Taxes, inheritance and financial planning
A few years ago, my husband and I inherited an estate from his father. Before dad passed we had worked with him to get his stocks in order. Many of the certificates he held were no longer valid and it took the help of a professional stockbroker to sort out the different acquisitions and payouts on his portfolio.
Because inheritance is taxed on original value, it makes sense to understand what the original costs of these stocks were and I encourage people to talk about this long before a threat of death or sickness impairs a discussion.
We went to a financial planner and discussed what was important to us and opted for a diversified plan including stocks, annuities, mutual funds, a money market account and Roth Individual Retirement Accounts as well as bonds, CDs and cash.
Our retirement planner convinced us to put some of our money into an annuity because it was guaranteed and we could borrow against it as collateral if we wanted. The same was true of our money market account but that money was instantly available if we wanted it, and it earned a higher interest rate than our normal checking accounts.
Last year our stocks took a pretty big hit but they are starting to come back. Technically we have another 30 years before we should be looking at retirement so I am trying to put my head in the sand and not look.
Underfunded retirements is the boon in baby boomers
I remember on our first visit, after going through some of our portfolio, we asked our financial planner if he thought we could retire, and he laughed at us, and told us if we wanted to move to a third world country like Thailand, we could, but if we wanted to stay stateside, we needed to either change our lifestyle or invest for at least another five years before we could retire, or both.
He told us this story about how sad it was that a lot of his customers would come in at the end of their working careers and say to him, “Ok I am ready to retire”. After reviewing their assets, he would find out that all they had was their house and maybe $45,000 in the bank.
If it was a couple with monthly expenses running about $3500.00, and their house tax was $2000.00 it was costing them $45000 for one year, it didn’t take long for them to see how severely underfunded their retirement plan was.
Depression Era children are frugal fannies
My 92 year old grandmother sometimes reminisces about when my grandfather was alive and what a tight wad he was. They ran a mom and pop grocery store in their town of Longmeadow, MA. She was never on the books as collecting a check though she worked just as hard as he did. Today she gets ½ of his social security as she never remarried and never qualified on her own. She has lived off his stock investments, mostly and a bit of inheritance money she received.
Grandpa died over 35 years ago, but gram still has her house and her car. Since grandpa died, she has been to the west coast, and Europe. She enjoys concerts and lives a decent life although she is frugal. I tell her it was a good thing grandpa was a cheap skate otherwise, maybe her golden years, wouldn’t have been so golden. She laughs and tells me it wasn’t because grandpa was a cheap skate, it was because she was so frugal!