Author Topic: Modest incomes now but inheritance in the future  (Read 3701 times)

Hula Hoop

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Modest incomes now but inheritance in the future
« on: September 10, 2017, 05:17:12 AM »
New member here.  I've been reading MMM for a while though.  I have a question about living the MMM lifestyle when there is a substantial inheritance in your future (although, of course, nothing is certain in life).

We are a family of 4 - 2 young kids and my husband and I work full time at modestly paying jobs.  We are naturally mustachian - husband grew up very poor and I grew up middle class with very frugal parents.  For example, we live in the center of a city and don't own a car, no babysitters or cleaning people. 

We just got back from visiting my elderly father.  He's in his early 80s and finally did a will - leaving me a third of his estate.  While we were there, he took me and his wife to meet with his pension's financial advisor and, basically, it turns out that my dad is quite wealthy and I stand to inherit a significant amount (around $1.4 million).  Part of this is that the home my dad bought back in the 70s for peanuts is worth a lot now.  Part of it is that he's extremely frugal (some would say cheap) and never spends anything.  He had a modest income from government employment and now gets a good pension.  When I was a kid, my sibling and I were always told we couldn't afford things, used to go on camping vacations in our ancient car and basically never spent money.

The clincher is that my mother (parents are divorced) is similar.  She had a similar job and has a similar pension.  She also bought a home back in the 80s that's worth a lot now and has also penny pinched for years.  She's in her late 70s and still working part time as she loves her job.

So I'm finding it hard to keep to our mustachian ways, knowing that retirement and saving for the kids' college is probably not as necessary as it seemed before I realized this about my parents.  In my head I usually think in the old mustachian way - no we don't need to buy a car as would only use it once a month and we can just do car sharing.  No we don't need a cleaning person even though we both work FT.  But then I think that all of this is kind of ridiculous.  I also dislike my job and would love to work part time.  But the thought of giving up salary is scary.  Especially since my parents will probably live a long time and might need pricey assisted living in old age or other help.

Is anyone else in this situation.  Any advice?

ricgnzlzcr

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Re: Modest incomes now but inheritance in the future
« Reply #1 on: September 10, 2017, 05:45:50 AM »
I also stand to inherit a good bit of assets in the future. I continue to work towards my own financial freedom because:
  • I like the sense of accomplishment that I earned it my financial freedom
  • Things can change at any moment. I know someone who was going to inherit a lot of money, but a sibling manipulated an elderly parent into signing 100% of the inheritance to them. That doesn't mean you should mistrust family, just that things are out of your control.
That being said I still sacrifice a higher savings rate for luxuries that aren't mustachian, such as hiring cleaners and driving the clown car a little more often. It's just what makes us happy.

If you dislike your job I'd recommend saving to the point where you can take a long "mini-retirement" and trying to transition to a career you find more fulfilling. It's the option I took when I was miserable with my job and it helped immensely.

Hula Hoop

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Re: Modest incomes now but inheritance in the future
« Reply #2 on: September 10, 2017, 06:22:23 AM »
I guess I said that wrong.  I'm generally OK with my job - I don't love it but it's OK - but 40 hours a week is too much. We are all stretched way too thin with 2 small kids. I'd love to go part time but we would save very little without my FT income.  I'm the breadwinner although my husband works long hours.  I live in a European city and there are very few opportunities for foreigners here so I lucked out with this job.

So it sounds like you've taken the approach of living by certain mustachian principles but also splurging on luxuries like cleaning person and clown car.  I guess I need to find a way to be less strict with myself about saving but easing up in certain areas.

Freedomin5

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Re: Modest incomes now but inheritance in the future
« Reply #3 on: September 10, 2017, 06:36:35 AM »
I think you also need to be aware that unforeseen circumstances may arise that may wipe out your parents' savings, so don't count your chickens before they hatch. You never know if one parent may need long term care in the future or may rack up medical bills. I learned from personal experience when a large chunk of the "inheritance" was used up in a lawsuit a few years ago.

Raenia

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Re: Modest incomes now but inheritance in the future
« Reply #4 on: September 10, 2017, 06:40:49 AM »
I generally take the position that until you actually receive it, that inheritance could go poof at any moment.  As you said, your parents could live a long time.  Or they could need expensive long term care for many years.  They could get very involved in charity and choose to donate a large amount of it.  A friend of mine is having this happen right now - his grandmother is declaring her intention to leave everything to a political party, with nothing for her kids or grandkids.  So don't make any decisions counting on one day receiving a large inheritance.

As far as you and your spouse feeling stretched thin - since you are the breadwinner, would it make more sense for your husband to drop the long hours and go part time, to take some things you are currently doing off your plate?  That could help you both feel less stretched without impacting your finances as badly.  If that does not meet your needs, or he doesn't want to drop hours, it's not the worst thing to have a lower savings rate for a few years while your kids are young.  Just don't let lifestyle inflation eat up the difference when you go back to full time work when the kids are older.

Hula Hoop

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Re: Modest incomes now but inheritance in the future
« Reply #5 on: September 10, 2017, 06:41:16 AM »
I think you also need to be aware that unforeseen circumstances may arise that may wipe out your parents' savings, so don't count your chickens before they hatch. You never know if one parent may need long term care in the future or may rack up medical bills. I learned from personal experience when a large chunk of the "inheritance" was used up in a lawsuit a few years ago.

