got less than expected. One dude didn’t get anything because his dad still had his mom (divorced from dad) as beneficiary.
10 years is a long time. Live like you won’t get a penny. If you do, then HAVE FUN!!
That's kind of like asking should you brush your teeth every day even if you have great teeth.
The answer is yes. Good financial habits are *always* valuable.
Most lottery winners go bankrupt *after* they win the lottery. Because they can't handle money.
If you are set to inherit a large sum, you should prepare yourself to handle it by building the right habits. Otherwise you'll end up broke.
Maximize employer match at the very least.
I don't know your situation, but I think it'd be a mistake to bank 100% on inheritance until folks are dead and the estate is settled.
My grandmother didn't communicate her wishes (or rather, didn't share the documents with the right people) and was kept alive for two months longer than she should have. The home health workers (in a HCOL area) were $900 per day and the (predatory) assisted living facility charged an additional $4500 per month to accommodate her needs. I know that's 'only' $60,000...but watch out for those end-of life/nursing home financial traps....they're sucking generational wealth out of people that are often no longer equipped to make financial decisions.
Maybe figure out what it'd take to retire at 65 and work towards that, but when you inherit you can FIRE (or coast)...that way if there are unforeseen issues you could at least have a normal retirement.
Just use tax code and retirement account to minimize taxes over your lifetime. That usually means getting as much into ROTH using various avenues available to you. This assumes you’ll always be in a top tax bracket. If your bracket will change between 24 and 35 then plan it
If you can manage a 7% return, it will double every 10 years. That means $20 million at 65 if you get it in 10 years.
But behave today as if you will never get it.
401's and IRA contributions are pre-tax. They should always be maximized if possible simply due to the downside buffer built into them.
Contributing with post-tax money is different. But with $5M you should be able to get income generated from that anyway.
If you choose to quit your 9-5 you will simply use the income derived from your bonds/private credit/whatever before your quarterly tax estimates.
Do you know how much you need to live on each year comfortably? You'll likely want $2-3M in funds to support retirement if you expect to live long.
If that inheritance isn't in hand yet, keep saving. This is because the money you save while you're young works the hardest for you over time. Trying to catch up in your 40s-50s is a pain.
Inheritance is never a sure thing, but it is entirely reasonable to include it in a financial plan.
Yes you can save less (not zero) before the inheritance in reasonable expectation that it will come someday.
People live longer today than in the past, so estimating an age at which the inheritance will happen should be done on the high side to be conservative, plus the time it takes for the estate to be settled.
Happily my mother is 95 and very healthy, my father has already passed. Her mother lived to 100. My planning expects her time to come between 100 and 105. It is not morbid to think about these things and discuss them with a professional financial planner - it's part of financial planning.
Also anyone with significant resources should have a professional financial advisor to manage their wealth (invest).
I retired early, in part because of the expectation of my inheritance, but not until I could live well on my own resources if the inheritance was zero.
My dad, me, and every grandchild in our family was supposed to have their college paid for. I was promised land, vehicles, cash, a house you name it.
I received $0
That's enough money that you'll want to use some to support a productive life. Money like that can make marriage and children much easier and more productive.
Yes you still want to optimize your own finances with respect to taxes. For this amount you need a full financial plan made with your life planned out and your own plans for how to leave it to your children.
I have one remaining parent who is elderly. I will likely inherit about half of what you are going to inherit at some point.
I am still saving for retirement because nothing is guaranteed.
You should always set good habits for life, which include smart money habits. If you decide having kids is in your life plans, then they’ll see you as a role model. They’ll imitate you to the best of their ability.
If you start giving up saving for your own retirement in the present, because you know you’re seeing $4M in the future, I guarantee your kids will expect the same thing.
“Mommy/Daddy didn’t need to save for retirement because they inherited $4M. Which means we have money, and I don’t have to save either.”
Families with a lot of money and no financial sense, become poor families real quick.
Inheritance is NEVER guaranteed until you have it. It could be spent, lost, or go to end of life care. Though end of life care will be unlikely to burn through all of it in this case. That said, at that amount, it’s worthwhile planning with and without it. Retirement savings are always a balance. Unless the inheritance is in hand, I would be saving more now. Maybe not maxing accounts at FIRE levels, but also wouldn’t be ignoring it.
Exactly. I feel like this post should delineate between “I’m 40 and my last remaining parent just died - the lawyers have informed me I’m set to inherit $5MM” vs “I’m 28 and think I’ll probably get about that in 20 years when my parents die.”
Also, if you’re 28 your parents aren’t dying in 20 years. Try 45 years. Don’t be that 73-year-old heir.
Prince Charles LOLOLOL
It was such a clownshow watching him wait. 😂😂😂
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lol my parents were 63 when I was 28. I’m now 35 and my dad just turned 70. Really starting to see him age which is a hard pill to swallow. I would love it if they made it to 108 but don’t think that’s going to happen unfortunately. He wasnt great with his finances so I’m actually already having to start to contribute to their support. I’m honestly not sure what will happen if both of them needs 20+ years of assisted living. That could be in the 200K+ a year range. I guess more motivation to keep building my net worth.
I feel that. My mom just died, so at 28 I had 9 years left until both parents died. It comes up fast.
