[Editor’s Note: This has been an amazing week for us with the release of the WCI Online Course Fire Your Financial Advisor: A Step by Step Guide to Creating Your Own Financial Plan. The response so far has been extremely positive. Thanks for telling your friends, colleagues, and family about it!
This is a republished post from Passive Income MD (PIMD), the newest member of The White Coat Investor Network. The original post ran here, but if you missed it the first time, it’s new to you! ]
The fear of running out of money in retirement is very real. In fact, it’s the number one fear among older adults – even over declining health. According to the Transamerica Center for Retirement Studies, 43% of adults surveyed said their greatest fear about retirement was outliving their savings and investments.
This very fear is what keeps people working well past what might have been their retirement age. It also makes people take certain risks and make questionable decisions.
This fear is understandable. No one wants to run out of money during the time of life when you’re supposed to be enjoying the spoils of years of hard work. However, is this fear truly something we should be stressing about? Financial Samurai thinks we might be overdoing it.
In fact, perhaps there’s something else we should think about when it comes to money and retirement: the fear of dying with too much money.
Stay with me here. It may seem a like silly thing to worry about, but is there a downside to dying with too much money? Let’s look at what this might mean.
Downsides to Dying with Too Much Money
1) It means you worked more than you needed to.
Perhaps you gave up those vacations and time with family and were left wondering where the time went. You missed out on time you won’t get back for money you didn’t need. For physicians, that might mean that you took those extra weekend or holiday calls for a little extra cash. And of course, one of the greatest regrets older people have is that they worked too hard and too often.
2) It might mean that you deprived yourself of some pleasures by being too frugal.
You’ve had some things on your bucket list, but you were worried about the financial impact of traveling there or buying that certain thing, so you abstained. Because of your desire to save (perhaps for retirement), you missed out on some pleasures in the here and now.
3) Perhaps there are other people who could have benefited from your income but did not.
Maybe you thought about giving more, but the fear of not having enough money kept you from it. It’s an uncomfortable thought, but when you’re on your deathbed, will you be happy for the money you saved? Or rather, for the difference you made?
The thought of giving more isn’t unheard of among the wealthy – Mark Zuckerberg, Bill Gates, and Warren Buffett are just a few people who have signed a pledge (The Giving Pledge) to give away a majority of their wealth in their lifetime.
4) You might trigger inheritance or estate taxes.
These might sound similar but are two different things. Only certain states have an inheritance tax (up to 18%), which is taxed on an inheritance over a certain designated amount. An estate tax, on the other hand, currently only exists for estates greater than $10 million (according to the new 2018 Tax Law). But this can be a significant amount. I concede that this fits in the “good problem to have” category, but perhaps it would be better to avoid the extra taxes in the first place, especially if it’s for good reasons.
5) You might ultimately hand down your money to someone who doesn’t really need it.
With increased life expectancy, people are often passing along their money to their children who are in their fifties and sixties or beyond. If you’ve been able to teach them great habits and they’ve been disciplined, hopefully they’ve already financially independence by that point. If so, your financial gift may mean that they’ll die with too much, and we’re back to square one.
Final Thoughts
The truth is, even after reaching financial freedom or financial independence, a good number of people, including physicians, find reasons to continue to work. Look at some of the wealthiest people, like those I mentioned earlier. They’re financially independent, and yet they continue to work. Because of this, they’ll likely continue to grow their net worth more and more. For many people, retirement isn’t the end of their career. You may want to continue working anyway, even if you have more than enough money.
Ultimately, we have to ask ourselves these questions.
What is the point of money, anyway? Is it our greatest goal, or a means to an end?
I believe that happiness, both now and in the future, relies on seeing money as a tool, not the goal. Indeed, money doesn’t buy happiness — but it can buy you time and experiences.
Of course, as with everything, balance is the key. Savings are important, but it’s up to you to decide just how important. Will growing your retirement fund become your ultimate goal? Or will you live life to the fullest now, enjoying your short time with family, and bettering your community? Can you find that great balance?