Yeah, I mentioned this above.  Neither parent has long term care insurance so who knows what's going to happen.  My mother is going in for surgery next week and she lives alone.  I've been urging her to spend the money on having a home helper come over after the surgery to help her around the house.  Obviously, she could have much more serious issues down the line.

nereo

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Re: Modest incomes now but inheritance in the future
« Reply #6 on: September 10, 2017, 07:04:28 AM »
Hula Hoop - I strongly suggest that you take some time to develop an investor policy statement (IPS) that includes guidelines for what to do once you have achieved and surpassed your "FI number". Regardless of whether you have $1MM or $150MM you should know - in advance - what WR you are comfortable with, how your assets will be invested, what your anticipated spending rate should be and other important and financially fundamental questions.  Are you prepared to sell or rent out your parents' homes?


It seems likely that these windfalls may push you into philanthropy.  If so, where and how will you give?  What is your super-safe annual withdraw rate (WR)?  How much do you need for yourself? As examples, we've decided that our "super-safe WR" is 3%.  Should our savings ever allow a lower WR we'll take out 3%, deduct our spending and then give the rest to pre-selected charities (we try to do 50% local and 50% national/global). 
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Hula Hoop

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Re: Modest incomes now but inheritance in the future
« Reply #7 on: September 10, 2017, 07:22:21 AM »
Thanks nereo.  Good suggestion but what is your thinking behind doing it now?  My parents are old but currently healthy.  I think they have many good years ahead (at least I hope so) so until then we're living on our modest incomes. 

I'm the executor of my father's will and it directs me to sell his home upon his death and divide the assets into thirds (me, my sibling and his wife).  His wife will be able to buy a nice place in the LCOL area where she comes from and where the rest of her family lives with that money.  They have only been married a few years so they don't have children together or other assets.

I feel like if I were to receive these 2 windfalls, I'd have to learn a lot about investing very quickly and so would my sibling.  I'm trying to read as much as I can now partly for this reason.  But drawing up a plan seems premature to me.

As far as philanthropy, we don't earn much but we currently give to a few charities that mean a lot to us so I'd probably continue but on a larger scale.

Finallyunderstand

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Re: Modest incomes now but inheritance in the future
« Reply #8 on: September 10, 2017, 07:33:13 AM »
Personal family experience here, my aunt and uncle had my grandpa change his will while he was in the hospital leaving almost the entire estate to them instead of other siblings to the tune of $20+ million.  That's not a typo. 

Original plan was an even split between all of the kids up until almost his death. 

One aunt who was planning on her portion wasn't working because she knew she was getting money.  She didnt get even close to what she thought so she started working again.

Hula Hoop

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Re: Modest incomes now but inheritance in the future
« Reply #9 on: September 10, 2017, 07:52:53 AM »
Horrible and I've heard so many family stories like that. :(

Finallyunderstand

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Re: Modest incomes now but inheritance in the future
« Reply #10 on: September 10, 2017, 08:07:02 AM »
Horrible and I've heard so many family stories like that. :(

All the more reason to never count on it. Even if you think there's no chance of a sibling ever doing that, there's always a chance.

SwordGuy

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Re: Modest incomes now but inheritance in the future
« Reply #11 on: September 10, 2017, 08:29:29 AM »
Don't forget they could remarry or get religion.   Or just get swindled out of it.

But aside from all that, there's a much better reason to continue as you are doing.

Your kids.

They will learn how to live their lives based on your behavior and how you live together.   Spend your time and money so that your marriage is strong and loving, and your kids see, hear and participate in sound life and financial principles.

There is a reason why the wealth one person earns is usually gone within 2 generations - and a lot of it has to do with what the grandkids experience as children.

dreams_and_discoveries

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Re: Modest incomes now but inheritance in the future
« Reply #12 on: September 10, 2017, 09:19:52 AM »
I've got a book recommendation "The Nest" - a good inheritance story, focusing on how an expected inheritance effects people in different ways.

I'd also say from reading your post, especially some of the words you have used, you are clearly not bought into Mustachianism....I read that you appreciate the benefits, but feel it is a sacrifice.

From a rational financial point of view, sounds like it makes sense for your husband to go part time..

nereo

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Re: Modest incomes now but inheritance in the future
« Reply #13 on: September 10, 2017, 09:21:56 AM »
Thanks nereo.  Good suggestion but what is your thinking behind doing it now?  My parents are old but currently healthy.  I think they have many good years ahead (at least I hope so) so until then we're living on our modest incomes. 


The reason that I suggest putting together an IPS now is that it lends clarity to your short, mid and long-term wealth strategies. FWIW, I'm in a similar boat; modest incomes but with the potential of a substantial inheritance which, I hope, will not be for another two decades (but of course it could come sooner).
Objectively, it's better to have your IPS in place before such windfalls.  Doing so can reduce or eliminate poor decisions driven by inexperience, grief or other emotions. Sudden jumps in wealth often cause people to say "I'm rich, I can afford this!" In reality there's no amount of money too large to overspend. Conversely, people who've lived frugally their whole lives find it hard to fathom what to do with large amounts of cash.  I've seen numerous examples of people leaving six-figures in bank accounts because they never outlined how they would invest 'excess' money.

More broadly, anytime someone asks the question "what should I do with this excess money?" my response is always: what does your IPS say?
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Chesleygirl

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Re: Modest incomes now but inheritance in the future
« Reply #14 on: September 10, 2017, 09:38:01 AM »
Personal family experience here, my aunt and uncle had my grandpa change his will while he was in the hospital leaving almost the entire estate to them instead of other siblings to the tune of $20+ million.  That's not a typo. 

