"Why we should all aim to die broke"

[QUOTE="Sophrosyne, post: 1486021,

It is rather like Maggie in Cat on a Hot Tin Roof "You can be young without money, but you can't be old without it".[/QUOTE]


That sound so true when you read it quickly, but the reality is the same in both cases really.
 
David,

Do you really want you kids to be lazy ? ... living off of your hard work ?... do you not trust in them enough to allow them stand on the own feet...? What personal scence of achievement will your kids have knowing that they go a head start on others ?

As for the emigration brain drain comments ... I meant that all governments world wide would apply the same inheritance tax system making each new generation responsible for their own level of success or failure.
 
Brendan Burgess said:
Most people want to have a comfortable retirement while maintaining their wealth and leaving the family home to their children.
That should not be their financial objective. Or put it another way, they should not be making serious financial sacrifices during their working life and retirement to achieve that objective.
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I'm on board with this part of your argument. Children will benefit more from early investment in education than from inheritance later in life. If they are short-changed on financial literacy, the promise of a lump sum later on may even be detrimental.

On the other hand, we're looking at a generation of retirees who have (collectively) failed to fund their own retirements. Part of this is visible in the impending shortfall in public pension schemes. The other part (i suspect) is wrapped up in inflating property values over the last 20 years. This seems to represent a massive transfer of wealth from the young to the old(er). In the context of this failure, I'm inclined to plan defensively. Who knows how long the younger members of this forum will live? I think it's entirely possible that an average 20 year old today might expect to live past 100.

Brendan Burgess said:
advisers should ... make sure that most of their clients die close to broke
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It seems to me that (past a certain point) consumption provides sharply diminishing returns in terms of happiness. As people get older (and presumably wiser) the importance of "stuff" to their sense of wellbeing tends to decline, in favor of relationships, health and security.
At a certain point, isn't the happiness benefit of extra consumption outweighed by the cost of worrying about "living too long"?
 
I was also thinking about intergenerational wealth. For example with farmers.
You may be building wealth not for yourself or even the next generation, but for your descendants hundreds of years down the line.
A legitimate point of view too, in my opinion.
 
Joe_90 said:
I agree but the great unknown is when is the person going to die!!!

Bob retires at 60 and has a pension pot of €1m growing at 5%.

He has three choices
1.draw out €50k per year indefinitely. Pot still €1m.

2. Draw out €80k per year for 20 years. Pot nothing at age 80.

3. Draw out €58k per year for 40 years. Pot nothing at age 100.

Think I'll be burning through €80k a year and have nothing left!!
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The thing is, Bob will be spending a lot more in his 60's than he will in his 70's. When he is still relatively young, he will want to go off and do different things. As he gets older, adventure is a lot harder to do and he begins to look at routine at home...until it's a nursing home or a box.

And yes, nursing homes are incredibly expensive and you can't insure against the cost.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Codogly said:
I can see no reason why 100% inheritance tax should apply...!!!

Note : Family Business / Farms etc could be transferred title to kids but if they ever sell or realize a gain from the sales of those assets then inheritance tax should kick in.
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Why should the government be entitled to the assets that a person has built up over a lifetime? In most instances, assets that they have already paid taxes on?


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
The whole point here is that individuals should " Die Broke " thus the government would end up with nothing as no tax would accrue.
People should plan to run down their savings and assets over their own lifetime.

Your average person would sell their family home upon retirement and use the funds to sub their pension , either buy a smaller place or rent. This would also have the advantage of freeing up a family home for the next generation of families and reduce the number of empty nesters in the system.
 
Codogly said:
The whole point here is that individuals should " Die Broke " thus the government would end up with nothing as no tax would accrue.
People should plan to run down their savings and assets over their own lifetime.

Your average person would sell their family home upon retirement and use the funds to sub their pension , either buy a smaller place or rent. This would also have the advantage of freeing up a family home for the next generation of families and reduce the number of empty nesters in the system.
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That's your opinion and of course, a valid one. But my thinking is that I will have funded my pension pot through years of hard work and I will damn well do with it as I please!
 
