marketwatch July 29 2019
I built a nest egg of $1 million and I'm only 46 - so why Do I still
spend my working hours worrying?
https://www.marketwatch.com/story/i-built-a-nest-egg-of-1-million-and-im-only-46-but-i-spend-my-waking-hours-worrying-2019-07-27
I built a nest egg of $1 million and I’m only 46 — so why do I still spend my waking hours worrying?
Published: July 29, 2019 2:22 p.m. ET
‘We massed our savings all on our own, without an adviser’
Author photo
By
QUENTIN
FOTTRELL
PERSONAL FINANCE EDITOR
Dear Moneyist,
Over the past 25 years, my wife, 47, and I, 46, have both held
professional careers, making well above the average income. Our home, purchased in 1998 for $84,000, and after $50,000 plus of upgrades and additions, is valued at $185,000. We have invested our money, maxing out 401(k)s and IRAs (including Roth IRAs) when we could.
We have made investing mistakes, but learned from them. We have over $1 million in investments for ourselves, an additional $50,000 in
investments for our two girls to be used for college.
We have made investing mistakes, but we have learned from them. All
told, we currently have over $1 million in investments for ourselves, an additional $50,000 in investments (529s and a Scottrade TD, +0.26%
custodial account) for our two girls to be used for college, with our
only debt being the final few years of our mortgage. We have never had credit-card debt. I will also point out we both started with nothing — literally.
Don’t miss: I earn $15 an hour and will inherit $150,000 — how do I secure my financial future?
So far, you may not think we have a problem. But we do. I spend a lot of
my waking hours worrying. In 2017, as we approached the $1 million
dollar milestone, the realization that our retirement is only nine years
away (when I turn 55 in 2027) really hit me. I will point out now that
we amassed our savings all on our own, without an adviser.
I anticipate to have $2 million. How do we handle that legacy? What
vehicle can we use, such as a trust, to ensure that money lasts not just
with our kids, but multiple generations?
Here is our problem: By the time we retire in early 2027, we should have about $2 million in investments. We plan on living conservatively as we
do now, with the majority of our time spent traveling. I anticipate that
we will live on less than our accounts make, and that $2 million will
grow even more.
Without throwing out what I think that number might be at the end of our life, my point is how do we handle that legacy? What vehicle can we use,
such as a trust, to ensure that money lasts not just with our kids, but multiple generations? How do we handle estate planning with emphasis on reducing or forgoing death taxes?
Next Steps in Peoria, Ill.
Dear Next Steps,
You have lived within your means and even managed to buy a home before
the property bubble — not an altogether common feat for someone in their mid-40s. Not only have you invested wisely and across a variety of
products, you are now thinking about how you can make this $1 million or
$2 million work … for other people. And not just your own children, but your children’s children. Bravo!
Delaying retirement for just three to six months does to the standard of living after retiring what an entire percentage point of 30 years of
earnings would do.
Of course, you should also give yourself a break and not lie away
worrying when you have done so much and worked so hard. But that’s where the Moneyist comes in. If you don’t have to work beyond 57 and you want
to travel the world, fine. But be aware that the later you retire, the
higher your benefits will be. (Social Security benefits are lower if you retire before your full retirement age.)
Delaying retirement for just three to six months can have a big effect, raising the standard of living after you retire to the same degree that
an entire percentage point of 30 years of earnings would, according to a recent report from researchers at Stanford University, George Mason University, Cornerstone Research and Financial Engines. “The relative
power of saving more is even lower if the decision to increase saving is
made later in the work life,” it says.
Don’t miss: My fiancé wants me to move into the home he shared with his ex-wife — and help with his mortgage
An irrevocable trust is one option, but you should consult a financial adviser on the tax implications, which may vary from state to state.
Here is a checklist for you to consider. In 2019, the unified federal
gift and estate tax exemption is $11.4 million or $22.8 million for a
married couple, so you don’t have to worry about that unless you have a really lucky break.
“Tax laws change all the time and an estate plan should be reviewed
every five years or so to make sure it is still efficient and effective
in transferring assets to the next generations,” says Jim Todd, a client adviser with Mercer Advisors in Boulder, Col. “A complete estate plan package should also include documents such as powers of attorney, HIPAA authorization and medical directives.”
You should also be cognizant of how a deterioration in your health
and/or an unexpected life event, such as an accident, could suddenly
change everything.
“A trust set up in your will or living trust is called a testamentary trust. It is irrevocable upon your death,” he adds. “The children will have to abide by its terms so care must be taken to allow them some flexibility, but not so flexible that they have unlimited access to the
trust funds, if the parents’ main goal is to make the funds last several generations.” It could last for many decades.