Question: Didn't your grandfather's lawyer try to talk your grandfather out of doing this? Most good lawyers will try to talk to someone about changes in their will, because if the will is contested after the person's death, it could eat away at a lot of the inherited money. (in terms of legal fees).  It's often not a smart move to leave some children out of a will for no good reason, because of the possibility the will can be contested if there is a lot of money at stake. Disinheriting children often has long term repercussions that are often not seen until later on, that's why most good lawyers will say "wait a minute, are you sure you want to do this"

lbmustache

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Re: Modest incomes now but inheritance in the future
« Reply #15 on: September 10, 2017, 11:16:09 AM »
Definitely do not plan around an inheritance. It'll be a nice windfall when you get it, but you never want to get too complacent in life thinking it's guaranteed.

My uncle cheated my mom out of a 1/3 of my grandpa's estate. (another case of manipulating the sick and elderly) It's in another country, but USD-wise she was probably looking at at least $200k (~$1 mill USD estate). It's not a huge amount in the grand scheme of things, especially considering some of the other amounts listed here... but that could have paid off my parent's mortgage or done some other pretty great things. Thankfully my parents did not plan their life around this supposed inheritance.

oldladystache

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Re: Modest incomes now but inheritance in the future
« Reply #16 on: September 10, 2017, 11:33:12 AM »
I'm 72. Still waiting for my inheritance from my 102 year old father. I'm sure glad I never counted on it.

Frankies Girl

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Re: Modest incomes now but inheritance in the future
« Reply #17 on: September 10, 2017, 11:57:50 AM »
Get your ducks in a row now, and don't count on seeing one dime from any inheritance.

I received a substantial inheritance when my father died, enough to make it possible to quit my job forever. But it also took me over a year to process what I was going to do, get up to speed on how to invest well and how the market works, and figure out all the moving pieces. And also deal with grieving, changing family dynamics and such.

I never counted on anything from either parent, but I was a good saver and frugal spender, and that's what led me to the whole concept of early retirement, and how I found MMM and learned how to put my money to work from Jim Collins' site. I needed to take the time to learn how to invest, and it was very scary for a little while. I wished I'd taken the time early in my career to learn, but at least I figured it out before making any mistakes, and I was way ahead than most folks since I already had great habits locked down and a basic gameplan that I was already following for our future without relying on any help from anyone else.

If you already know how to invest, have good saving and spending habits and are generally smart with your money, then you automatically know what to do if you get an inheritance. Don't fritter away your now thinking you have a giant pile of money later... get the good habits ingrained and teach yourself and your children how to be smart with money, and then if more money comes along, you'll be happier and have even more options.

The world is full of cautionary tales of broke lottery winners and heirs that blew through a lifetime's worth of money. The problem is that none of those people valued what they received because they weren't good with money to begin with.
« Last Edit: September 10, 2017, 12:02:38 PM by Frankies Girl »
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ROF Expat

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Re: Modest incomes now but inheritance in the future
« Reply #18 on: September 10, 2017, 12:58:45 PM »
Personally, I would plan my finances as if there will be no inheritance. 

My parents are typical "millionaires next door" and have given me and my siblings a good idea of their current net worth so we know how much we will inherit at some point.  I have told them that they worked hard for their money and they set me on the path that has already led to my own financial independence, so I want them to live forever and spend their money for their own enjoyment (to include visiting their grandchildren often). 

If I were counting on their inheritance, it could set me up for a strange conflict of interests in which I am waiting for them to die because I want/need their money.  If I stopped saving for my daughter's college tuition and bought myself a really nice boat because I thought my parents' estate would pay for college, I suspect my parents would think less of me.  I would certainly think less of myself. 

Many people with a substantial estate worry that the expectation of inheritance will sap their heirs' ambition.  I live a financial life that I think can make my parents feel good about giving me an inheritance if that is what they choose.  But if they want to spend it all on themselves or give it all to charity, that's ok, too. 

Hula Hoop

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Re: Modest incomes now but inheritance in the future
« Reply #19 on: September 10, 2017, 01:20:18 PM »
ROF of course I want my parents to live a very long time.  And I've urged my parents to use their money to make their own lives more comfortable.  My grandmother lived to be almost 103 so I'm well aware that no one should count on an inheritance.  But I literally had no idea about my father's wealth at least and this last trip was kind of a shock.  I was made aware that his apartment was worth a lot as one of his neighbors recently sold his place for a large amount.

I also can't imagine a world in which my parents would have any idea whether or not I was saving for my kids' college expenses or my own retirement.  We never talk about these things.

Anyway I guess we'll continue along our frugal and hard working path until we get to FI of some kind -probably due to our savings - and then maybe we can think about one of us going part time or ramping down our paid work in some way.

My husband is self employed so going 'part time' is difficult. 

I'm sorry to hear so many stories about family members bilking others out of their inheritance.  Aside from the money, it must be so hard  to have someone you love and who you thought loved you do something like that.

Birdie55

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Re: Modest incomes now but inheritance in the future
« Reply #20 on: September 10, 2017, 01:24:52 PM »
I'm glad Oldladystache posted because I have a similar situation.  My Mom died and the estate will not be distributed until my Dad passes.  He is 97 and going strong.

So, you can't really bcount on an inheritance until you are past retirement age.  And then if you did not save for your own retirement, and the inheritance does not pan out, you will be stuck. 