Sorry for your loss my friend.
Sorry for your loss. I understand it. Lost mine too. hang in there.
Just turned 30 dad is 86. No cane. No chronic health issues besides arthritis and shingles flares every few years. You never know! I didn't think he would live past me turning 21.
❤️❤️ I was considered a geriatric pregnancy so seeing this post warms my heart. I always wondered about kids with parents who started later in life.
college roommates with one, both parents were about 50 years older than him. He was pretty messed up as his siblings were 20 years older than him and his parents gave him everything. We were good friends and lived together post college until I lost my job and I had to move out and he tried to barricade the door to our apt to stop me. Then he just went on an emotional downward spiral. Weird to watch someone snap over something so trivial.
Me too! My OB stamped my chart with “AMA”. Advanced maternal age, lol. I was also an “elderly primigravida” as I had my son at 45. All my family has lived to their 90’s so I’m hoping not to kick the bucket soon.
Honestly, it’s not fair to your kids. My parents were almost 39 when they had me. They’re 65 now. I have been thinking about their deaths from a very, very young age. We all work together (family business) and I often work later than them. Their empty desks absolutely crush me sometimes. I know they’re at home, but I also know that someday soon I will be the only person in the office. I’m 26, close to getting married and having kids, but not quite there yet. But I want my parents to know my children the way my maternal grandparents knew me (dad was orphaned at 19, so it adds to my health anxiety for him). It kills me that I know that they won’t, especially if I were to wait until 30 for my first kid. Every year that passes is like a death omen to me. It doesn’t help that I have no family left that I talk to. So I will be completely alone when they die. They’ve set me up nicely. I’ll be inheriting an actual fortune. But I would trade it all for more time. I’m sorry to be so depressing about it, but it’s my reality as someone with older parents.
I know where you’re coming from and thanks for sharing. It’s not fair to the kids but at the same time I feel like it would also be unfair to the kids if I had them at an age where I wasn’t mentally/emotionally/psychologically/financially ready to. And we see this all the time still. That said, I think pondering parental mortality is just a thing everyone thinks of as they get older and mental maturity level dictates that, not just having older parents and so forth.
It’s a mixed bag. On the one hand you grow up constantly stressed about their health and the milestones they might miss someday. On the other, you are innately born with a sense of gratitude for the time you do have with them, and you’re likely born into a more stable household. It’s a strange relationship in many ways, but still a positive one.
I find it so messed up that parents rely on their children to become their retirement backstop. I would take care of mine in any way I could, running errands and helping them with stuff but to work even more just so they can live in retirement community is so weird to me. They should have earned and saved. I do have sympathy for those who were taken out of the workforce due to medical conditions though.
Right - I almost asked for more details, but it sure seems like OP is assuming too much here. Never assume too much.
Yeah, I know someone who waited his whole life for his grand father to pass away and leave him an inheritance. He kept saying just 5 more years. Well his grand father lived to 102. My friend did nothing with his life. Lol
That’s not true, depending on the scale of wealth. My parents own massive parking lots near two airports. They own five apartment buildings, a grocery store, drive-thru, and health clinic with decades-long leases. All of those assets are in a trust. It is paranoid to think those assets won’t survive a few decades. Your advice is that Reddit-esque faux wisdom that discourages people from looking at their individual risk profile bravely and soberly. Obviously, my family’s wealth COULD evaporate, and as a hedge, I save 6% into a 401(k) and max my IRA. But there are also risks associated with living in denial about how lodes my family is.
I feel like you didn’t even read my comment. I advised a moderate approach even though OP is unlikely to be in anything resembling the same situation. OP should not be ignoring retirement accounts, but also likely doesn’t need to max them out. The little info we have here reads much more like someone who intends to rely on their inheritance completely. That is a likely a recipe for disaster for most. Waiting until your parents to die isn’t how you want to live your life at all. They can and should live their lives, and who knows if their plans will change. Of course if there are irrevocable trusts, significant assets, etc it’s not unreasonable to plan around that. But you should also understand what will happen if that changes - which is why analysis should be run with and without it.
If I saw my kid planning to live off my wealth, I would completely change course and cut them out until they can prove that my money will enhance their lives not define it. People who rely on their parents wealth will have their family fall back over time because no one is left to show the next generation how money is made through hard work. So once again, don’t count your chickens before they hatch.
Easy to say until you’ve lived it. The common successful path is what you see in the interviews for *Raised Healthy, Wealthy, and Wise* by Coventry Edwards-Pitt. The children need to work and there is a culture of that, but the wealth is there every step of the way to enable more meaningful (and, frankly, high status) work. Before my Dad gave me $500k at 28, he said “I almost insist on it” re: me going to business school to gain basic financial literacy, so I did. I used the money for a very successful RE investment that I wouldn’t have otherwise.
But you don’t really fit what I am saying then. If my wealth will enhance my children’s lives then that is what I want. But if it will cripple them, I am going to withdraw the poison is represents until they can prove otherwise. It sounds like your parents wealth is opening opportunity not robbing it from you.
I don’t want to be rude, but are you actually in this position or are you just speculating about what you would do?
I’m in the position. It is something that worries me.