Gordon Gekko said:
I don't agree with the prevailing sentiment. In aggregate, the current "older generation" are probably the first who will do better than their offspring. In my experience, they want their capital to endure so their kids have a backstop. Personally, I view my own pension fund as something for my kids rather than a simple retirement planning tool.
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If you don't mind, this might be a good point to discuss... rationally looking at it then, do you think you've mixed in a legacy for the kids with your retirement fund? A retirement fund is for your retirement. You're also saving into your pension plan something to pass on to the next generation but this isn't anything to do with your retirement. But these are two distinct arrangements that we never plan for as two separate items.
 
Hi PaddyW ... that's a fair enough point , however my point is that the government is responsible for ensuring a fair and just society and in that context they have through Inheritance tax the capacity to make each generation start on a level playing field.
Example : If PaddyW leaves his son a house worth say 250k that's a huge advantage for his son over and above Codogly son who got nothing ...and PaddyW's son have achieved this advantage through no effort by himself.
So in the same way that the government tells PaddyW that he cant spend his hard earned money on illegal activities (Drugs / Prostitution / weapons etc ) they government could and in me opinion control inheritances to ensure a fairer society.
 
Brendan Burgess said:
That is a brilliant analogy. I will use that. Is it plagiarism if it's first said by an anonymous person? :)

Brendan
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I'm not anonymous... you just don't know me!

And anyway, use away! My father is the perfect example of this mentality, he often tells the story of a bachelor farmer who used to save at every opportunity, when he was told that he should be spending it or someone else will do after his death, he said: ' Well, I hope they enjoy spending it as much as I did saving it!'
 
Codogly said:
Hi PaddyW ... that's a fair enough point , however my point is that the government is responsible for ensuring a fair and just society and in that context they have through Inheritance tax the capacity to make each generation start on a level playing field.
Example : If PaddyW leaves his son a house worth say 250k that's a huge advantage for his son over and above Codogly son who got nothing ...and PaddyW's son have achieved this advantage through no effort by himself.
So in the same way that the government tells PaddyW that he cant spend his hard earned money on illegal activities (Drugs / Prostitution / weapons etc ) they government could and in me opinion control inheritances to ensure a fairer society.
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So your suggestion is to kick families out of their homes once their parents die??? Nothing much in that to ensure a fairer society.
 
Hi T McGibney,
No that's not what I'm suggesting at all ... my proposal would have no issue with a family taking over their parents home after the pass on ...however my proposal requires that they the children don't get that house for free ..i.e. in this case the parents could sell the equity in their house to the government agency for say 200k which the parents would then spend on themselves and the children would have the option when the time came to take a 200k mortgage from the government agency if they wished to continue living in that house.
This way the children are required to pay their own way in life and the parents enjoy the full benefits for their hard earned cash.
 
So a kid whose parents die young would be forced to buy their own home back from the government?


That, my friend, is tyranny.
 
rob oyle said:
If you don't mind, this might be a good point to discuss... rationally looking at it then, do you think you've mixed in a legacy for the kids with your retirement fund? A retirement fund is for your retirement. You're also saving into your pension plan something to pass on to the next generation but this isn't anything to do with your retirement. But these are two distinct arrangements that we never plan for as two separate items.
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I'm using the tax advantages of a pension to build more capital than I'll need, so it is a succession planning play.
 
As someone put it "if you don't drive a Merc, your son in law will!

More seriously though, inheritance is the cause of great inequity in society. If someone wants to work for you, then the government takes a substantial wedge off the money you pay them, although of course you paid tax on that money. But if you just die and someone ends up with the money the government takes a lot less, so those who work for it pay and those who work for it pay less. It would be more equitable if the government had high inheritance taxes but also insurance mechanisms for nursing homes etc.

On a related issue there was an article in the Indo about a 96 year old women having a problem with her roof and a Facebook campaign to get it fixed, as "she didn't want to burden her family". Yet some collection of people within that family will inherit that house, one inside the canals in Dublin which might be worth quite a bit, and will inherit in the next few years one imagines, but they wouldn't fix the roof but found a kind (or perhaps foolish) person to do it as a pro bono.
 
But Ardmacha, that money has already been taxed!

Do you think it's fair that someone can earn €100, lose 55% of it in taxation, end up with €45, and have another €15 taken if they give the money to their son or daughter?

The State taking 70% of someone's money!!!
 
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