ROF Expat

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Re: Modest incomes now but inheritance in the future
« Reply #21 on: September 10, 2017, 02:07:06 PM »
Hula Hoop,

I hope you didn't interpret my comment as making any implications about your relationship with your parents.  None were intended, just thoughts about my own feelings and situation. 

It is interesting to hear you say that your parents would have no idea of your financial situation.  Maybe my family is strange, but my parents have always been open about money.  I have had many discussions over the years with my father about the mechanics of personal finance and investing.  He doesn't know all my details, but even now, I still ask him for financial advice. 

In any case, I wish you good luck in your journey toward FIRE. 

ROF of course I want my parents to live a very long time.  And I've urged my parents to use their money to make their own lives more comfortable.  My grandmother lived to be almost 103 so I'm well aware that no one should count on an inheritance.  But I literally had no idea about my father's wealth at least and this last trip was kind of a shock.  I was made aware that his apartment was worth a lot as one of his neighbors recently sold his place for a large amount.

I also can't imagine a world in which my parents would have any idea whether or not I was saving for my kids' college expenses or my own retirement.  We never talk about these things.

Anyway I guess we'll continue along our frugal and hard working path until we get to FI of some kind -probably due to our savings - and then maybe we can think about one of us going part time or ramping down our paid work in some way.

My husband is self employed so going 'part time' is difficult. 

I'm sorry to hear so many stories about family members bilking others out of their inheritance.  Aside from the money, it must be so hard  to have someone you love and who you thought loved you do something like that.

Hula Hoop

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Re: Modest incomes now but inheritance in the future
« Reply #22 on: September 10, 2017, 02:21:06 PM »
My parents could not care less about money or investing and never talk about it.  They both literally stumbled into this money by buying houses in cities that became crazy expensive (purely because that's where they wanted to live) and also not spending much money because of their frugal natures and poverty as children.  I was under the impression that they weren't doing too well financially - at least my dad wasn't- because of the way he's always trying to not spend money on things.  For example, the last time he renovated was 1981 and he did most of the work himself - and he has never owned a dishwasher or a microwave. His bathroom has dripping loose faucets and he tries to fix them himself as he can't near to call a plumber. If they'd talked about money openly and/or cared at all about money then this would not have come as a shock.

My parents saved nothing at all for my and my sibling's college education which worked out OK as we both got various scholarships and worked/lived at home throughout college.  They just don't think about money and assume it will all work out. Partly because of the way I grew up, I've always been more of a planner about financial things than they are.


StarBright

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Re: Modest incomes now but inheritance in the future
« Reply #23 on: September 10, 2017, 03:07:59 PM »
Thanks nereo.  Good suggestion but what is your thinking behind doing it now?  My parents are old but currently healthy.  I think they have many good years ahead (at least I hope so) so until then we're living on our modest incomes. 


The reason that I suggest putting together an IPS now is that it lends clarity to your short, mid and long-term wealth strategies. FWIW, I'm in a similar boat; modest incomes but with the potential of a substantial inheritance which, I hope, will not be for another two decades (but of course it could come sooner).
Objectively, it's better to have your IPS in place before such windfalls.  Doing so can reduce or eliminate poor decisions driven by inexperience, grief or other emotions. Sudden jumps in wealth often cause people to say "I'm rich, I can afford this!" In reality there's no amount of money too large to overspend. Conversely, people who've lived frugally their whole lives find it hard to fathom what to do with large amounts of cash.  I've seen numerous examples of people leaving six-figures in bank accounts because they never outlined how they would invest 'excess' money.

More broadly, anytime someone asks the question "what should I do with this excess money?" my response is always: what does your IPS say?

Nereo - I've never really thought about an IPS until reading your post. But I'm in a similar-ish boat to you and OP. Both DH and my's parents are actively planning on leaving (and currently trying to grow) inheritances to children and while I just try to ignore it and hope they are all around for another 30 years the IPS makes a lot of sense the way you put the above. Thanks!

Hula Hoop

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Re: Modest incomes now but inheritance in the future
« Reply #24 on: September 10, 2017, 03:55:58 PM »
Thanks nereo.  Good suggestion but what is your thinking behind doing it now?  My parents are old but currently healthy.  I think they have many good years ahead (at least I hope so) so until then we're living on our modest incomes. 


The reason that I suggest putting together an IPS now is that it lends clarity to your short, mid and long-term wealth strategies. FWIW, I'm in a similar boat; modest incomes but with the potential of a substantial inheritance which, I hope, will not be for another two decades (but of course it could come sooner).
Objectively, it's better to have your IPS in place before such windfalls.  Doing so can reduce or eliminate poor decisions driven by inexperience, grief or other emotions. Sudden jumps in wealth often cause people to say "I'm rich, I can afford this!" In reality there's no amount of money too large to overspend. Conversely, people who've lived frugally their whole lives find it hard to fathom what to do with large amounts of cash.  I've seen numerous examples of people leaving six-figures in bank accounts because they never outlined how they would invest 'excess' money.

More broadly, anytime someone asks the question "what should I do with this excess money?" my response is always: what does your IPS say?

Nereo - I've never really thought about an IPS until reading your post. But I'm in a similar-ish boat to you and OP. Both DH and my's parents are actively planning on leaving (and currently trying to grow) inheritances to children and while I just try to ignore it and hope they are all around for another 30 years the IPS makes a lot of sense the way you put the above. Thanks!