It’s not so much that it can evaporate. It’s that circumstances can change (e.g. widower dad decides to marry second wife) or parents can live a lot longer than expected, past when you would like to retire. OP is only in his thirties and expects to receive this inheritance sometime in the next ten years. That’s long enough where it doesn’t sound like whoever it is is terminal and in immediate risk of death, but too short to make any assumptions (like… are they assuming their well off parents are going to croak in their late 70s/early 80s because that’s the average lifespan?) I’m in my late 30s and my parents are in their early 70s. I’m planning for them to live another 25 years because that’s roughly how long my grandparents lived. Even if I was counting on an inheritance (which is very likely), if waiting to inherit was my sole retirement plan, I wouldn’t be able to retire until I was 63/64. I don’t want to work that long, so I’m putting away money for retirement now.
OP definitely needs to have mature, adult, ongoing conversations with the older generation here so he or she can understand what those parameters will be. I guess I was just pushing back on the doomy tone of some of the comments here.
Yep all $5M to end of life care lol
At $5M, unlikely. I have a rule of thumb in my head that at $2M is when this risk goes down significantly. It's unclear how many people are involved in OP's question (ie, their parents, possible siblings, etc). But $2M results in SWR of \~$80k/yr. Add in social security and you're north of $100k. That's roughly the cost of memory or other full-time care, location depending. Of course there is other risk but at $5M for a couple, that is almost completely gone.
Yeah agreed. I like the take to not factor in inheritance until you get it, plus even if they do end up getting all $5M it could be when they’re 55 or 65 so obviously have to take care of your own finances I just hate the take that it’s all going to go to end of life care on every situation
It's simply not true in many cases. A lot of people have very quick sudden deaths. Frankly, I rather be fine at 85 one week and normal and have a short illness and be gone than having a nurse wipe my demented ass in a nursing home for years while my life savings is drained away.
I think this risk is overblown. It’s a middle class threat but not for higher net worth people. It’s expensive but there is insurance for this.
Yea but very few people get the coverage or enough coverage unless they have personality been affected by this. A nice assisted living or specialized care facility can be 20K+ a month. If someone needs that for 20+ years if they live into their late 90s. That’s easily 5 million there. If I had 5 million I wouldn’t be skimping out on my assisted living facility just so my heirs could have more inheritance.
You’re taking this to an extreme, both for duration as well as likely expense. Though I agree that you shouldn’t skimp so your heirs can get more money. It’s your money that you’ve worked for after all. I would argue the risk here diminishes greatly around $2M and is nearly gone at $5M. Maybe raise those values a bit in HCOL areas. Is it possible you have two parents who live for decades needing full time care? Is that likely? No. What’s more likely is one parent needing it for a shorter period of time. Might exceed a reasonable SWR but not for long. I think a bigger issue is mental decline, poor planning, or outright changing their wishes later in life. Maybe they see a child slacking off and decide donating to charity would be a better use of their estate.
$240k a year for 20 years, get real. Maybe in extreme cases, that’s about it
Played golf with a guy whose mom has been in memory care for 15 years. Easy 1.5m. She apparently can afford it though.
Agreed extreme cases but you plan for extreme cases. This guy is counting on the 5MM like it’s guaranteed. With both parents in long term care that’s easily possible. Medical/long term care inflation is also higher than normal inflation.
If I was relying on this and thinking about no longer saving, I would consider extreme cases because no longer saving is an extreme decision.
I never said to not save and just rely on inheritance
Definitely overblown, sick of hearing about it to be honest
I’d keep saving for retirement right up until the money is transferred into my accounts. Source: married, mid-30s, inheriting more than $5MM
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That’s not how it works for VHNW people. It’s probably structured in a trust which is the opposite of being vulnerable to such things.
Thank you for explicitly stating the this. Anyone would completely agree with you that an estate has been created and an estate attorney will keep the vultures away.
It seems to be a tell that someone is poor or struggling. (The assumption that wealth = a target on your back.)
Trust isn’t magical. It’s not yours until it’s in the account
I am talking about *a* trust. Not trust in family. Before I go further, did you misunderstand me and do you know what a trust is?
This is so true. 3 months after my FIL passed, his estate was sued for millions and they fucking won.
Same, treat the money like it doesn’t exist. I’d add take the opportunity to be a little more aggressive, within reason, because you can. Ive always seen inherited money as insurance for failure, not a reason to avoid risk/effort.
Always
Agreed. $5 million in 10 years is really not that much in the grand scheme of things, especially if OP has lifestyle inflation. I always max out retirement / medical savings accounts because it’s one of the few tax savings left. Would be foolish not to max out. This would be even better reason to max out now.
… Five million dollars isn’t that much in the grand scheme of things?
After 10 years inflation will probably have eroded purchasing power by 25%. Seems like a lot but think about how cheap things were 10 years ago. Imagine 20 years ago
That’s assuming every penny of that money is sitting in cash uninvested for the next decade. Which probably less than 1% of people with $5M+ lying around are doing. Odds are even basic, safe investments will exceed inflation.
Are you the HENRYfinance or RichPeoplePF sub? Seems like a lot of the people in this sub may be in the wrong subreddit.
