Do you cut back on 401k/IRA saving if you expect to inherit millions?

[Anonymous]

If you can reasonably expect to inherit a sizable amount by your normal retirement age, and you’ve already accumulated “enough” in your tax advantaged retirement accounts, would it make sense to cut back on the aggressive 401k saving and enjoy the money while you’re young instead? Say you have 1M in your 401k at 40, and will probably get 3–5M when your parents are gone. Maybe only contribute up to the 401k match instead of max it out? I don’t want to live a life of deprivation when I’m young and able bodied only to come in to a fortune when I’m too old to enjoy it.

[Anonymous]

No way. That is even more incentive to save tax free.

[Anonymous]

I don't have this "problem" but to my mind it's dependent on what you make and what you spend (and to a lesser extent, what your match is). My feeling is if you have $1M at 40, you're already at a high income and you shouldn't necessarily need to cut back $1k/month to avoid a "life of deprivation." But if your 401k is really high because you get $20k/year from your employer, and you actually don't make that much, then cutting back to the max might be fine, because you'll end up with $5M+ with those numbers regardless.

But if you already make $250k+, I would not forego the tax savings and focus on spending more on the assumption that your retirement is taken care of 20 years from now assuming your parents don't have anything happen to burn through their estate. A lot can happen.

[Anonymous]

Anonymous wrote:I don't have this "problem" but to my mind it's dependent on what you make and what you spend (and to a lesser extent, what your match is). My feeling is if you have $1M at 40, you're already at a high income and you shouldn't necessarily need to cut back $1k/month to avoid a "life of deprivation." But if your 401k is really high because you get $20k/year from your employer, and you actually don't make that much, then cutting back to the match might be fine, because you'll end up with $5M+ with those numbers regardless.

But if you already make $250k+, I would not forego the tax savings and focus on spending more on the assumption that your retirement is taken care of 20 years from now assuming your parents don't have anything happen to burn through their estate. A lot can happen.

[Anonymous]

No

[Anonymous]

If youre an an only child, sure. Enjoy life whilr you’re young.

[Anonymous]

Nope. You don't know what can happen.

[Anonymous]

No, that’s idiotic. It’s the best tax loophole out there.

[Anonymous]

It may depend upon the nature of the assets you expect to inherit.

For example, if you expect that your parents estate will mostly entail tax deferred IRAs, then perhaps you have a bit less incentive to pile up tons more tax deferred assets of your own (I.e. maybe just contribute to the match). To avoid an even bigger Required Minimum Distribution coincidence, etc.

[Anonymous]

Anonymous wrote:If you can reasonably expect to inherit a sizable amount by your normal retirement age, and you’ve already accumulated “enough” in your tax advantaged retirement accounts, would it make sense to cut back on the aggressive 401k saving and enjoy the money while you’re young instead? Say you have 1M in your 401k at 40, and will probably get 3–5M when your parents are gone. Maybe only contribute up to the 401k match instead of max it out? I don’t want to live a life of deprivation when I’m young and able bodied only to come in to a fortune when I’m too old to enjoy it.

Probably too late now, but if I were in this situation, I'd have refinanced my home to the hilt when rates were low and be spending down that money now while it sits in a MM account while at the same time comfortably contribute to retirement accounts. I can pay off my large mortgage with my inheritance or a bailout from mom and dad down the road.

[Anonymous]

Anonymous wrote:No, that’s idiotic. It’s the best tax loophole out there.

This. So much so that I still out in a Roth contribution each year even after inheriting a large amount of retirement accounts.

[Anonymous]

I’m not rich, don’t expect to inherit from rich relatives, and have no financial expertise, so consider this opinion in light of all that.

I think that until you actually inherit the money, you shouldn’t count on it. They might change their will. They might lose it in bad investments. They might need the money or decide they want to enjoy it while they’re able. It seems to me that if they wanted you to be able to count on getting money, they would have established a trust. Short of that, it’s theirs to dispose of as they wish, and there’s no guarantee that will include you.

[Anonymous]

I wouldn’t count on that money until it’s mine.

Also, are there tax implications of that inheritance which might make the amount much smaller than you think?

Until I get that money and know how much of it I can keep, I wouldn’t decelerate on savings plan.

[Anonymous]

I'm in a similar situation- the thing about having to drain down an inherited IRA in 10 yrs is a game changer. A lot of people will do Roth conversions in retirement when income is low, but I'm assuming I will probably be having inherited IRA distributions to deal with at that time instead, plus my spouse will also have a pension payout going. So I am anticipating a high future tax burden. I am still contributing the max, but am putting all of it into Roth accounts and am doing Roth conversions of existing money over the next several years while the trump tax cuts are still available.

[Anonymous]

I feel like no one answering here is actually in a true position of inheriting real money. My parents are roughly 20M net worth and it will only grow as it is invested. They couldn’t spend down the principle if they tried. Of course, I am counting on inheriting a large amount in my due time, it would be foolish to plan otherwise. We save the minimum in retirement but otherwise aren’t worried about it in the slightest. We have other worries but money isn’t one of them. I know we will be just fine in retirement.