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How to Plan Retirement Around an Inheritance You Might Not Get · How to Retire on Time

• 0:00
  Mike: Hey, thanks for joining. Here's a question I was recently asked on my show, How to Retire On Time. Take a look. What's the first question we got for today?
• 0:13
  David: Okay. First question that was submitted. How do you plan around receiving an inheritance mid retirement?
• 0:21
  Mike: So this is the... I think they call it the trillion dollar transfer.
• 0:24
  David: Oh, because that's what's happening like out there right now, lots of wealth moving.
• 0:28
  Mike: Yeah. I mean, we're living longer than we ever have. And so, it used to be like, you're retired, you die, and you give your kids the money right before they retire. Now, we're seeing it would be called the sandwich generation, where you've got someone who's retired, and they're retired taking care of their parents and helping their kids. So, they got it on on both sides of the age spectrum.
• 0:52
  And then when their parents die, they get the money, but they already kind of save for their retirement. Yeah. And so, the question really goes down to, should I plan my retirement, if I'm hearing this right? Should I plan my retirement around receiving the inheritance, as in, can I increase my income? Uh-huh.
• 1:09
  Or, like, should I pull back and then if it happens, it happens. It's a pleasant surprise.
• 1:16
  David: Yeah. Because you never know. Right? Maybe your parents are sick for a long time and a lot of the wealth gets used up with some kind of whatever skilled nursing thing.
• 1:28
  Mike: I personally lean towards work with what you have, and if there's a pleasant surprise later, adjust then. And here's the crux of it all. They may be healthy. They may not be healthy, but like they don't need intensive health care. The stars might look like it's a great situation for you, and you're gonna receive a million dollars.
• 1:52
  And then something changes, and their health care for the last three years spends most of it down. Yeah. You can't bank your retirement on certain things you cannot control. So just be careful with that. Every situation's different.
• 2:09
  You gotta ask a lot of questions. But if you're gonna retire, let's say early, and you need to get at least a 500,000 from inheritance within the next ten years for your plan to work out, I would say it's a very risky proposition. Mhmm. It might work. But if it works, that's not the issue.
• 2:27
  It's what if it doesn't? What's your backup plan? And most people's like, I don't really have it, but I should get this.
• 2:31
  David: Right.
• 2:32
  Mike: Well, I've got the house. Well, what if the house gets, I don't know, like there's some weird laws about taking over the primary residence if they've spent through all of their money, and now they're on Medicaid, then when the house is sold, the government's gonna take a lot of the profits of the in some states. Alright. These are things you gotta be aware of. So, I say plan with what you have and what you have control over, and if you have a pleasant surprise, then great.
• 2:59
  Have that backup plan, that backup mission for that if that were to happen. And there's all sorts of cool things you could do. Maybe you don't need it. Maybe you do need it. If you don't need it, maybe you're taking the money and setting up an endowment, a foundation.
• 3:11
  Maybe you're doing some sort of dynasty trust or or generation skipping trust using form seven zero nine of the of the company. There's there's all sorts of things that you could do with the money. Mhmm. But you do need to define a mission for every part of your money. Not just the lump, but section things off.
• 3:28
  And I'll I'll kind of dive into that real quick before we go to the next question.
• 3:31
  David: Okay.
• 3:33
  Mike: There's been a lot of people I've worked with, but they don't need all of their money. So we... I wanna figure out, okay, well, how much do you need to live off of? Let's say it's a $5,000,000 plan. They only need a million dollars to sustain their life.
• 3:45
  They've got a pension maybe, maybe they don't. Maybe they've got into some income streams. Maybe it's just social security, and they only need about 40,000 to bridge that gap, and spending more money isn't gonna make them happier. Mhmm. So we can take a million dollars, shore up that gap, and then have a $4,000,000 portfolio that has a completely different mission.
• 4:05
  Oh. Or maybe it's 2,000,000, 3,000,000, or something like that. Like everyone's different. But unless you run your plan, you can't know how much of your portfolio really is there to support you, and how much is invest the rest for another mission. Charitable intent, healthcare costs, whatever it is, legacy intentions.
• 4:26
  Mhmm. But you gotta run the flip plan first because you gotta take care of yourself first. Then you go from plan to strategies. How do you get more out of your money? So that that's an interesting proposition.
• 4:38
  For some people, they might wanna spend down their IRA assets because of their legacy intentions and how they're passing. Right? Because a brokerage account, if you just don't really need it, you would get what's called a step up in basis. You're basically passing the assets tax free, and you get some dividends along the way. That's a cool situation.
• 4:56
  Yeah. But they had more IRA issues because you have required minimum distributions at one age. Yeah. Whereas other people, they might do a couple of IRA to Roth conversions, and then they then they're good to go, and they wanna let the Roth be the growth vehicle, and then they're gonna pepper in some long term capital. You've got different ingredients and different amounts.
• 5:16
  I mean, it's like, how many types of bread are there?
• 5:19
  David: Oh. Yeah.
• 5:21
  Mike: I like bread. Bread?
• 5:22
  David: I'm pro gluten. So good. Yeah. Yeah. For so many reasons.
• 5:26
  Yeah. You got your sourdough, you got your rye, your challah, whole wheat. Great great accent there. Thank you. I mean, there's just a lot
• 5:34
  Mike: of options in bread. And what are the ingredients? Flour, water, salt, yeast, maybe a starter. Yeah. Maybe butter.
• 5:43
  It's all kind of in the same family of ingredients that you can have so many different variations. And if you like cinnamon rolls, then you've got the cinnamon sugar. Mhmm. Right? But the point being is there are so many different balance and structures within your plan.
• 5:56
  Going back to the inheritance, maybe assign a purpose to the inheritance so if you get it, it serves that mission. If you don't get it, it's still not gonna disrupt your own life.
• 6:09
  David: Yeah. You'd hate to, like, count on it. You'd hate to set up your plans such that, oh, yeah. That... That's an essential part in order for me to stay retired.
• 6:18
  And then if you don't get it, then then what?
• 6:20
  Mike: Yeah. I mean, like, it's one thing to say I'm gonna sell my house or sell the rental property on this date. Uh-huh. You control the asset. Yeah.
• 6:28
  You don't control the health of your parent. So for all those who are tuning right now going, hey, this is this is great. What's the next step? I'd say come to our workshop. It's this Tuesday night at 06:30 central time.
• 6:40
  We're hosting it on Zoom, so you can attend from the comfort of your home. Just go to retireontime.com/workshop to RSVP. That's retireontime.com/workshop. We'll see you there.