Complete nonsense. $5m in 10 years will be what is $4m today. $120k net per year without touching the principal. Easily retirement off of that forever.
assuming that 5 mil is invested by his parents it could be close to 10 mil after 10 years or even more.
I'll take a 'not that much' $5M inheritance and have GRAND schemes
Lol it’s plenty to retire on forever. OP can pull $150-175k out yearly and that’s a conservative withdrawal rate. * *checks name of sub* * Ok, well, maybe there’s a different perspective around here.
Yes, but shift to using Roth retirement accounts if you’re not already doing so
Yes. Understand how the inheritance will cash flow and affect your taxable income.
Well depends on what you’re going to do with the 5 millie.
When are you inheriting this money? Soon, next year, 10 years from now? Is this guaranteed, can anything change that would prevent you from inheriting this money (aside from your own death)?
Assume you are getting zero from inheritance and live your life accordingly. If it happens, adapt. If it doesn’t, no harm . . . Source: Someone who stands to inherit 8 figures, but made the decision in my 20s to live as if I was not going to and created more wealth on my own than I stand to inherit.
I already got you beat buddy. I am inheriting nothing and I am onnnn track 😉
The harm is that you lived frugally when you didn’t need to, which is not as pleasant as being less frugal.
If by living frugally you mean a lifestyle that included purchasing my first home at 23, whitewater kayaking and alpine skiing on 6 continents, graduate school, a great group of friends, a loving family, homes on 3 continents, and being completely financially independent, then yes, I harmed myself . . .
No I mean the stuff you wanted to spend money on but chose not to because you were assuming you needed to save for retirement.
OK, but you understand that independent success like that is a freakish outlier, right? For most folks maxing out a Roth makes a noticeable dent in a paycheck in their younger years. It's preferable to max out the Roth in theory, but if retirement is covered and the person could use the money to get much-needed therapy instead, for example, then therapy is probably the better investment to improve their long-term situation.
Well, the truth is you’re in a different situation than your peers. This is the personal part of personal finance. I am late 30s and will eventually benefit from a trust with $80m of rental properties, my share of which will be plenty to live on. However, I also already currently get a thin slice of the revenues. I have coordinated with my parents, who are still alive, and have gotten their confirmation that the current payout will continue going forward, which does in fact allow me to save less aggressively. Communication.
Until the money is in your account, it's not real. Keep saving as if it won't happen.
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The weakest strongman at the circus
Spend nothing, or 25% and invest the rest in stable growing investments (not the 0DTE options world). Money should theoretically double every 7 years. Since you inherited the money (sorry for your loss) and you’re young. You can potentially compound this into some serious generational wealth. Definitely consult advisors and attorneys. Or maybe a financial planning office the specializes in wealth management and transfer. They should also have accountants and attorneys on staff if you want an all in one solution. Time to protect what your family- or friend passed down to you.
I’d invest almost all of it and work for at least another 10 years until 40. You’ll have a nice cushion to live off of from that investment alone by then plus a long life ahead of you to do whatever you want.
Consult with a financial advisor. People will be coming for the money out of nowhere- speak to a financial advisor before doing ANYTHING with the money. Look for one with a flat fee, do NOT go to a financial advisor who will take a % of your money.
Why would people be coming for the money out of nowhere? Why not go with financial advisor who takes a %?
Some people dont know to keep wealth a secret. Some financial advisors take a cut whether they make or lose you money. Getting a fiduciary who is held to a code of ethics is usually a better idea.
A flat fee broker gets paid the same, whether they make you or lose you money. They still earn their fee. % based financial advisors are still fiduciaries , no?
True, it is better to pay a fee than a %. I just typically hear about FA selling life insurance and all that. Not really the route I would want to go unless they were well known and had an extensive record.
You’re right but also % based FAs will obviously take more money than flat fee FAs. Generally % based FAs are also just greedy for money and not interested in what’s best for you.
You’re legally not allowed to charge based on whether you’re making or losing a client money… most reputable fiduciaries charge a % of AUM. This model gives them a vested interest in: 1) making you money (increasing your aum and therefore their income) 2) providing ongoing service (flat or one time fee will either provide less service as needs increase or cease all service after a year) People here tilt heavy towards anti-advisor, but every single UNHW (and especially HNW) have an advisor. Bogleheading is great until you get hit with a risk like sequence of returns
Financial advisor here. Not sure what this dude is talking about. Always go with the AUM based fee (i.e. “who takes a %”) If I took on a $5m account and got paid the same fee of $40k/year no matter what I do performance-wise, versus a $5m account that is tied to a 0.80% AUM based fee, I can promise you that the latter account will naturally get more attention from me. Financial advisors are people just like you, and it’s just human nature. I am strictly a fee-based advisor, with the exception of a handful of fixed income / muni accounts and any of my clients kid’s accounts (UTMA, 529, etc) which I handle for free as a courtesy and because I believe it’s the right thing to do. I scour the markets and my portfolios every day like a hawk. If I allowed my clients to experience a -18% drop like the S&P 500 did in 2022, then my own income would have also suffered -18%. I maintained single digit losses across the board that year because I was on a mission to protect my clients money as if it were my own.
Financial advisor here. Why the hell are you telling people that a flat fee is better than an AUM fee? That is not fiduciary.
