Quentin Fottrell
‘I’m a 36-year-old man with no plans on having children, and I’d like to be able to use this very small amount to pursue one of my passions in life’
Dear Moneyist,
Last week, my parents surprised my three siblings and I, by giving us an in-life inheritance of $8 million U.S. dollars in stocks, bonds, ETFs etc. in a shared account (25% for each). As my brothers and I were discussing that we’d re-invest almost all of the profit, I told them I’d like to be able to withdraw 0.25% of my part every year ($5,000 as of now) or even less, for travel expenses (traveling is my passion).
My youngest brother spilled this to my parents, and they told me that their wish is for this money to be used as savings for when we retire. I love my parents dearly, I have a huge respect for them, and I’m really grateful for what they did, and would feel terribly awful to have a disagreement or even argue with them about this.
But I’m also a 36-year-old man with no plans on having children, and having the opportunity to inherit this money early in my life, I’d like to be able to use this very small amount to pursue one of my passions in life. I’d be really grateful if you could share some advice on what to do in a situation like this. Thank you in advance.
Wanderlust
Dear Wanderlust,
We are in the middle of a pandemic, so you probably don’t need to worry about traveling the world for at least another year. If not more.
Make saving your No. 1 priority and spending No. 2. Jay Kopfer, senior managing director at Antioch Partners LLC in Houston, Texas, says, “In our lifetimes, it is our goal for all of us to fill up a bucket of money to have and use in our golden years to make them golden. Presumably, you were dedicating a portion of your income, hopefully at least $5,000 a year, for retirement contributions to fill up that bucket for money to be used in retirement.”
“Your parents generous gift has allowed you to stop/reduce your retirement contributions, increasing your monthly cash flow, allowing you to transfer your budgeted monthly retirement savings contribution to your travel budget,” he adds. “It is irrelevant as to whether you take the $5,000 from your parents’ inheritance, or take it from your increased monthly/annual cash flow; to keep good relations, I would suggest you pay for travel out of your increased cash flow.”
You can, of course, still take time off, work-schedule permitting. But I also agree with your parents. You should fund this on your own. It will help you to create a healthy work-life balance, something millions of people are reflecting upon during the coronavirus pandemic, and teach you to prioritize your income and expenditures. It will also encourage you to find ways to raise that $5,000 yourself, and excel at whatever it is you do best.
Until they relinquish control of this money, it belongs to them, and it is up to them to decide when and how you should spend it. If you had gone to them first and told them about your travel plans, what would have happened then? We will never know, unfortunately. It’s quite possible that they felt like they had done something monumental and the first piece of feedback they received was, “Yes, but…” It may have raised red flags for them.
If it were your decision alone? Travel while you’re young and healthy. Knock yourself out. Susan Carlisle, a CPA at CDW CPAs in Los Angeles said travel can substantially enhance our life, and $5,000 a year wouldn’t exactly dilute your nest egg. “He is not asking to withdraw his $2 million share, after all: only $5,000 per year. As a CPA, a personal-financial specialist, a senior citizen with four grown children and six grandchildren, I say to this lucky young man, ‘Safe and happy travels.’”
David Batchelder, a senior investment officer at the Sentinel Benefits & Financial Group in the Greater Boston Area, is concerned at the ambiguity surrounding this inheritance/gift and/or whether you are using the wrong term to describe it. If your parents have relinquished ownership or control of these investments, it is obviously a gift. “It sounds like the parents have essentially (intentionally or unintentionally) given up control of the funds to the brothers,” he said.
”If I was in this position as a parent, I would love to witness my kids enjoying some of that gift while I’m alive and able to experience their joy in making memories. We are talking about $5,000 of $2 million or 0.25% of the inheritance per year. Crumbs in terms of the whole cake. Looking at it solely from a financial planning perspective, this plan does not seem ideal for the parents or children as it potentially opens them up to estate, gift and tax issues.”
Overall, however, I don’t believe that the expectation of a large inheritance is necessarily a good thing. Such a windfall could prevent you from experiencing failure, something psychologists say is useful, if not critical, in our social and professional development. Young people with more grit are more likely to show higher levels of self-control, resilience, passion, mental well-being and life satisfaction, according to a 2018 Frontiers in Psychology review of three studies.
In this review, three themes emerged among people with more grit: 1. “Passion and perseverance, included themes of having short and long-term goals, resilience, dedication, and endurance.” 2. “Self-control, included time management, self-awareness, prioritizing tasks and knowing strengths and weaknesses.” 3. “Positive mind sets. This included having a positive attitude toward learning, the importance of feedback and constructive criticism and that success is not materialistic.”
That’s probably why your parents may wish for you to fund your own wanderlust. Sacrificing something that you really want can build character and make it all the sweeter when it happens. It can also change your outlook: How can I make a living and contribute something meaningful to society? How much do I really need to be happy and healthy right here, right now? We all have many wishes and dreams and goals. But what we have to give others is equally, if not more, important.
In the meantime, everyone should ask: How can I make sure that I retire comfortably, and have enough cash flow set aside for job loss and/or a medical emergency?
