Common scenario for the forum but one worth continuing to talk through. All framed around safe withdrawal rates and risk I think.
Curious if anyone has a good framework to apply to make things more automatic when parents have "enough" money to give some to kids early (before death and inheritance). There are emotional factors (including the joy of seeing money used before their death) to consider but for this post I am curious simply on people's opinion of the math and investment philosophy on this only please...
70 year old, Single Mother of 3
$38k a year in Social Security
$2.07M in a 50/50 index portfolio (475k IRA, 1.6M taxable) - 58% of NW
$1.5M House paid off in Greater LA - 42% of NW
Thus, net worth of $3.575M
Spends $125k-140k a year on things. So with SS she needs to pull out approx. $85-100k a year from investments for living expenses. Note again please this is a 70 year old with a paid off house.
Please ignore the emotional side, curious on the math and risk side of the house no pun intended. Also, yes I aware of gift tax laws and needing to file paperwork if gifts exceed $18 and each family member can get $18k with no paperwork in 2024. Also also, there will be 15% capital gains tax on getting this money out to give which is acceptable cost given she is not 90 imo.
How much could she afford at this moment to give each of the 3 kids? If not now, when in the future? How much? Lump sum or something per year?
A "safe" 4% on the 2.07M would $82,800 per year. 5% being $103.5k which is a little less "safe" but seems fine.
So if we consider just the liquid investments (IRA+Taxable). I think we would say she is not in the position to give money to each kid, right?
But now take into account the $1.5M house. Consider she is 70, and before we know it 80, etc... this asset is one that I think can and should be considered in the math on what is safe to withdraw from her NW to give to kids now (versus after death).
Said another way with a $3,575,000 NW it seems she could give the kids $100k each to start? More? Less? Other ways to do this and think about it?
Bringing emotions into it at the end for one paragraph, ideally this would help each kid buy a house but it would be up to them if they want to do that with the money, no strings attached or judgement. An extra $100k post tax would very much help each kids reach that goal soon. $200k each more so of course. Also, the joy of just seeing the money in the kids hands before death versus being gone.
What are people thoughts and advice please!
Curious if anyone has a good framework to apply to make things more automatic when parents have "enough" money to give some to kids early (before death and inheritance). There are emotional factors (including the joy of seeing money used before their death) to consider but for this post I am curious simply on people's opinion of the math and investment philosophy on this only please...
70 year old, Single Mother of 3
$38k a year in Social Security
$2.07M in a 50/50 index portfolio (475k IRA, 1.6M taxable) - 58% of NW
$1.5M House paid off in Greater LA - 42% of NW
Thus, net worth of $3.575M
Spends $125k-140k a year on things. So with SS she needs to pull out approx. $85-100k a year from investments for living expenses. Note again please this is a 70 year old with a paid off house.
Please ignore the emotional side, curious on the math and risk side of the house no pun intended. Also, yes I aware of gift tax laws and needing to file paperwork if gifts exceed $18 and each family member can get $18k with no paperwork in 2024. Also also, there will be 15% capital gains tax on getting this money out to give which is acceptable cost given she is not 90 imo.
How much could she afford at this moment to give each of the 3 kids? If not now, when in the future? How much? Lump sum or something per year?
A "safe" 4% on the 2.07M would $82,800 per year. 5% being $103.5k which is a little less "safe" but seems fine.
So if we consider just the liquid investments (IRA+Taxable). I think we would say she is not in the position to give money to each kid, right?
But now take into account the $1.5M house. Consider she is 70, and before we know it 80, etc... this asset is one that I think can and should be considered in the math on what is safe to withdraw from her NW to give to kids now (versus after death).
Said another way with a $3,575,000 NW it seems she could give the kids $100k each to start? More? Less? Other ways to do this and think about it?
Bringing emotions into it at the end for one paragraph, ideally this would help each kid buy a house but it would be up to them if they want to do that with the money, no strings attached or judgement. An extra $100k post tax would very much help each kids reach that goal soon. $200k each more so of course. Also, the joy of just seeing the money in the kids hands before death versus being gone.
What are people thoughts and advice please!
Statistics: Posted by WhatsUpB — Fri Sep 27, 2024 1:42 pm — Replies 38 — Views 1619