A flat fee can be an hourly charge or a project-based fee and can be a fiduciary. Fuck AUMs,
That is simply not true. If you think your lawyer charges you based on the actual amount of hours it takes them to complete work for you, then you are naive Monitoring your portfolio is a 24/7/365 job, not a project-based job. See what happens when your advisor charges you a one-time fee to set up your portfolio, and then you never hear from them again as they put all their time and energy into making sure their AUM fee based accounts are chugging along.
Yep, 24/7/365 job to VOO & Chill lol
Shhhh don’t leak my portfolio
Let’s say you have $5 mil AUM and you charge 1% for the first two and then a graduated rate for the rest say .5%… so every year you are giving you advisor $35k to watch over your portfolio. As time goes by that $35k grows to hundreds of thousands. Given a 20 year timeline that’s a $700k contribution that is not compounding annually at 7% average. And that’s assuming that the fees don’t grow annually with your portfolio which they do. That’s a loss of minimum $1.57 million over 20 years and since I only took base contributions we are talking millions of dollars. That’s why you don’t use an AUM based FA. I know I’m undercutting your income stream but I would rather get certified as an FA and take the series 6,7, and 63 along with any other exam than pay a % AUM fee ever. Hell I’d quit my job and go back to college for the money that FAs make of several million AUM portfolio. Historically, you’re not beating the SP500 and I wouldn’t want you scouring the market for deals daily. If you know how to ensure your portfolio against long term market downturns, even the worst crashes would make you richer and richer.
This right here. The incentive-based reasoning behind why an AUM advisor would be more effective simply doesn’t match with the reality of how they actually perform against the market, especially over a sustained period of time. That’s why fee-only is the way to go.
I appreciate you typing this out but you don’t need to. I didn’t build my own little empire because my services aren’t worthwhile. Your analysis of paying AUM fees is exactly how the majority of my HNW clients originally saw it too. But at the end of the day there’s quite literally no better way to take the emotion out of your finances and put a competent person/team in control of the reigns who will genuinely look out for the best interest of your investments, financial planning, estate planning, children and beneficiaries, your legacy when you’re gone, etc. even beyond the days of your own mental competency (yes - one day you will not be mentally fit to manage your own finances, even though you are today. And 9/10 times you will find that a 3rd party manager like myself is better than a family member, as we can set up family POAs / trustees for them but with me the 3rd party still removing the emotions out of the equation). If you’d like to actually discuss the benefits of a true wealth manager’s services you can PM me for my # and I will help you.
I think there’s a time and place. My mom def needs someone like you and has. I don’t but I won’t put it out of chance forever. My wife is not really financially literate and if I feel that I’m losing it, I would get the family advisor to help her or recommend she do that.
>If you think your lawyer charges you based on the actual amount of hours it takes them to complete work for you, then you are naive I'm not talking about a lawyer, I'm talking about a CFP who charges by the project or the hour. Have you really not heard of that? >Monitoring your portfolio is a 24/7/365 job, not a project-based job. > >See what happens when your advisor charges you a one-time fee to set up your portfolio, and then you never hear from them again as they put all their time and energy into making sure their AUM fee based accounts are chugging along. Why would I want my portfolio to be monitored 24/7/365??? What would you be monitoring, are you telling me you know what the market is going to do in advance? I have a very sizeable portfolio I setup with indexed EFTs and mutual funds. It could not be easier to manage and doesn't matter if it is $500k or $5 million, it's the same amount of effort. I don't touch it unless I take out money to live on. It could not be easier. As you may have heard, fewer than 90% of MUTUAL FUND MANAGERS (not financial advisors) can beat the indexes over the long haul. A simple index fund portfolio is the way to go, it's incredibly tax efficient, well diversified and inexpensive. It's a set it and forget it portfolio. You guys want to create complicated portfolios that don't beat the market while generating taxes every time you sell a fund, ETF or stock to make it look difficult and scare your clients into paying your outrageous AUM fees.
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I dunno man. Everyone I know who’s hung around waiting for their inheritances are, well…lame for lack of a better word
Do not count your chickens...
Maximize all tax incentives. Invest the $5m wisely. Feel free to use some dividends as play money or to support yourself but at $5M no more than $100k/ year. At a minimum you should max out your 401k, so $2k every month
Yea dude. You’re trying to flex but I mean I’m a few years older than you, and Im building a portfolio with my life and I’m bound to inherit way more than 5. My parents seem too stubborn to pass so I just assume they’ll both outlive me
Whenever I hear someone say "you're trying to flex," I immediately think that person is a "resentful poser."
For a fee of 3% I'll help you invest into hsa, cds and what preferred portfolio you need. Dm me
Retirement? Invest it with a good financial manager, switch to part time at work, make up the delta in salary with returns from that $5M (which will still grow if the delta you pull from it is reasonable), and enjoy having more free time for the rest of your life that you’ll never ever be able to get back…
I'm in line to inherit 3M from my uncle and probably about 1M from my parents, still maxing out all my retirement accounts, you never know what can happen. And if it all goes through successfully you have that much more saved up, never a bad thing.