How would I go about doing in IPS?  With some kind of fee based financial planner or on my own? What kind of info would it include.  Current investment strategy is basically buy lots of index funds and REITS at Vanguard.  I guess it would have to be more detailed than that.

nereo

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Re: Modest incomes now but inheritance in the future
« Reply #25 on: September 10, 2017, 04:19:48 PM »

How would I go about doing in IPS?  With some kind of fee based financial planner or on my own? What kind of info would it include.  Current investment strategy is basically buy lots of index funds and REITS at Vanguard.  I guess it would have to be more detailed than that.

For months I've had a half-written topic on "What is an IPS and why do I need one" that I intend to make into a 'sticky' for this forum.  This might be the motivation I need.

In brief:
An IPS should consider your short, medium and long term financial goals.

It should consider your risk tolerance

It should outline what your asset allocation (AA) is currently, and what it might be once you are FI or after major life events (e.g. empty nest)

Your IPS should consider your revenue streams in retirement (e.g. taxable accounts, IRAs, SS, pensions, rental properties) and in what order you will rely on each (i.e. will you wait until 70 to take SS and what gives you the lowest taxable burden) .  Consider what your 'safe WR' is (4% is a starting point, you may adjust that higher or lower depending on your risk tolerance, spending flexibility and other revenue streams).

Finally your IPS should outline how to handle both a financial emergency (e.g. which assets to sell and in what order) and what to do with unexpected windfalls.  Typically I recommend investing windfalls exactly according to your AA, but if said windfall pushes you over the FI mark your strategy might change (see above). If you "overshoot", what is your plan for the excess?

Note that an IPS doesn't have to be terribly long or complex. Mine is handwritten (in pen!) on a single sheet of 8.5x11".

Other reading sources:
http://www.investopedia.com/terms/i/ips.asp
Link to Vanguard's ISP form (opens PDF)
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ender

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Re: Modest incomes now but inheritance in the future
« Reply #26 on: September 10, 2017, 05:43:54 PM »
I've been meaning to write an IPS for... years now...

nereo

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Re: Modest incomes now but inheritance in the future
« Reply #27 on: September 10, 2017, 07:31:15 PM »
I've been meaning to write an IPS for... years now...
No time like the present.
I'd be interested in your approach, should you decide to follow through.
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Paul der Krake

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Re: Modest incomes now but inheritance in the future
« Reply #28 on: September 10, 2017, 07:48:07 PM »
My IPS is about one page long. It summarizes my investing philosophy, with a brief explanation of why I believe these things. It also lists medium and long term goals, and how to achieve them.

Should my world turn upside down, re-reading it should be enough to make decisions, or lack thereof.

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Re: Modest incomes now but inheritance in the future
« Reply #29 on: September 10, 2017, 08:27:50 PM »
Another person here who had a sure-thing inheritance vanish. My mother told us for twenty years that she was dividing her seven-figure estate into three equal portions, between my stepfather and my brother and me. In the 2008 meltdown she got worried that a third of the estate wouldn't actually be enough to support my stepfather, and she changed it so it all went to him. A few years later she died. I imagine the estate has recovered fine... but I'll never see any of it.

I never counted on it, and I'm fine, but my brother is a trusting soul who went through life believing he was going to be rich, and now he's going to have a pretty lean old age.

skip207

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Re: Modest incomes now but inheritance in the future
« Reply #30 on: September 11, 2017, 02:32:08 AM »
My own view has been to never count on a penny.
My folks are not wealthy, they live off SP and whist they own a home I don't count on inheriting it.
Its theirs to do with as they wish so they could finance it or anything.

On my wifes side she has a lot of family money but I can see that being very messy.
Her parents probably have another 20-30 years to live (and spend) and then I suspect the leaches will sap a lot of their estate well before they die.
Then after they do die I expect we will be so far into FIRE we probably wont care what happens.

Liberty Stache

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Re: Modest incomes now but inheritance in the future
« Reply #31 on: September 11, 2017, 07:51:41 AM »
For all of the reasons others have said, don't count on it until its in your bank account.

One other reason to not count on it not listed above: pride. Its too soon to tell but my guess is DW and I am in a similar spot from both sets of parents. One of the driving factors for us is pride: knowing that we grew our incomes / NW and weren't just handed the silver spoon. In my experience, it is so much more satisfying when you've earned FIRE (other any other accomplishment in life, really) yourself vs. it being given to you.
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Erica

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Re: Modest incomes now but inheritance in the future
« Reply #32 on: September 11, 2017, 11:36:03 AM »
I've done hospice twice and both times, were shocked at the amount of money going out for medical. I knew if this was the avenue, they'd be broke within 4 years. Both had good jobs and saved. So absolutely never think you will get an inheritance in the first place.

The second is my FIL and he let my BIL borrow 300K. This person also borrowed 100K from a brother. He has a self entitlement attitude and was yelling at my FIL one weekend because he didnt get his $$ wired in time. I was sick to my stomach hearing it.

He also included him in the will though never told us. Prior, he said he was cut out of the will because he owed so much $$ and got his inheritance already. Grandkids will need $$, so willl other family members down the line. The only thing I would change, if you can, is working full time while having children. Investing in your children, even if you are dirt poor, is more important imho. They really need at least one parent with them but such is life...good luck, I hope it all works out

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Re: Modest incomes now but inheritance in the future
« Reply #33 on: September 11, 2017, 11:51:40 AM »
My wife and I stand to inherit truck loads. But I'd rather spend more time with my parents not working as they age than spending piles of money and getting my freedom from them.
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honeybbq

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Re: Modest incomes now but inheritance in the future
« Reply #34 on: September 11, 2017, 11:52:30 AM »
I'm 72. Still waiting for my inheritance from my 102 year old father. I'm sure glad I never counted on it.

