From a425couple@21:1/5 to All on Sun Feb 4 08:25:49 2018
I built a nest egg of $1 million and I’m only 46 — how do make sure my
Published: Jan 29, 2018 4:22 p.m. ET
This man says he’s done everything right, but still loses sleep over his finances
PERSONAL FINANCE EDITOR
‘The ethics and etiquette of your financial affairs.’
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 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: What should I do with the $300,000 I am about to inherit?
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.
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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. Starting in 2019, the unified
federal gift and estate tax exemption will effectively double — to about $11.2 million or $22.4 million for a married couple, so you don’t have
to worry about that unless you have a really lucky break.
Also see: I saved my neighbor $40,000 by recommending a buyer for her
house — how much does she owe me?
“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
“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.
The Facebook Group for this column weighed in on your question. 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
Do you have questions about inheritance, tipping, weddings, family
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