In the personal finance world, we often find ourselves coming up with creative ways to make giving up enjoyable things more bearable. We pass on vacations we can afford, spend weekends watching free movies at home, and feel guilty for wanting anything that’s not in our budget. It feels like we’re recovering alcoholics who miss out on fun experiences just to ensure a comfortable retirement.
When does this cycle end? The idea of leaving an inheritance is like running a marathon and then having to walk home. Isn’t completing the marathon itself enough? After all the training, effort, and sacrifice, why not treat yourself to a cab ride home? If someone has been responsible and frugal their whole life, starting from age 22, isn’t 40 years of disciplined living enough? Considering the average life expectancy in the U.S. is around 79 years, that means more than half of one’s life is spent denying oneself pleasures—during the years we’re best able to enjoy life without needing adult diapers and complex pill organizers. So, when does it truly end?
If you want to leave an inheritance, you’ll likely do so around the same time your body is becoming part of the earth.
Saving for retirement in the U.S. is like trying to find a gay man coming out in Uganda—pretty unlikely. For those of you who are diligent savers, let’s talk numbers: saving a million dollars over 40 years at a 6% growth rate requires putting away about $500 per month. To leave an inheritance, you have two choices: either save more than you need for retirement or continue living frugally even after retiring. To increase your nest egg from 1 million to 1.2 million, you’d need to up your monthly savings to $600. It seems manageable on paper, where market growth is assumed to be a steady 6%. But remember, a million dollars doesn’t stretch as far as it used to. Research by Bernstein Global Wealth Management showed that at a 4% withdrawal rate, adjusted for inflation, there’s a 72% chance that 1 million invested in municipal bonds will run out before you die. A more realistic retirement goal, including an inheritance, might be over 2 million dollars, which means doubling your savings and enjoying Ramen noodles with an egg.
Regarding living below your means in retirement, I ask once more: when does it all end?
There’s also the question of what leaving an inheritance does to my life and the lives of my (future) kids. From my experience, kids who know they’ll inherit money often have little in common with frugality—like Kanye West with humility. They spend freely and are clueless about saving for retirement. Mentioning the concept of “enough” will make their brains freeze, much like Honey Boo Boo struggling with a math problem.
I don’t want this for my kids. My plan is to teach them frugality, the idea of having enough, and the importance of saving for retirement. I’ll provide for them, mentor them, and prepare them for an independent adult life. That’s my responsibility as a parent. But I am not responsible for their retirement, their first house down payment, or upgrading their lifestyle so they can have a boat in their 20s. They need to learn to save for big purchases. My retirement savings are mine, and I intend to enjoy them with long-awaited trips, relaxation, and perhaps a suitcase of Viagra. After 40 years, haven’t I earned it?
What about you? Will you leave an inheritance?