What to do when you have saved more than what you need at retirement?
Posted by: Uma Shashikant on Jun 11, 2018, 12.19 PM IST
My friend has an unusual problem. What’s more, he believes many of his friends are plagued by the same problem as well. After years of hard work, sacrifice and saving, my friend has built a large corpus to fund all his life goals, and some more.
As he and his wife gloat at the graduation of their only son from an Ivy League university in the US, their son asks for his graduation gift: He wants to be disinherited from the wealth his parents have built.
The son’s argument is simple. After having studied at a top school and being placed in a good job he will soon begin, he wants to build his life with his own hands. He feels indignant about using the money his father has accumulated. He does not believe it belongs to him, and does not like the privilege it entails. He subscribes to a lifestyle that hinges on minimalism, and does not want to begin his journey with crutches provided by his parents’ wealth
My friend is very proud of his son’s ideals. He is not angered by the young man’s stance. He does not want to argue about the merits of the case being made. His problem is that he has made no alternate plans for the wealth he has created. He always assumed that he would leave a large bequest for his son, and that the wealth would enable his son to live a life of greater comfort.
Now that there is no such need for the wealth, he does not know what to do. The son’s suggestion is simple: It is your money to spend, so do whatever you wish to do with it. But my friend is not prepared for that kind of open-ended proposition. He has lived his life exercising control over things, planning in great detail, working out the math before making a money decision, and enjoying the specifics of his decisions.
Faced with the prospect of spending a large corpus of money, which covers the retirement requirements of his spouse and himself many times over, our friend does not know where to begin.
Here is what he can do.
First, he has to estimate his retirement requirements and earmark the funds needed to cover it. It is the only financial goal to provide for at this time. Our friend is well versed with the exercise of estimating expenses and inflation. He knows how to invest and draw the money needed to lead a life minus any money worries. He needs to invest enough to be able to draw from it whenever necessary. This is the first thing to get out of the way.
Second, he needs to talk to his spouse to identify large-ticket expenses that have been postponed till now. It can range from renovation and upgradation of their house, jewellery for the spouse, travel to favourite destinations to acquisition of material comforts like a better car and so on. These may seem like frivolous expenses for 55-year olds, but they represent real desires for many—dreams and desires that were locked up in hidden cupboards, so that the child could get the best education and a better footing in life. There is no harm in bringing the list back to the table, and making the decision about what actually matters a lot. When the constraint around money is no longer there, it is not always easy for people to spend. This is especially true of those who have made frugal living a habit.
They should make lists that include large ticket expenses that can enhance the quality of their lives, and spend like today’s youngsters, who believe that they deserve the best in the world once they have begun to earn some money. When I told my friend to buy as if you they were buying for their son, the couple smiled, and understood what that meant.
Third, they should think about expenses that would make a big difference to the quality of everyday life. Hiring help that will reduce the burden of mundane or bothersome tasks; spending on books, movies, music, art and food with deserved indulgence; cultivating a new interest or hobby that needs serious investment of time, energy and money; and so on. Simple joys of life that were given a go by only to save money can be funded now.
Fourth, they should focus on the world outside of their little home. There are friends, relatives, household staff, and so many people who we meet in our everyday lives. There are so many relationships that enrich our lives in ways we do not pause and think about. The overt focus on our little household and our children shuts out all else and leaves us cocooned in our narrow priorities. The security that a well-funded future and lack of anxieties around living provides, should enable a more cheerful, generous, inclusive, empathetic and helpful demeanor. Take interest in lives around you.
Fifth, they have to get serious about giving. When you have accumulated wealth that transcends the needs of your life, you owe it to society to give and to return what you can no longer use. If all the lists we discussed so far seem very selfish and narcissistic, they indeed are. We are but people who cannot look beyond our narrow selfinterest, very easily. But we can get better with effort and self-awareness.
To think of our wealth as ours alone, is not a default option. If we choose to honestly introspect, we can recognise the many unsuspecting enablers of our growth, who came in our paths and made it possible for us to succeed. To give is to recognize our responsibility to enable the success of many unknown others, who stand where we did during our times of trouble. Identify causes you want to support; join like-minded friends to explore, research, analyse, and choose; Create concrete plans to give and implement those decisions; and make sure your money supports worthy causes that make a difference to the lives of people.
The traditional ways of looking at things have to change, because the world we live in is changing. The opportunities that youngsters have to grow and thrive in their chosen professions have expanded. This has the power to set many parents free of the burden of bequest to heirs. It is possible now to live a meaningful and fulfilling life in which we can allocate the wealth we have not just for ourselves. Grab that opportunity and make a mark.