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Elderwood17

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Re: Modest incomes now but inheritance in the future
« Reply #35 on: September 11, 2017, 12:45:39 PM »
I'm 72. Still waiting for my inheritance from my 102 year old father. I'm sure glad I never counted on it.

That is a great reason to keep potential inheritances in perspective.

Hula Hoop

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Re: Modest incomes now but inheritance in the future
« Reply #36 on: September 11, 2017, 12:52:34 PM »
My wife and I stand to inherit truck loads. But I'd rather spend more time with my parents not working as they age than spending piles of money and getting my freedom from them.

???I think you're missing some punctuation or something here.  You mean your parents still work and you'd rather that they're able to retire? 

I don't need to worry about that as my mother loves her job and chooses to still work part time and my dad has been happily retired for years. 

I just feel kind of sad to work so many hours while my kids are smallish (both are in elementary school) in order to sock away money for retirement if this, ultimately, won't be necessary as retirement will be taken care of.  But I get the message loud and clear from this thread that I should just keep working long hours and not assume anything about the future. 

mizzourah2006

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Re: Modest incomes now but inheritance in the future
« Reply #37 on: September 11, 2017, 12:54:55 PM »
I'm 72. Still waiting for my inheritance from my 102 year old father. I'm sure glad I never counted on it.

This is why I'm personally not counting on it either. I don't want to be waiting for the chance to receive an inheritance. My mom and dad are divorced and both of them have full pensions that pay near 6 figures and over 1 million in assets and my wife's parents are both retired and have 6 figure + pensions, plus about 2 million in assets. So I've estimated chances are pretty solid we receive at least $250-$300k(1 of the 3 pans out and they will all be split into 3rds). But I'm definitely not waiting for it or planning my financial freedom around it.

Now I have toyed with the idea of considering a 5% SWR, but I'm still about 10 years out from that, so maybe I'll think about that more as that gets closer.

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Re: Modest incomes now but inheritance in the future
« Reply #38 on: September 11, 2017, 01:43:22 PM »
I would like to stress here that there is a difference between:
i) "never relying on an inheritance for your retirement plan"
and
ii) "having a plan detailing how to manage a potential inheritance (or other large windfall)"

Lots of reasons (many given above) to not count on an inheritance.  However, having no plan at all comes with its own perils.
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cchrissyy

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Re: Modest incomes now but inheritance in the future
« Reply #39 on: September 11, 2017, 04:00:43 PM »
Quote
I just feel kind of sad to work so many hours while my kids are smallish (both are in elementary school) in order to sock away money for retirement if this, ultimately, won't be necessary as retirement will be taken care of.  But I get the message loud and clear from this thread that I should just keep working long hours and not assume anything about the future.

The solution is to communicate with your parent(s) about if they wish to send some of the money early, so they can see it impacting your life for good while they are still alive, or do they prefer to keep it for their own needs up to the end.  Either way is valid but also very individual and so communication is key.  If you can't imagine even asking then you have your answer, you have to proceed as if the money isn't there.

boarder42

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Re: Modest incomes now but inheritance in the future
« Reply #40 on: September 11, 2017, 04:19:18 PM »
Quote
I just feel kind of sad to work so many hours while my kids are smallish (both are in elementary school) in order to sock away money for retirement if this, ultimately, won't be necessary as retirement will be taken care of.  But I get the message loud and clear from this thread that I should just keep working long hours and not assume anything about the future.

The solution is to communicate with your parent(s) about if they wish to send some of the money early, so they can see it impacting your life for good while they are still alive, or do they prefer to keep it for their own needs up to the end.  Either way is valid but also very individual and so communication is key.  If you can't imagine even asking then you have your answer, you have to proceed as if the money isn't there.

this is a good solution i was lucky enough for my parents to realize this on their own and they have started transferring money to my brother and i ... though we will still inherit piles.  we've got 5 years til FIRE not counting their money though.  so we'll still be retired early enough
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Candace

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Re: Modest incomes now but inheritance in the future
« Reply #41 on: September 11, 2017, 05:16:58 PM »
Quote
I just feel kind of sad to work so many hours while my kids are smallish (both are in elementary school) in order to sock away money for retirement if this, ultimately, won't be necessary as retirement will be taken care of.  But I get the message loud and clear from this thread that I should just keep working long hours and not assume anything about the future.

The solution is to communicate with your parent(s) about if they wish to send some of the money early, so they can see it impacting your life for good while they are still alive, or do they prefer to keep it for their own needs up to the end.  Either way is valid but also very individual and so communication is key.  If you can't imagine even asking then you have your answer, you have to proceed as if the money isn't there.

Yep, this. I made the decision a number of years ago that I wouldn't broach that subject with my parents. I was living a frugal life in order to achieve FIRE, while knowing that my parents (almost 80) had done "very well" with their investments. My mom likes to brag. They've done well enough that their money is in a trust to avoid taxation, so it's substantial. I know they could possibly need a tidy sum for health care needs before they eventually pass on, which I hope is a long time in the future, but it kind of seems like I have a decent probability of inheriting some serious cash.

It's tempting to daydream about how much I could loosen the purse strings if they would gift me some cash every year. I have also taken the hassles from my mom about driving a 1998 Camry for so long. "When are you going to buy a more appropriate car?", I've been asked several times. On top of that, my brother and his son have been the recipients of financial life support from my parents more than once. My sister has kids, so I imagine their college funds have been stocked by our parents. Me, I don't have kids and have never needed the financial life support. When I turned 50, I dared hope for, well, something. I got a card. I love my parents. It's their money and they don't have to give me any of it. I still felt a little pouty inside.