What do you think? Do you worry at all about dying with too much money? Think the fear of outliving your money is overblown?
I think fear does motivate some to work longer than needed. Also, we work till we drop because it’s what people do. Contrarianism isn’t natural for most.
I think about ltoo much” often and I equate it to overstudying for a test (we’ve all taken a few of those as docs). You probably could have gone home to see your family or gone on that trip instead of grinding out the amino acid metabolism pathways that weekend. But you didn’t, you studied, and the questions were much easier than you thought they would be and you overdid it. So now you have some knowledge for a few weeks which will surely be gone next month and was basically worthless and a waste of time.
I’m no Bill Gates. I want to have enough for me and my wife and some to get my kids educated and jump started. If I die with zero it’s all good. It’s like having zero tax bill, I don’t want a refund (interest free loan to govt) but I didn’t underpay either.
I completely agree that you can die with too much money. Money is a resource to be used. I felt conflicted about retiring before most of my friends had (I am 59) even though I had saved plenty because even though a medical career can be brutal, being a physician is an identity that is hard to top. How does one become something else? How can we let go of being an expert? I wanted to study music but didn’t have a background as a child. I began at age 42 and found that although pianists easily translated their skills to study science and medicine a physician isn’t necessarily a natural musical genius. I’ve stumbled a lot and embarrassed myself in front of people in the middle of a piece I had labored over but could not remember. As foolish as I could possibly look and sound I am thrilled to be a student again, using my brain while it’s still functional. The world is full of opportunities. Why not try something new and more challenging than making more money?
Love that last sentence.
you cannot be too rich or too skinny
its a problem most would die for
The fact that some people DO die in pursuit of those goals means that you can indeed be too rich or too skinny.
The ghost of Karen Carpenter begs to differ.
Everyone wants to be a little more rich and a little more skinny. Somewhere along that path is the balance of enough. I think this blog is trying to get you to face the issue of what is enough.
Dr. Cory S. Fawcett
Prescription for Financial Success
I hate to quibble with terminology. But your definition of inheritance and estate tax are incorrect. States can impose either an inheritance tax or an estate tax or both. This is related to whose has the obligation to pay, the one receive the bequest or the one making it. There are quite a few states with an estate tax and some states apply this tax to small estates. At the federal level, there is no inheritance tax only an estate tax. The 2018 tax law exempts $11.2 million for an individual, indexed for inflation, and retaining portability.
I know these details were not the point of the article. But on the week the new online course launched, it seemed like a post on WCI, regardless of the author, should be precise.
Thank you for the corrections.
Just for clarity, thats 22.4M for a married couple. So, pretty tough for most, especially when indexed for inflation.
That 22.4M is only if they know how to play the game right. The first one to die must jump through the right hoops at the right time or they will not both be able to claim the 11.2M. If you do not plan right, the first to die leaves everything to their spouse and then when the spouse dies and passes it all to the next generation, they can only pass their share, or 11.2M.
So If your estate is that large, you must make special plans to utilize both person’s allotment. But those who have such estates, probably already know this.
Dr. Cory S. Fawcett
Prescription for Financial Success
That’s absolutely correct Cory. On the advice of our tax attorney, my parents created an A/B Revocable Trust. When my father passed away, his portion (A), went to his children along with the tax exclusion. The estate value was lower and has since doubled. The
B portion of the trust will pass to the children with the tax exclusion in the future. For those in this situation, an A/B Revocable Trust is the way to go.
You seem to have missed the changes in portability of the exemption a few years ago. A/B trusts no longer required to get the whole thing.
https://www.rbcwm-usa.com/resources/file-687701.pdf
Yes I missed that. Thanks for the info. It is still not automatic though and this is something I hate about the current tax system. Only the people who “know the rules” can get all the benefits. I think if something is good for everyone, it should be for everyone, not just the well educated or those who can afford an accountant. Here is the section of the report you shared that shows what I’m talking about:
The surviving spouse can use the
unused portion of the predeceased
spouse’s estate and gift tax exemption,
if the predeceased spouse’s executor
affirmatively elects portability on a
timely filed estate tax return.
