{"id":234867,"date":"2021-04-24T23:18:00","date_gmt":"2021-04-24T20:18:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/opinion-why-you-should-plan-to-leave-money-to-your-kids\/"},"modified":"2021-04-24T23:18:00","modified_gmt":"2021-04-24T20:18:00","slug":"opinion-why-you-should-plan-to-leave-money-to-your-kids","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/opinion-why-you-should-plan-to-leave-money-to-your-kids\/","title":{"rendered":"#\n  Opinion: Why you should plan to leave money to your kids"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a4e993361dec\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a4e993361dec\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/opinion-why-you-should-plan-to-leave-money-to-your-kids\/#Planning_to_%E2%80%98die_broke_isnt_a_great_strategy\" >Planning to \u2018die broke\u2019 isn\u2019t a great strategy<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/opinion-why-you-should-plan-to-leave-money-to-your-kids\/#Paul_A_Merriman\" >Paul A. Merriman<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#<br \/>\n  Opinion: Why you should plan to leave money to your kids<br \/>\n<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"Planning_to_%E2%80%98die_broke_isnt_a_great_strategy\"><\/span>\n  Planning to \u2018die broke\u2019 isn\u2019t a great strategy<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div class=\"cx--next\">\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000240848\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       No, your kids did not pay me to write this. Heck, I don\u2019t know if they even deserve to get an inheritance.<\/p>\n<p> But bear with me while I tell you why you should want to be able to leave money to them.<\/p>\n<p>When you\u2019re planning (and managing) your retirement finances, arguably your most important goal should be to avoid running out of money.<\/p>\n<div class=\"paywall\">\n       From time to time I hear people say they want to \u201cdie broke.\u201d I understand what it means: They want to use up their assets while they\u2019re alive. But it\u2019s a bad thing to plan for.<\/p>\n<p>Because you don\u2019t know how long your life will last, you have to assume that you\u2019ll keep on living. And that means you need to keep money in your portfolio generating income and growth.<\/p>\n<p>Read: Imagining your future self can help you plan for a better retirement<\/p>\n<p>Financial planners of all s<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/trip-and-travel\/\" data-internallinksmanager029f6b8e52c=\"10\" title=\"Trip &amp; Travel\" target=\"_blank\" rel=\"noopener\">trip<\/a>es tend to recommend annual withdrawals of 3% to 5% of your portfolio\u2019s value. If you can meet your needs taking out 3%, you\u2019re in very little danger of running out of money.<\/p>\n<p>If you take out 5% each year, you\u2019ll probably be fine for a while. You\u2019ll certainly have more to live on. But this level of withdrawals is less likely to be sustainable over a long retirement.<\/p>\n<p>Read: The inventor of the \u20184% rule\u2019 just changed it<\/p>\n<p>For many years I\u2019ve published and updated a set of fact-based tables showing hypothetical year-by-year results (starting in 1970) from various portfolios and rates of withdrawal.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>If you click on <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/paulmerriman.com\/wp-content\/uploads\/2021\/02\/Fixed-Distribution-Tables-BoY-50-50-2020.pdf\" class=\"icon none\">this link<\/a> you will find some of those tables. For this discussion I\u2019ll refer only to the top four of them, Tables 10-13..<\/p>\n<p>To quickly see how these work, start by scrolling down to Table 12.<\/p>\n<p>The table has 10 columns, each of which shows year-by-year portfolio values for a particular percentage combination of bond funds and the S&amp;P 500 index<br \/>\n        SPX,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210599714\/realtime\" class=\"positive\">+1.09%<\/bg-quote><span>.<\/span>\n      <\/p>\n<p>In this table we assume you took out $50,000 (5% of your portfolio) in 1970 and then adjusted that amount each year to keep your spending ability up with actual inflation.<\/p>\n<p>At a glance, you can see that the end-of-year portfolio values dis<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>eared in each column, starting in the late 1990s.<\/p>\n<p>Granted, these portfolios funded a lot of retirement years. But with increasing demands for annual withdrawals, they simply had to give up the ghost at some point.<\/p>\n<p>This table (and others you\u2019ll find in that link) have many interesting lessons to teach. But for now let\u2019s focus on how much you should plan to take out each year to reduce your risk of running out of money.<\/p>\n<p>Read: Save $1,000 a year, retire with millions<\/p>\n<p>Scroll down to Table 13, and you\u2019ll see the startling results of taking out $60,000 in 1970 (and adjusting for inflation) instead of 5%. This plan was able to fund 15 years of retirement (plus a few more in some cases). But after that, it went belly-up relatively quickly.<\/p>\n<p>Table 11 shows the results of 4% withdrawals. You\u2019ll see in an instant that none of those columns had any trouble continuing the payouts through 2020 \u2014 a very long retirement.<\/p>\n<p>This is the result you want, and it would indeed let you leave money to your kids. If you scroll up to Table 10, you\u2019ll see that 3% withdrawals would have let you leave extremely generous bequests.