<p>OK, it’s impressive that you generally get windfalls of 6 or 7 figures most years. That’s outside my realm of experience–guess we all live in very different worlds. For me, the windfalls I’ve gotten in the past are 3, 4 or if we’re very lucky 5 digits.</p>
<p>I’ve been pondering this. At what point does one draw a line and say that their medical care, elder care, etc. is sufficiently funded? Would, say, 500k fund a worst case lingering illness? For a couple? Should people hoard these windfalls for disasters that may never occur, or set aside some and spend some, or be generous with some?</p>
<p>And what portion of a windfall should a single generation use, versus future generations? How many generations should be provided for?</p>
<p>It may depend on many factors–what resources/assets are available, needs of the various generations, family history, community support, etc.</p>
<p>It can be and IS tough figuring out how to decide between current vs future generations.</p>
<p>As a practical matter, how helpful is it to give/save for future generations if there are not enough resources retained to care for CURRENT needs?</p>
<p>Ideally, the next generation gets enough of a good start to not need their parents’ resources.</p>
<p>Unfortunately, many of us don’t live in ideal worlds. Without some significant financial help, many cannot return to live in HI & afford a place of their own to purchase. This is my reality in our state. We have given our kids great starts, but our housing prices lead the nation.</p>
<p>I realize I’m pretty conservative. All it takes is losing everything, so I’ll spare you all that. With a windfall:</p>
<p>First, make sure you have 0 debt. No mortgage, no credit cards, no car bills.
Second, make sure you have liquid cash to survive an emergency. Some people only keep 3 months, I keep 12.
Third, get those college funds funded
Fourth, put as much as you can into retirement. You can’t borrow retirement funds and your kids will thank you if you remain financially solvent
Fifth, build wealth
Sixth - splurge on what makes you happy</p>
<p>You should be figuring out when you want to retire and how much you need to retire. The safe withdrawal rate of your nest egg should not exceed 4% if you want your money to last for 30 years. You have to invest to get that withdrawal rate plus inflation.</p>
<p>In there be generous with those who are less fortunate, with your money and time. We also set our kids up with ira’s, and I’ll continue to contribute the max until they are working f/t and able to do it themselves. Imagine how compound interest could really work in their favor. </p>
<p>As you make more money don’t increase your lifestyle, increase your savings.</p>
<p>I hope that those of you who are thinking of helping their kids (home buying, iras etc) are seriously considering how much it takes to retire, the impact of inflation, illnesses and the possibility of lower returns in the future due to things such as boomers pulling money out of the market.</p>
<p>Central Bankers seem to be dumping it in faster than the Boomers are taking it out.</p>
<p>It is fascinating to read everyone different prespectives. Thanks and please keep them coming. </p>
<p>I agree that it’s important to eliminate debt and be sure to have a sufficient emergency fund. I also agree that it’s likely future returns will be significantly lower than current returns.</p>
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<p>I’ve found that spending a lot of money doesn’t make me happy. It may bring pleasure but not happiness. But I imagine that it may bring happiness to some if it can be sustained.</p>
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<p>This stuff goes in cycles.</p>
<p>I’m sure that returns in the Great Depression were awful (outside of precious metals mining companies) but they got better, then worse, then better, then worse.</p>
<p>Central bankers may be doing that but it won’t last forever</p>
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<p>I agree. They will stop, reverse the process and then start it back up in the future. It goes in cycles.</p>
<p>bc - splurge to me means hubby buys a guitar, or we go on a vacation. I don’t think it’s realistic to never do anything you find enjoyable whether it’s seeing a show, taking a trip, just doing something for yourself. I’m the type that struggles with that so if I plan it, I’ll do it.</p>
<p>I also believe children will be more grateful if you are prepared to pay for your own care in your retirement than making sure they have a house or inheritance.</p>
<p>Eyemamom, with a four percent withdrawal, do you mean that the total funds x 0.04 = annual income from savings? So say you wanted 50k per year. That would require 1.25 million? Now you have to keep that 1/2 million or 1 million around for a big bucks illness too. Also you would want to save some to help fund kids education, retirement, etc. What sort of windfall are we talking about that would allow economic stimulus aka expenditure of fun money? That would allow for generosity towards non-family?</p>
<p>(mind boggling numbers for most of us…)</p>
<p>There are studies that show that those who have less donate more, for whatever reason. The things I’ve read suggest 4% withdrawal is calculated from the corpus or principal. 4% of the income would be much, much less, of course. This assumes there will be SOME growth of the principal to keep it from disappearing too fast.</p>
<p>Yes, 6-7 figure windfalls are pretty mind-boggling for most of us. Wish we were more like BCeagle, who seems to get them regularly.</p>
<p>With a windfall-- I’d buy a piece of property.<br>
A nice place where we could retire.<br>
Grow lots of fruit and vegs.</p>
<p>One problem with windfalls, if you actually realize them - is that you can wind up with a very large tax liability. It can make the windfall feel a lot smaller.</p>
<p>treetop - yes you’d need 1.25 mil to get $50k out to live. </p>
<p>Education fund should be separate from that, this is retirement only, not emergency, not education. And with the 4% withdrawal rate there will be winners and losers - some will end up with more money over time, a much smaller percentage will run out of money before 30 years is up. </p>
<p>But don’t forget at 65 you will get SS so add that number into your figure and subtract it from that 50k. So if you get say 1,000/mo in ss then you need to get 38k out of your investments.</p>
<p>It’s why I don’t know if people realize how much $ they need to retire, and maybe buying houses or putting kids education ahead of retirement is necessarily a good idea. </p>
<p>Compound interest is your friend. There are many calculators out there and many examples of how a smaller amount invested over a long period of time ends up making more than a larger amount later.</p>
<p>^^exactly. However I assume that those of us who talk about funding their childrens’ iras etc have many millions saved away.</p>
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<p>How do you do this in a tax-efficient way?</p>