Generational Money Investing

If you are retired and taken a close look at your investments and your income needs you may find you have more money than you will ever spend.

If you don’t know if your retirement money will be enough for you then we should meet and discuss this.

Many of my clients are on the conservative side of investing and their portfolios reflect that. It certainly makes sense not to take on unnecessary investment risk when there’s is no need to chase higher returns.

But, what if you will never need some of the money in your portfolio? Ideally, you would have run some “what-if” scenarios to confirm that even in the worst case you will never outlive your retirement nest egg.

In that case, I think it makes sense to view the money you will never spend with an eye on the distant future. I’m saying that even though you may be 70 years old, you should invest for a 40-year time horizon.

This is your legacy money. Why not try for maximum long-term growth?

The difference in growth with an all-stock portfolio vs. 50/50 stock/bond could be huge! This is more true these days with bond interest rates being so ridiculously low.

Take a look at the HUGE difference returns makes over time.

I’m assuming $100,000 is invested and not accounting for any tax.

20 years                         30 years                          40 years

4%       $219,112                 $324,339                  $480,102
6%       $320,713                 $574,339               $1,028,571
8%       $466,095             $1,006,265              $2,072,452
10%      $672,479             $1,744,940              $4,525,925

Let me review why I am looking at 40 years for a 70-year-old. If you have money you will never spend, that money will be inherited by your children. They can then add that to their retirement nest egg. If your children are in their 40’s, they probably have a 50-year joint life expectancy. Therefore, wouldn’t that be great if you took a more aggressive approach and gave them that much more money.

I’ll give you another example. I have three kids in college and I don’t expect them to be married or have kids for maybe a decade. Despite this, I have money I didn’t use leftover in their 529 College Savings Plans. I have it invested as aggressively as possible and add to it with money I won’t need every month.

It could easily be 25-30 years until I have a college-age grandchild.  Be allocating some aggressive investments in that direction that money could grow to a great six-figure grandchild college fund!

Most people don’t think past what they are doing today or this week. As a planner, I can’t help but look far, far into the future when I think about what’s best.

If you think you may have money that you won’t need during retirement then we should talk about how it might be invested for higher potential growth.

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