I asked a husband and wife who were meeting with me for the first time what was most important to them about their money. They were in their late 70s and said that they would like to live a little better and give more money to charity.
They had already left enough money to their only son so they weren't planning on leaving him any more money. They had also funded 529 plans for their grandchildren. To them, "living a little better" meant flying first class and staying in nicer hotels when they travel. Also, they were already making small charitable contributions to their church, the local theater and some other charities. But they wanted to make a larger impact and experience the gratification that comes from their contributions while they're still alive.
So I asked them why they didn't give more now, and they stated that they had read numerous articles about longer life expectancies and how that posed the risk of running out of money during retirement. They worried that could happen to them.
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Many, if not most, retirees "circle the wagons" when they get to retirement because they need to protect all the money they have to support them for the rest of their lives. Of course, any time you "circle the wagons," all progress stops. Even very affluent people who tell me they have all the money they need to support their lifestyles don't know how much more they're going to need for the rest of their lives. So they can't give away as much as they might like and really can't enjoy their wealth to the fullest.
In order to get maximum enjoyment from your wealth, it's not enough to know you have more money than you need. You have to know how much more. For this reason, I've found in my practice that some of the happiest people are retirees who are living off of a pension plan from their former employer. It pays them a certain income every month that, when taken with Social Security, is more than they need to live on. So they don't really need their other assets for basic living expenses and can use that money to create unique experiences in retirement.
Getting back to the retired couple in my office, I asked them: What if you invested in some products that promise you a specific income for the rest of your life that's large enough to support your lifestyle? Some examples might be an immediate annuity from an insurance company or a charitable gift annuity from a charity you already support. We'll make sure the income increases with inflation, so you're standard of living is not eroded by cost of living increases. That will leave you with excess assets that you can spend on more elaborate travel experiences and to support charities you care about.
They thought that was a great idea, so we implemented the plan using an immediate annuity (as opposed to the deferred annuities you see advertised in the newspapers every week) and two charitable gift annuities with their favorite charities.
I recently attended an event at one of the charities they support. The development officer, who knew my clients and my relationship with them, approached me and asked why they had increased their giving so much. She also told me that my clients seemed to really enjoy all the events they were now invited to as major donors of the charity.
On another occasion, the clients themselves called me after just returning from a trip to Europe. They told me that, for the first time in their lives, they had flown first class. They'd also upgraded their hotel rooms to suites.
Yeah for them!
Bruce Udell has more than 40 years of experience in the financial industry. He designs solutions for wealth accumulation and enjoyment for high net worth individuals.
This story above is for illustrative purposes only and should not be deemed a representation of past or future results. This story does not represent any specific product, nor does it reflect sales charges or other expenses that may be required for some investments. No representation is made as to the accurateness of the analysis.
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