However...I've just never gone there. Asking them for money in advance of a (probable) inheritance just would be too much like treating them like they're dead while they're still alive. So, I continued my high savings rate, and I am now FIRE without having done something to make them feel badly -- unless you count embarrassing them with my old car.

My brother, my sister and I may inherit some fairly serious money. I figure at that time I'll get a plan together for some spending and some philanthropy. I'm sure I should write an IPS now, but my priorities keep changing regarding the types of organizations I'm currently giving to. I figure they'll keep changing for a while before there's anything to consider.

Meanwhile, I'm still frugal. I'd love to loosen up a bit, travel more, maybe buy some things for myself. Maybe even a newer car when my 1998 eventually gives up. But I'll be doing whatever I'm doing with my own stash, at least for the foreseeable future. May that future be long.

Spiffsome

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Re: Modest incomes now but inheritance in the future
« Reply #42 on: September 11, 2017, 06:13:21 PM »
My grandparents are the Millionaire-Next-Door types; work hard and make it big in self-employment, put their kids into professions. They handed management of the family asset base over to their kids about 15 years ago and my mother is now hinting about us kids gearing up to take it over in the next 10 years. There's always been a 'this will be you someday' vibe; I went to my first creditor's meeting at 12, and the 'shirtsleeves to shirtsleeves in three generations' story got told a LOT while I was growing up.

I chose to pursue FIRE as if none of it existed for a lot of reasons. One is pride: I want to prove that my husband and I can make it on our own efforts. Another is related: I don't want my parents worrying about whether we're eyeing them up for money. I want to be able to talk with them as equals. Lately we have been discussing our respective projects (DH and I bought a duplex recently, and Mum and Dad are developing a site) and it's been really good to be able to talk to them almost as colleagues, rather than as superior to dependent.

The only downside is that now that Mum and Dad know our approximate FIRE date, they've hinted that I can use that free time to take over the family business! Unfortunately for me, the timing would work out very neatly.

Hula Hoop

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Re: Modest incomes now but inheritance in the future
« Reply #43 on: September 12, 2017, 03:04:12 PM »
Quote
I just feel kind of sad to work so many hours while my kids are smallish (both are in elementary school) in order to sock away money for retirement if this, ultimately, won't be necessary as retirement will be taken care of.  But I get the message loud and clear from this thread that I should just keep working long hours and not assume anything about the future.

The solution is to communicate with your parent(s) about if they wish to send some of the money early, so they can see it impacting your life for good while they are still alive, or do they prefer to keep it for their own needs up to the end.  Either way is valid but also very individual and so communication is key.  If you can't imagine even asking then you have your answer, you have to proceed as if the money isn't there.

Yep, this. I made the decision a number of years ago that I wouldn't broach that subject with my parents. I was living a frugal life in order to achieve FIRE, while knowing that my parents (almost 80) had done "very well" with their investments. My mom likes to brag. They've done well enough that their money is in a trust to avoid taxation, so it's substantial. I know they could possibly need a tidy sum for health care needs before they eventually pass on, which I hope is a long time in the future, but it kind of seems like I have a decent probability of inheriting some serious cash.

It's tempting to daydream about how much I could loosen the purse strings if they would gift me some cash every year. I have also taken the hassles from my mom about driving a 1998 Camry for so long. "When are you going to buy a more appropriate car?", I've been asked several times. On top of that, my brother and his son have been the recipients of financial life support from my parents more than once. My sister has kids, so I imagine their college funds have been stocked by our parents. Me, I don't have kids and have never needed the financial life support. When I turned 50, I dared hope for, well, something. I got a card. I love my parents. It's their money and they don't have to give me any of it. I still felt a little pouty inside.

However...I've just never gone there. Asking them for money in advance of a (probable) inheritance just would be too much like treating them like they're dead while they're still alive. So, I continued my high savings rate, and I am now FIRE without having done something to make them feel badly -- unless you count embarrassing them with my old car.

My brother, my sister and I may inherit some fairly serious money. I figure at that time I'll get a plan together for some spending and some philanthropy. I'm sure I should write an IPS now, but my priorities keep changing regarding the types of organizations I'm currently giving to. I figure they'll keep changing for a while before there's anything to consider.

Meanwhile, I'm still frugal. I'd love to loosen up a bit, travel more, maybe buy some things for myself. Maybe even a newer car when my 1998 eventually gives up. But I'll be doing whatever I'm doing with my own stash, at least for the foreseeable future. May that future be long.

I feel the same.  Asking my parents for money would be really strange.  They'd probably worry that I'm having financial problems and wonder why I needed it.  My parents both worked long hours all their lives in jobs that they loved while raising 2 kids so wanting to go part time would seem like a weird idea to them.  In fact, they kind of look down on people (mostly women) who don't work and this has caused a lot of issues in my dad's marriage as his wife doesn't bring in an income and he just can't fathom that.  Also as Candace said it would seem like I'm just waiting for their money or that I value them for their money or something.

My issue was more should I ease up a bit on saving and being Mustachian since it seems that this may not be so necessary in retirement but I think I'll continue for the various reasons cited above.