You should also be cognizant of how a deterioration in your health
and/or an unexpected life event, such as an accident, could suddenly
change everything, as could a dip in the stock market after a nine-year
bull market. (Premiums for Medicare are also changing.) They also
recommend financial education for your children and long-term care
insurance for you and your wife.
I hope this helps. You need a road map, some advice and a full night’s sleep.
Do you have questions about inheritance, tipping, weddings, family
feuds, friends or any tricky issues relating to manners and money? Send
them to MarketWatch’s Moneyist and please include the state where you
live (no full names will be used).
Would you like to sign up to an email alert when a new Moneyist column
has been published? If so, click on this link.
Hello there, MarketWatchers. Check out the Moneyist Facebook group,
where we look for answers to life’s thorniest money issues. Readers
write in to me with all sorts of dilemmas: inheritance, wills, divorce, tipping, gifting. I often talk to lawyers, accountants, financial
advisers and other experts, in addition to offering my own thoughts. I receive more letters than I could ever answer, so I’ll be bringing all
of that guidance — including some you might not see in these columns —
to this group. Post your questions, tell me what you want to know more
about, or weigh in on the latest Moneyist columns.
MORE FROM MARKETWATCHcomments include
What should I do with the $300,000 I am about to inherit?
My wife and I have a $1 million mortgage and $200,000 in cash — do we reduce our repayments or invest it?
Should I give my father’s home health aide a raise this year?
QUENTIN
FOTTRELL
Quentin Fottrell is MarketWatch's personal-finance editor and The
Moneyist columnist for MarketWatch. You can follow him on Twitter @quantanamo.
WE WANT TO
HEAR FROM YOU
Join the conversation
COMMENT
On 7/29/2019 1:05 PM, a425couple wrote:
marketwatch July 29 2019comments include
I built a nest egg of $1 million and I'm only 46 - so why Do I still
spend my working hours worrying?
https://www.marketwatch.com/story/i-built-a-nest-egg-of-1-million-and-im-only-46-but-i-spend-my-waking-hours-worrying-2019-07-27
I built a nest egg of $1 million and I’m only 46 — so why do I still
spend my waking hours worrying?
Published: July 29, 2019 2:22 p.m. ET
‘We massed our savings all on our own, without an adviser’
Author photo
By
QUENTIN
FOTTRELL
PERSONAL FINANCE EDITOR
Dear Moneyist,
Over the past 25 years, my wife, 47, and I, 46, have both held
professional careers, making well above the average income. Our home,
purchased in 1998 for $84,000, and after $50,000 plus of upgrades and
additions, is valued at $185,000. We have invested our money, maxing
out 401(k)s and IRAs (including Roth IRAs) when we could.
We have made investing mistakes, but learned from them. We have over
$1 million in investments for ourselves, an additional $50,000 in
investments for our two girls to be used for college.
We have made investing mistakes, but we have learned from them. All
told, we currently have over $1 million in investments for ourselves,
an additional $50,000 in investments (529s and a Scottrade TD, +0.26%
custodial account) for our two girls to be used for college, with our
only debt being the final few years of our mortgage. We have never had
credit-card debt. I will also point out we both started with nothing —
literally.
Don’t miss: I earn $15 an hour and will inherit $150,000 — how do I
secure my financial future?
So far, you may not think we have a problem. But we do. I spend a lot
of my waking hours worrying. In 2017, as we approached the $1 million
dollar milestone, the realization that our retirement is only nine
years away (when I turn 55 in 2027) really hit me. I will point out
now that we amassed our savings all on our own, without an adviser.
I anticipate to have $2 million. How do we handle that legacy? What
vehicle can we use, such as a trust, to ensure that money lasts not
just with our kids, but multiple generations?
Here is our problem: By the time we retire in early 2027, we should
have about $2 million in investments. We plan on living conservatively
as we do now, with the majority of our time spent traveling. I
anticipate that we will live on less than our accounts make, and that
$2 million will grow even more.
Without throwing out what I think that number might be at the end of
our life, my point is how do we handle that legacy? What vehicle can
we use, such as a trust, to ensure that money lasts not just with our
kids, but multiple generations? How do we handle estate planning with
emphasis on reducing or forgoing death taxes?
Next Steps in Peoria, Ill.
Dear Next Steps,
You have lived within your means and even managed to buy a home before
the property bubble — not an altogether common feat for someone in
their mid-40s. Not only have you invested wisely and across a variety
of products, you are now thinking about how you can make this $1
million or $2 million work … for other people. And not just your own
children, but your children’s children. Bravo!
Delaying retirement for just three to six months does to the standard
of living after retiring what an entire percentage point of 30 years
of earnings would do.
Of course, you should also give yourself a break and not lie away
worrying when you have done so much and worked so hard. But that’s
where the Moneyist comes in. If you don’t have to work beyond 57 and
you want to travel the world, fine. But be aware that the later you
retire, the higher your benefits will be. (Social Security benefits
are lower if you retire before your full retirement age.)
