Should You Preserve Your Wealth for Future Generations?

Everyone goes into meetings with their financial advisors with a unique set of circumstances and goals, but there are at least two things that most people have in common. They want to grow their wealth as much as they can, and they want to make sure their loved ones are protected. Many investment conversations and estate planning conversations that clients have with their advisors revolve around ways to hold onto as much money as possible and pass it on to future generations after death. 

Because the idea of dying with little or no money in their estate sounds like a worst-case scenario to many people, the “die with zero” philosophy has gotten a lot of attention in the last few years. It’s the brainchild of hedge fund manager Bill Perkins, who published Die with Zero: Getting All You Can from Your Money and Your Life in 2020. The idea is that you should spend your money on experiences and pass it to future generations and charity while you’re still alive, rather than trying to preserve your wealth until your death. 

What does “dying with zero” look like?

Perkins lays out nine distinct money rules in his book. His general philosophy is that prioritizing life experiences is more fulfilling than prioritizing material things and money in the bank, so using money to create those experiences is the best way to make the most out of our lives. Here are a few of the key points of his “die with zero” philosophy:

• Spending all your money before you die allows you to maximize your life energy and really enjoy your life. And because everyone’s physical health declines over time, your money’s “peak utility” as a tool to pay for life experiences declines over time too. You’ll get more enjoyment out of every dollar at age 30 than you will at 50, and more enjoyment out of every dollar at 50 than at 70. Memories of meaningful experiences will stay with you and continue to make your life feel fulfilling until the end. 
• Striking the right balance between spending now and saving for the future is important. Perkins advocates breaking into your nest egg sometime between 45 and 60. This moment would be your “net worth peak,” when your net worth is the highest it will ever be. Then start spending money on meaningful, memorable experiences while you’re still young and hopefully healthy enough to really enjoy them. 
• Give away money to future generations and/or charity during your lifetime instead of preserving money to bequeath as an inheritance when you’re gone. Make these gifts when they would be most impactful for the recipient. 
• Aim to die with as close to zero money as possible. Perkins suggests consulting with your doctors to evaluate your biological age and mortality estimates, and calculating how much money you’ll need to survive for the rest of your expected lifetime. In theory, your money should start to run out just as you reach the end of your life.  

So, should you preserve your wealth for future generations, or die with zero? Consider these five questions.  

Does the idea of spending more money on memorable experiences instead of preserving your wealth resonate with you? Shifting your savings and estate planning goals is something that you have to talk to your financial advisors about for specific guidance; the “die with zero” strategy just isn’t going to be a good fit for a lot of people, for a lot of reasons. 

So it’s important to look down the road and anticipate the benefits and challenges of this approach to financial planning. These are just some of the many questions to consider, both before and during your conversations with your advisors. 

1. What are my goals for the remaining years of my life?

What experiences do you still want to have in your life? Can you afford both the time and money to enjoy them in a meaningful way, while continuing to grow your wealth? Or would you need to let go of the idea of continuously growing your wealth to pursue those experiences?

For example, if you’ve always dreamed of traveling the world for a year, the “die with zero” philosophy might motivate you to retire early and start spending some of your savings so you can have that experience while you’re young enough to do it the way you want. But if you’re already living a fulfilling life, or have more financially modest goals, your existing plans might continue to work for you. 

2. When would an inheritance be most useful for future generations? 

A 25-year-old relative might prefer receiving $100,000 now over inheriting $200,000 in 20 years. By the time they’re 45, they’ll hopefully be financially stable. The money might be useful but not life-changing. But at 25, $100,000 could be the down payment for their first home or the seed money for a new business. Or they could invest their inheritance early and give it decades to grow. 

Depending on the ages and circumstances of the members of your family’s younger generations, it might make more sense to help them start establishing themselves now instead of preserving your wealth until they’re already established. On the other hand, if you have very young grandchildren or other relatives who are still minors, it might make more sense to preserve money in accounts where it can keep growing interest and pass it as an inheritance after your death. 

3. How would my investment, tax and estate plans be affected? 

Any change to your financial planning strategy will have a ripple effect that touches the other plans you and your advisors have created. Estate planning won’t necessarily get simpler, even if you plan to die with no money; you’ll still need tax-advantaged plans in place to preserve and transfer assets to your heirs in case you die unexpectedly. There are a number of tax considerations you’ll want to think about too, including gift taxes and estate taxes. 

4. How would I make sure not to run out of money? 

This is naturally one of the biggest sticking points for anyone who might consider trying to die with no money: What if you run out too soon? Buying an annuity is one strategy Perkins suggests. Your financial advisors are the best resource for helping you create a financial safety net to ensure you’re comfortable for as long as you live. 

5. How would this strategy affect my mental health and relationships?

Everyone has a unique and deeply personal relationship with money. If you’re someone who has a lot of anxiety around running out of money, spending down your estate earlier in life might make your final years unnecessarily stressful. 

Changing your strategy for passing money to future generations might also affect family dynamics, too. What would happen if you elected to make a large gift to one child now, but not make a gift to their siblings? How’s it going to affect your relationships with younger relatives if you disagree with the way they spend the money you give them? These are just a few of the things to think about seriously before making any changes to your existing plans.  

Don’t wrestle with big financial planning decisions alone. Sachetta, LLC’s financial and estate planning advisors are here to help clients evaluate all their options. We want to help you make the financial decisions that allow you to live a fulfilling life now, and set up your family’s future generation for that same success. Contact us today.

Joseph Sachetta, CFP®, CPA/PFS, MBA, MST For over 40 years, Joe has worked in finance and accounting. He is a Certified Financial Planner™ professional, and a Certified Public Accountant. Joe’s passion lies with helping his clients strike a balance between living for today and saving for tomorrow.