<\/p>\n<p>This choice of your annual withdrawal rate should normally be determined by how much you need from your portfolio when you retire.<\/p>\n<p>If you have substantial savings and can get by with 4% or less, you are likely to be in very good financial shape. But if you need to start by taking out 5% or more, your prospects aren\u2019t quite that sound. In this case, you may want to consider postponing your retirement if possible and\/or find a way to earn some extra money while you\u2019re retired.<\/p>\n<p>As we have seen, the percentage you withdraw from your portfolio each year is extremely important. But as you can see plainly in Table 12, some columns ran out of money much sooner than others because they had different proportions of equity funds and bond funds.<\/p>\n<p>For the sake of longevity, the \u201csweet spot\u201d seems to be portfolios that hold 40% to 60% of their assets in equities.<\/p>\n<p>There are some tricky trade-offs associated with this topic.<\/p>\n<p>For example, some people are quite risk-averse when it comes to holding equities in retirement. According to these tables, they could have done just fine with the 4% withdrawals while limiting their equity exposure to 40% or less.<\/p>\n<p>However, the low equity exposure bought those investors only peace of mind, not more money to spend in retirement.<\/p>\n<p>Before I briefly discuss the idea of \u201cI want to die broke,\u201d here\u2019s my bottom-line advice when you\u2019re planning retirement withdrawals.<\/p>\n<p>Most important of all, start your retirement with as much money as possible. In this article, I argue that many people could effectively double their retirement income by postponing it five years.<\/p>\n<p>Second, plan to live a bit below your means. No matter how much you take out of your portfolio every year, see if you can meet your needs and still live a good life by spending a bit less than you have available. That will build in a bit of cushion for extra expenses to deal with various needs and opportunities that are sure to arise.<\/p>\n<p>Third, if you\u2019re unsure about all this, enlist the help of a financial adviser who does not have products to sell and who is a fiduciary.<\/p>\n<p>Do you still want to try to live until you\u2019re broke (and in the process disinherit the kids)? \u00a0\u00a0<\/p>\n<p>In <a rel=\"nofollow noopener\" target=\"_blank\" href=\"http:\/\/www.paulmerriman.com\/my-grandson-says-my-financial-adviser-is-steering-me-wrong-and-double-charging-me-what-should-i-do\/\" class=\"icon none\">an article late last year<\/a>, I discussed a reliable way to do that using a single-premium life annuity. An insurance company will take your money (permanently) and in return will guarantee you a monthly income for as long as you live.<\/p>\n<p>With this arrangement you can\u2019t outlive your money. However, this is a permanent decision, so don\u2019t do it unless you are sure you understand what you\u2019re doing.<\/p>\n<p>One interesting \u201chybrid\u201d approach, if your savings are ample, calls for buying an annuity that will meet your basic needs and then spend the rest as you like. \u00a0<\/p>\n<p>Even then, I think your best bet is likely to be planning to have some money left over to leave to the kids.<\/p>\n<p>This discussion is based on many tables that over the years have helped thousands of investors figure out what they need to save, how to fine-tune their investment risk and how to plan for withdrawals.<\/p>\n<p>To learn how to get more from these tables, check out <a rel=\"nofollow noopener\" target=\"_blank\" href=\"http:\/\/paulmerriman.com\/fixed-distributions-in-retirement-2021\/\" class=\"icon none\">my podcast<\/a> about fixed distributions. And early next month, I\u2019ll write about how to safely take more from your retirement portfolio.<\/p>\n<p><em>Richard Buck contributed to this article<\/em>.<\/p>\n<p><em>Paul Merriman and Richard Buck are the authors of\u00a0<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.amazon.com\/Were-Talking-Millions-Supercharge-Retirement\/dp\/1736119605\/ref=sr_1_1?crid=3BA3IVOXW372H&amp;dchild=1&amp;keywords=we%27re+talking+millions+merriman&amp;qid=1606681437&amp;sprefix=merriman+talkin%2Caps%2C200&amp;sr=8-1\" class=\"icon none\">We\u2019re Talking Millions! 12 Simple Ways To Supercharge Your Retirement<\/a><\/em>.<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Paul A. Merriman\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Paul_A_Merriman\"><\/span>Paul A. Merriman<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<div class=\"mw-author-contributor\">MarketWatch Contributor Network<\/div>\n<\/p><\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B21005575-02D4-D4B5-4572-D3ACD00CBFF2%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Opinion: Why you should plan to leave money to your kids &#8221; Planning to \u2018die broke\u2019 isn\u2019t a great strategy No, your kids did not pay me to write this. Heck, I don\u2019t know if they even deserve to get an inheritance. But bear with me while I tell you why you should want&#8230;<\/p>\n","protected":false},"author":1,"featured_media":234870,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-234867","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/234867","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=234867"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/234867\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/234870"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=234867"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=234867"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=234867"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}