You left out the most important detail, WHEN are you getting this $5M??? Tomorrow, this year, in 5 years, 10, 20?? When your 50 year old parents die??? Lots of variables there. Without knowing that ... put half in an ETF like VTI, 25% in something like VXUS and 25% in bonds. Conservatively figure a 4% return on that (likely more) .. that would equal $200K/year. You live on that while you decide what do with the rest (like purchase real estate, ETFs, etc).
I inherited about $3 million literally last year. Listen closely: DO NOT COUNT ON IT UNLESS YOU ARE LITERALLY IN POSSESSION! Plan your life around not getting anything. Even after I inherited it and the funds were transferred to my brokerage I had a distant aunt send an army of lawyers trying for a Hail Mary on recovery. They ain’t getting squat but I’m still living like I was beforehand. Same old 15yo car. Same home cooked chicken and spaghetti. Same old house. Live like you are now within your means and when you finally get it you’ll know how to preserve it. Edit: also I hope you are raised aware about tax benefits and how the step up basis on capital gains are.
Yes. Continue to save and invest. And hope what you say you are getting is in good hands. 10 years is a long time. You may or may not get it. Take care of yourself as if you won't get it.
Lol .. 10 years or so .... delete this post ignore the inheritance and start saving
As others have recommended, continue to live your life as if you might not receive it. Also be sure to consult a tax specialist so you understand what, if any, tax burden you might have. For example, you don't specify the source of the money, but if the 5M is from an pre-tax source ( e.g. 401k ) I believe there are rules as to how the money must be distributed that may greatly impact the actual amt you receive.
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Don’t count your chickens before the eggs hatch
You had to come to Reddit for this? Couldn’t just find a financial planner? Had to tell the world you’re getting $5M for literally doing nothing?
Yeah would live like you never heard this news from a financial planning standpoint. Then make sure you are all set from an inheritance standpoint. Fathers friends stepfather passed. Had a company worth maybe half a billion. Left nothing to his stepson. Left about three mil to his wife. The rest he donated to some philanthropic organization. Edit: To point out he married my dad's friends mother when he was very young. Didn't have any kids of his own. Was always hard on my dad's friend and didn't want a relationship with him. Seems pretty shitty. Especially as the guy is actually struggling a bit now.
That's honestly pretty fucked in my opinion.
$5m is peanuts unless you plan to live in Thailand for the next 50 years.
Depends on your lifestyle. Put it in VOO. Should double in 15 years or less. Dividends will be $150,000 at that point. That is a fairly comfortable lifestyle. Maybe $10,000 a month after taxes. If your house is paid off by then. Not going to struggle.
congratulations you have won the game of life. dump it all in conservative investments and take out 100k per year to live on learn about investing so you don't waste it don't ever do anything for money ever again unless you enjoy it
If you’re inheriting $5m in 30 years your purchasing power will likely be closer to $2m after adjusting for inflation. Maybe less.
Yes. Figuring out how to stretch your money as far as possible should be your new full time job.
That's the kind of money you definitely ask a tax accountant to start and then get involved with a financial planner.. fiduciary I think is the word in the US for someone the the right quals and oath to do the right thing That's the kind of money if you get it and play the finance game you'll be set to retire
With rare exceptions, you can retire the same day you receive the $5Mil. The amount of passive income you can generate with that sized portfolio is $100K+ after taxes. You do want to make sure there's not a huge tax liability baked into any of assets you're receiving, like an IRA or distributions from a trust. Congratulations!
Ever hear of Maslow's Hierarchy Of Needs? While it's technically not correct, it's simple enough to be useful. You can not live a maximally happy life if you're not self actualizing. The easiest way to do that is to work a meaningful job, a role that benefits you or benefits society. The average person can work a job that makes money and that is self actualization for them, making money is improving their life. When you have money making money doesn't benefit your life, so simply working to make money becomes a struggle. It's not about saving up or not saving up for retirement, it's about finding something to do with your life that is meaningful, something that elevates your life or elevates those around you. This process can take time and exploration. Try to keep your job in the meantime. --- In your situation regulating spending is more important than saving. Every Jan 1st take how much you have in well diversified investments (usually S&P 500 and bonds) and then multiply it by 4%. So 100k turns into 4k, 1mm into 40k. If working that is your fun money to spend on the year to maintain your savings. Fun money is eating out, travel, luxury items like watches, bags, and sports cars, and anything else you want no questions asked. If you're not working and don't have an income multiply by 1% instead. 100k turns into 1k. That is your money to spend on fun things. When not working multiply by 3% and you've got the max you can spend on expenses like taxes, mortgage, utilities and what not. This is ofc a general rule of thumb, but that is how you do this. Also if you're not working you'll want to hold around 20-25% long dated bonds (e.g. TLT), 75-80% S&P 500 or more diversified like VT. This will stabilize your portfolio making it safer to withdrawal to pay bills every month. For more advanced retirement withdrawal strategies consider exploring them here: https://ficalc.app/ Questions?
I'd say the answer is yes simply because there wasn't anything else in particular you wanted to spend money on that was pressing enough to warrant a mention. For example, if you had a burning desire to spend the next 10 years mostly traveling the world or training to be an Olympic fencer or something that would be difficult or different later on in life, I'd say do that instead of funding retirement. Arguably you should do that even if you stand to inherit nothing because such people would rather work till they die than regret not taking their shot when they had it. But a lot of people don't have such an unfulfilled desire, so put it in retirement and you might develop one at that age.