Delaying retirement for just three to six months can have a big
effect, raising the standard of living after you retire to the same
degree that an entire percentage point of 30 years of earnings would,
according to a recent report from researchers at Stanford University,
George Mason University, Cornerstone Research and Financial Engines.
“The relative power of saving more is even lower if the decision to
increase saving is made later in the work life,” it says.
Don’t miss: My fiancé wants me to move into the home he shared with
his ex-wife — and help with his mortgage
An irrevocable trust is one option, but you should consult a financial
adviser on the tax implications, which may vary from state to state.
Here is a checklist for you to consider. In 2019, the unified federal
gift and estate tax exemption is $11.4 million or $22.8 million for a
married couple, so you don’t have to worry about that unless you have
a really lucky break.
“Tax laws change all the time and an estate plan should be reviewed
every five years or so to make sure it is still efficient and
effective in transferring assets to the next generations,” says Jim
Todd, a client adviser with Mercer Advisors in Boulder, Col. “A
complete estate plan package should also include documents such as
powers of attorney, HIPAA authorization and medical directives.”
You should also be cognizant of how a deterioration in your health
and/or an unexpected life event, such as an accident, could suddenly
change everything.
“A trust set up in your will or living trust is called a testamentary
trust. It is irrevocable upon your death,” he adds. “The children will >> have to abide by its terms so care must be taken to allow them some
flexibility, but not so flexible that they have unlimited access to
the trust funds, if the parents’ main goal is to make the funds last
several generations.” It could last for many decades.
You should also be cognizant of how a deterioration in your health
and/or an unexpected life event, such as an accident, could suddenly
change everything, as could a dip in the stock market after a
nine-year bull market. (Premiums for Medicare are also changing.) They
also recommend financial education for your children and long-term
care insurance for you and your wife.
I hope this helps. You need a road map, some advice and a full night’s
sleep.
Do you have questions about inheritance, tipping, weddings, family
feuds, friends or any tricky issues relating to manners and money?
Send them to MarketWatch’s Moneyist and please include the state where
you live (no full names will be used).
Would you like to sign up to an email alert when a new Moneyist column
has been published? If so, click on this link.
Hello there, MarketWatchers. Check out the Moneyist Facebook group,
where we look for answers to life’s thorniest money issues. Readers
write in to me with all sorts of dilemmas: inheritance, wills,
divorce, tipping, gifting. I often talk to lawyers, accountants,
financial advisers and other experts, in addition to offering my own
thoughts. I receive more letters than I could ever answer, so I’ll be
bringing all of that guidance — including some you might not see in
these columns — to this group. Post your questions, tell me what you
want to know more about, or weigh in on the latest Moneyist columns.
MORE FROM MARKETWATCH
What should I do with the $300,000 I am about to inherit?
My wife and I have a $1 million mortgage and $200,000 in cash — do we
reduce our repayments or invest it?
Should I give my father’s home health aide a raise this year?
QUENTIN
FOTTRELL
Quentin Fottrell is MarketWatch's personal-finance editor and The
Moneyist columnist for MarketWatch. You can follow him on Twitter
@quantanamo.
WE WANT TO
HEAR FROM YOU
Join the conversation
COMMENT
Sounds like you have done a good job thus far. Retire at 55, I would
advise against it.
I assume like most you will be dependent on SS as a major part of your retirement income. In that case, you need to max out what your benefit
will be. That requires working a bit longer to age 62 or better yet 65.
My advice is, visit with the SS Administration and figure out what your benefit is likely to be at age 62, 65, and 70. If that plus any other income you will have in retirement will provide you with the standard of living you desire in retirement then let that be your guide. This will allow you to keep your investments invested.
As for how to protect those investments setting up trusts are a very
good way to do it. Check with a competent estate planner whom is also a Fiduciary.
...See more
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I have a few observations.
$50k is not enough for 2 kids & college. Even if they go to state
schools, you will need $200k (unless you plan on them living in a
dumpster and begging for food while they study).
Why 'retire' at 55? Do something anyway (does not have to be the same job). Otherwise, you will get sick quickly and die.
You BETTER plan for less return on your money because of HYPERINFLATION
in 2024. It is pretty clear that should the political pendulum swing
left (as it has 100% of the time) expect a left-wing nut for president
and liberal house and senate AND multi trillion dollar deficits. Because
even if Trump wins in 2020, it is clear that 100% of the Democrat
candidates favor spending trillions on green deals, free health ins for illegals, open borders, reparations and universal income. These
freebies can ONLY be paid for by 'printing' money, but that will not
stop your taxes from going into the stratosphere, and the value of ALL
of your dollar dominated assets to plummet in value. And that means
.... LESS return.
Enjoy.
Reply
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