If you don’t ask for it, you don’t get it. If you didn’t know to ask for it, you don’t get it. I wish this would change in the system. Everyone should get it automatically.
Dr. Cory S. Fawcett
Prescription for Financial Success
Agreed.
Thanks for the reminder about portability. I had forgotten. The link is good too, since it identifies reasons for setting up irrevocable trusts other than A/B. For example, I don’t worry about it much myself, but my wife does sometimes express concern about protecting the kids inheritance in the event of divorce.
This is one of the big reasons that I prefer to invest via a Roth method as opposed to pre-tax into my 403B. RMD’s are going to place me into high tax brackets in retirement. Roth will decrease my RMD. Roth accounts will also leave more to my heirs for a Stretch Roth IRA.
I understand the marginal versus effective tax rate and arbitrage, but having too much is one of the big reasons that I think a Roth investment is wise.
I write about it here (https://thephysicianphilosopher.com/2017/12/14/pre-tax-versus-roth-403b-401k/)
Yes, the more of a super saver you are, the better a deal a Roth account is.
This is good information and timeless. Charles Dickens addressed this in A Christmas Carol with the character of Scrooge. I wrote a piece about it just before Christmas and you can find that at the address below.
http://drcorysfawcett.com/a-modern-christmas-carol/
We could all use a little less Scrooge in us. It doesn’t pay to die sitting on a pile of money.
Dr. Cory S. Fawcett
Prescription For Financial Success
I have no fear of dying with a very large amount of money. You can never tell how much might be enough, but you can determine where your excess goes to. If you are worried set up a system for any excess to go to charity.
I’m not a high earner (30 years in journalism) so leaving too much money behind when I die isn’t something I’d ever worry about. If there is money left, likely because I don’t live into my 90s as I’m trying to plan for just in case, it will go to causes that are important to me. So it it will be money well spent, whether it’s spent on me or on Planned Parenthood and Alzheimer’s research.
[Rude, politically charged comment deleted.]
[Politically inflammatory comment deleted. Future comments by this poster will be held for moderation given the frequency of them requiring it. Note to poster: This is not the CNN or Fox News comment section where anything goes. A very high level of decorum is expected here.]
This strikes me as similar to a fear of outliving your term life insurance. Or maybe it’s similar to a fear skydiving and landing without pulling ypur reserve chute. You don’t have these things for the times that everything goes right. It’s for the times that everything goes wrong. Hopefully I’ll die with a lot of money.
Agreed. These are the type of posts for posts’ sake. Get hits on Google. Better to die with money left than die poor.
Dying broke means you did not take care of your responsibilities.
Main downside to dying is death itself, regardless if you have or dont have money. Just sayin.
Money is of course a path to achieve something. You can always find reasons to continue working. If you have a 10x your expenses emergency fund, someone could argue that you can go 25x.
“Better safe than sorry…”
When achieving financial freedom, one has to change a lot of things: one of them is the mindset.
To manage the investments, and do something else beside working.
This notion of dying with too much money makes no sense to me. Earning, saving and investing money are goals in themselves. It is like being afraid of having been too good a parent, having too high an h index, having treated too many people too well. Like dying having paid too little in investment expenses, too little in taxes, having too good an estate plan.
The world does not end with my death. I hope my accomplishments outlive me. I hope my heirs benefit from my efforts.
Minimizing the total amount of work I do in my lifetime is not a goal. So quitting at my earliest opportunity would not advance any ambitions I have. I was at a meeting yesterday in a room full of highly accomplished people, most of an age and with incomes that would have permitted them to retire.
They were not trying to figure out how to do less, reduce their impact on their field, hasten the point at which they got to spend their time doing nothing. They did not get where they were by being the laziest people they could. They did not get there by identifying the minimal acceptable effort and trying to negotiate down from there.
If I have twice what I “need to retire” then I want 3x. If I have 3x, make it 5x. Make it as much as my work, saving and investing can make it.
It would be impossible to die with too much money.
Truly nonensical.