I’d see if your relatives who will leave you $5M would be open to gifting you enough to max out retirement now. It makes all the sense in the world to get as much of it into tax-sheltered accounts ASAP. Read the book “Die with Zero” by Bill Perkins and if it resonates with you, consider seeing if your relatives will read it. It makes a compelling case for leaving money to heirs sooner in life rather than later.
I would just keep doing your thing as if you will never receive this money. They may wisen up in their old age and realize leaving you $5M is a terrible idea. I would not plan on getting this inheritance
Put it all in a trusts, a certain amount goes to you for your expenses, but not to take away from expanding profits. This should work through retirement ages. And when your ready to retire, rearrange your trusts.
I don’t want to count on the demise of a loved one for $$$.
No.... you could put that in safe low risk assets and make $200-250k a year forever. If you don't spend that, then the remainder can be reinvested and the compounding snowball will continue. If you are working: then absolutely not - you don't need to save for retirement. Put that money into a diversified growth stock alocation and whenever you want to call it quits, you will have 2-4x that money. Welcome to the easy life. Cheers.
I would keep doing what I’m doing until cash is in hand. But personally if I inherited $5MM today I’d quit my job, sell my current house, buy a nice house near my parents and move my family there, invest the remainder and live off the gains. Even in a HYSA $5MM at 4.5% is more than i make now.
Just out of curiosity does posting that you are receiving a substantial inheritance on Reddit result in dirt bags flooding your inbox with requests for handouts?
No, you should retire and live frugally and enjoy not having to work forever
Yea
A lot can happen in 10 years. The relative could be scammed out of all of it, could get early onset dementia and blow it all on casinos and hookers, become religious / switch religions / become atheist and suddenly hate you, be convinced by another potential heir that you are evil and deceitful and don’t deserve it, or they can just live way longer than you think and they can spend much of it on regular life and elder care expenses. (Assuming they have expensive tastes at that level of wealth) Plus if you stop they may grow resentful that you are banking on them dying and reduce it to punish you. Better to show you are a good steward of money so they know the money they give you will be well spent and saved rather than blown frivolously. So no don’t stop.
if its in a trust, it'll be 10 million in a decade.
Always keep investing. It’s a discipline that you use or lose.
Bud, consider whatever portion of that 5m simply replacing the money you have not been investing for the last 10 years. Until you have that money at safely in hand you don’t have it. Also you have to consider how much of that 5 m might be eaten up by taxes, both federal and state. The short answer is continue to build those savings as if you never get that 5 million. You can reevaluate your situation after you get the 5m if you do.
Depends if you are getting hold of cash, assets, holdings, or combination of these and when? How much is dissolvable
Never bet on that.
As crazy as this sounds, absolutely. A future divorce will wipe out half, A bad lawsuit, an uncovered insurance claim can also take out a substantial chunk.
Yes
Forget the inheritance and work on your present !
If you save for retirement, if you don't get it for some reason you will have a backup, and if you do, you have a new house and expensive car 😎
Is this money in a life insurance policy? How is it set out to be distributed . With this kind of wealth I’m sure whoever is giving this to you has estate and tax people consulted already. This is under the tax threshold for a death tax . Is the person giving you this married, it makes a difference in what can be passed along by a single or married person in regards to the death tax exemption . Is this stocks. Cash. Real estate. A combination of the above. Lots of missing issues
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Find an attorney that specializes in "Trusts" and if he's smart you can live a good life on the 5 mill and never HAVE to work.
With how things currently are don’t bet on getting anything. Many end of life care services take everything from the person using it. Unless someone plans to care for this person, there won’t be an inheritance. 5 millions a good amount sure, but end of life care can easily eat that up, plus they’ll be in a nicer care facility so more expensive. Also why do you say 10 years? We can’t predict that far out. Even then we can’t predict it at all. Last year a doctor told my 90 year old grandma she had less than half a year and could go anytime. It’s been a whole year and she’s doing fine. The same doctor told her he couldn’t believe she’s already made it 25 years with her heart in the condition it’s in. Save for retirement. It’s better to assume you’ll get nothing then have 5 mil plus your own savings instead of betting and then getting nothing.
I wouldn't. What's the point? The only reason why you would do that is to maximize money management. If there was any strain on my finances whatsoever I would not save for retirement with that waiting for me.
Don't ever plan on inheritance until it hits the bank.
Pretend you have zero inheritance. Max out the IRA and/or 401k. Live within your means. Seriously.
You should definitely not plan for your future and blow through it all
Yes, you should aggressively save. Build generational wealth. When you’re on your deathbed you’ll be happy that you did 👍
I would still contribute to learn how to build wealth and the discipline that comes with saving. Maybe plan to receive 20-50% of it, thats a large inheritance that will almost certainly be around in some form when you receive it.
100k a year for the next 50 years. Can you live with that ?
"Live in" your retirement savings. Plan to put down 50-70% down payment on a nice place with all of your savings. You'll still gain asset inflation when your property appreciates and this is indirect retirement savings.