Laura33

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Re: Modest incomes now but inheritance in the future
« Reply #44 on: September 13, 2017, 07:30:54 AM »
So, first, the key is not to continue to work long hours and then feel bad if you find it wasn't worth it.  The key is to find a life that you are happy with, that suitably balances present and future needs, so that if you do get an inheritance, it's just a bonus.

The other reason to stay Mustachian despite the likely inheritance is that that's a fairly Mustachian inheritance.  First, I would assume some of it will go away -- if it's mostly tied up in a house, the market could drop, some of it will be eaten up by healthcare/end-of-life stuff, etc.  So say, reasonably, that 15 years from now you inherit $1M.  Awesome!  That will provide about $40K/yr -- easily sufficient for a Mustachian to live on.  Therefore, if you have stayed Mustachian, you are now FIRE and can go do whatever the hell you want for the rest of your life.

OTOH, if you spent 15 years of lifestyle creep because you knew this inheritance was out there, now your expenses are probably $60K, between the cleaners, the vacations, the extra things for the kids, etc.  Oops -- now your inheritance only covers 2/3 of your lifestyle.  And worse: since you cut back work so much (because, hey, I'm getting an inheritance -- I don't need to save!), you weren't really able to save much for retirement.  So now you need to keep working for another 10 years to cover the gap.  In this scenario, the inheritance didn't free you -- it in fact enslaved you to work for even longer, solely because you knew it was there and allowed that knowledge to affect your decisions!
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Hula Hoop

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Re: Modest incomes now but inheritance in the future
« Reply #45 on: September 13, 2017, 07:40:41 AM »
Yes, I guess you're right, Laura.  We will both continue to work full time at our jobs and save, save, save so that one day we can retire or at least drop down to part time.  But our kids are 5 and 9 now and in 15 years they'll be all grown up.  I sometimes feel sad spending all day in an office and my husband at his workplace (although he's self employed so at least has some flexibility when kids are sick etc.) while the kids are small if it seems likely that one day all this won't have been necessary.

We're not high income earners so if one of us ramped down our hours we would not save anything at all.  Our family of 4 is currently living on around $30K in a relatively high COL area (just ran the numbers) so there is not much fat to cut.  I'm going to make some small tweaks this month but nothing major.

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Re: Modest incomes now but inheritance in the future
« Reply #46 on: September 14, 2017, 09:33:48 AM »
I'm 72. Still waiting for my inheritance from my 102 year old father. I'm sure glad I never counted on it.

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Re: Modest incomes now but inheritance in the future
« Reply #47 on: September 14, 2017, 09:55:42 AM »
I'm 72. Still waiting for my inheritance from my 102 year old father. I'm sure glad I never counted on it.

Yes.  My grandparents were business owners, but not rich.  My mother grew up quite poor.  The business did fairly well later in life, grandpa sold out his portion to relatives, and they were frugal.

All in all, their net worth was probably around $750k, which doesn't seem like much but it goes far in rural PA.

Grandma died, grandpa remarried a lovely lady (who raised 12 kids on her own, basically, as her husband was an alcoholic who died young.)  He rewrote his will to leave the trusts to the kids (the "big one" to the 2 boys, of course, the "small one" to the 4 girls.)

My grandfather wasn't in the ground an hour before my uncle wanted to know "When am I going to get my money.  I've waited my whole life for my money."  I think he was probably almost 60 at the time (the uncle).  Thing is, the will was written that the kids don't get the trust until his second wife dies.  She gets to live off the interest, and principal if necessary.  They were married for 16 years.  Um...she died last year.  My grandpa died in 1998.  That's 18 years longer he had to wait.

Honestly I'm surprised he outlived her.  She outlived at least my aunt and my mom.

BFGirl

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Re: Modest incomes now but inheritance in the future
« Reply #48 on: September 14, 2017, 03:48:00 PM »
Yes, I guess you're right, Laura.  We will both continue to work full time at our jobs and save, save, save so that one day we can retire or at least drop down to part time.  But our kids are 5 and 9 now and in 15 years they'll be all grown up.  I sometimes feel sad spending all day in an office and my husband at his workplace (although he's self employed so at least has some flexibility when kids are sick etc.) while the kids are small if it seems likely that one day all this won't have been necessary.

We're not high income earners so if one of us ramped down our hours we would not save anything at all.  Our family of 4 is currently living on around $30K in a relatively high COL area (just ran the numbers) so there is not much fat to cut.  I'm going to make some small tweaks this month but nothing major.

And you also have the choice to lower your current savings rate and work part time and have more time with your kids now.  Then you can work on ramping up your career and savings rate as they get older.  I made a choice to work part time when my kids were in preschool and then take a full time government job with more flexibility than the private sector when they were both in elementary school.  I would be making more if I had focused more on my career back then and might have been able to retire sooner, but I'm glad I had some more time with my kids even though it means I may work longer.
« Last Edit: September 14, 2017, 03:50:03 PM by BFGirl »

rocketpj

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Re: Modest incomes now but inheritance in the future
« Reply #49 on: September 14, 2017, 06:53:37 PM »
I have seen so many families go to pieces fighting over the scraps left by their parents that I will never rely on any inheritance.  If one comes my way then great, but I intend to fully be in charge of my own future.

A close former friend of mine had his marriage fall apart over his future inheritance.  He stood to inherit millions, eventually, and his wife at the time was spending and planning for the death of his mother - somewhat enabled by him, to be fair.  In the end they had over $120K in credit card debt (!!!), he was working 3 jobs to sustain them in their 3300 sf rental house (2 adults, no kids), and all they did was fight about money (future and present).  So don't plan based on potential inheritance.