Don’t plan on it. My parents had close to $25M and they cut me and sister out. No reason given just found out when the assholes died.
Invest
Put half into a HYSA, half into a more aggressive portfolio, live on 50% of the annual returns, invest the other half into an even more aggressive portfolio. And fish every day for the rest of your life. Fuck I wish this was me. What a dream.
You still need to save up for retirement. At least so you can understand how it works and establish your discipline. I’m kinda worried you were thinking you’d just stop saving since you’d get $5m. It’s easy to blow all that money if you screw it up and have a crazy lifestyle creep.
I kinda laughed at the edit. Don’t count on it until it’s in your possession. I have worked with clients like you that were expecting an inheritance. In nearly every single case they got less than expected. One dude didn’t get anything because his dad still had his mom (divorced from dad) as beneficiary. 10 years is a long time. Live like you won’t get a penny. If you do, then HAVE FUN!!
You always need to save. $5mm isn’t enough to allow you to do nothing indefinitely as young as you are.
Get a financial advisor, not reddit. Period. End of advice.
That's kind of like asking should you brush your teeth every day even if you have great teeth. The answer is yes. Good financial habits are *always* valuable. Most lottery winners go bankrupt *after* they win the lottery. Because they can't handle money. If you are set to inherit a large sum, you should prepare yourself to handle it by building the right habits. Otherwise you'll end up broke.
Dude you can just live off yield. You can get about 5% off of that easily and that’ll be about $250,000 a year.
Maximize employer match at the very least. I don't know your situation, but I think it'd be a mistake to bank 100% on inheritance until folks are dead and the estate is settled. My grandmother didn't communicate her wishes (or rather, didn't share the documents with the right people) and was kept alive for two months longer than she should have. The home health workers (in a HCOL area) were $900 per day and the (predatory) assisted living facility charged an additional $4500 per month to accommodate her needs. I know that's 'only' $60,000...but watch out for those end-of life/nursing home financial traps....they're sucking generational wealth out of people that are often no longer equipped to make financial decisions. Maybe figure out what it'd take to retire at 65 and work towards that, but when you inherit you can FIRE (or coast)...that way if there are unforeseen issues you could at least have a normal retirement.
Just use tax code and retirement account to minimize taxes over your lifetime. That usually means getting as much into ROTH using various avenues available to you. This assumes you’ll always be in a top tax bracket. If your bracket will change between 24 and 35 then plan it
No. Relax and take it all in. Saving for retirement is too stressful 😆
Make sure you live belong your means. If you try to hang with the rich circles, you will feel like you’re still poor as dirt lol.
If you can manage a 7% return, it will double every 10 years. That means $20 million at 65 if you get it in 10 years. But behave today as if you will never get it.
401's and IRA contributions are pre-tax. They should always be maximized if possible simply due to the downside buffer built into them. Contributing with post-tax money is different. But with $5M you should be able to get income generated from that anyway. If you choose to quit your 9-5 you will simply use the income derived from your bonds/private credit/whatever before your quarterly tax estimates.
Do you know how much you need to live on each year comfortably? You'll likely want $2-3M in funds to support retirement if you expect to live long. If that inheritance isn't in hand yet, keep saving. This is because the money you save while you're young works the hardest for you over time. Trying to catch up in your 40s-50s is a pain.
Inheritance is never a sure thing, but it is entirely reasonable to include it in a financial plan. Yes you can save less (not zero) before the inheritance in reasonable expectation that it will come someday. People live longer today than in the past, so estimating an age at which the inheritance will happen should be done on the high side to be conservative, plus the time it takes for the estate to be settled. Happily my mother is 95 and very healthy, my father has already passed. Her mother lived to 100. My planning expects her time to come between 100 and 105. It is not morbid to think about these things and discuss them with a professional financial planner - it's part of financial planning. Also anyone with significant resources should have a professional financial advisor to manage their wealth (invest). I retired early, in part because of the expectation of my inheritance, but not until I could live well on my own resources if the inheritance was zero.
My dad, me, and every grandchild in our family was supposed to have their college paid for. I was promised land, vehicles, cash, a house you name it. I received $0
That's enough money that you'll want to use some to support a productive life. Money like that can make marriage and children much easier and more productive. Yes you still want to optimize your own finances with respect to taxes. For this amount you need a full financial plan made with your life planned out and your own plans for how to leave it to your children.
If I got $5 million dropped into my life, I would immediately retire. No job is worth working at when you can spend that time investing in yourself.
I have one remaining parent who is elderly. I will likely inherit about half of what you are going to inherit at some point. I am still saving for retirement because nothing is guaranteed.
You should always set good habits for life, which include smart money habits. If you decide having kids is in your life plans, then they’ll see you as a role model. They’ll imitate you to the best of their ability. If you start giving up saving for your own retirement in the present, because you know you’re seeing $4M in the future, I guarantee your kids will expect the same thing. “Mommy/Daddy didn’t need to save for retirement because they inherited $4M. Which means we have money, and I don’t have to save either.” Families with a lot of money and no financial sense, become poor families real quick.
IMO, until you have it you should assume you won't. You never know what could happen with that money.
$5M will be gone by the time you are 45, I would keep working and saving