How a Small Loan of a Million Dollars Change My Life

A little bit Investing, A little bit personal

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My father worked in Cadbury's for 40 years.

As a type 1 diabetic, I'm not sure working in a chocolate factory all his life was part of his master plan, but as a young man looking to put food on the table for a family of 5, it was where he ended up.

One, two, skip a few… the young family wasn't so young anymore, and retirement loomed.

I knew he was expecting a small payout as part of his retirement, so one night, I asked him. 'What's the plan with the money'?

Surprisingly, he replied, "I was thinking of just giving it to the three of ye."

This has always stuck with me.

Here is a man who has done shift work in a factory for 40 years, and when he finally gets a well-deserved payout, his first instinct is to give it away.

His initial reaction couldn't possibly be to buy himself something nice or splurge. He's never done that, so why on earth would he start now?

When you have lived all your life being frugal, it's hard to switch to a new setting.

My father is not the exception here. I see clients struggle with this all the time. We see tons of information around the 'perfect withdrawal rates in retirement' and 'the potential of running out of money in retirement due to longevity risk' but far less about the psychological transition from saving to spending in retirement.

Don't Play it TOO Safe

Let's not get too morbid here, but there is no point being the richest corpse in the graveyard.

It may be easy for me to say given that I am younger and retirement is less of a 'reality' just yet, but at a certain point, your focus has to change from 'How do I build wealth' to 'What can I get out of this wealth.'

I have met very few who have managed to do this; it's a tricky switch to flip.

We all have a tendency to veer towards the worst-case scenario. And with an unknowable time horizon, it's normal to worry that you might run out of money before you die.

So we just stay in savings mode.

However, the data suggests that we are overly cautious.

In his book 'Die with Zero' Bill Perkins states,

So, if retirees spend only 12% of their accounts over a 20-year period, surely they eventually start to spend more freely before they run out of time?

Not quite. Literally, the opposite is true. 

So you work all your life in pursuit of the carrot at the end of the stick… and when you finally get the carrot, you decide you're not hungry, and you give it to someone else?

Surely there is a better way.

Give If You Can 

Now, let me seamlessly transition back to the story about my father.

After some back and forth with my dad over various reasons I didn't want his money, he broke me.

His initial argument of 'sure, what do I want it for' didn't cut it for me, but eventually, he opened up.

In short, he said he had no interest in keeping it until he 'popped his clogs' and we could put it to 'better use'. He never wanted for anything, and if he could give us a start in life, that would mean a million times more than any new car.

So I took it. Yes, I robbed a man of his only lump sum payout after a lifetime of effort.

And that small loan of 1 Million Dollars changed my life…

Okay….. it wasn't DJT levels of wealth; maybe it was 99% less than that. But the more I think about it, the more I am convinced - that money changed my life

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I was working in Dublin at the time, and despite having a decent-paying job, I wasn't really getting far on the savings front. This money gave me the margin of safety I needed to take a chance.

So, with it, I moved to the Cayman Islands, safe in the knowledge that I could cover a few months' rent if I didn't end up in the job I wanted.

It's hard to imagine I would have made that move without it. And as I look back, that one move changed the trajectory of my life for the better.

The point of this long and personal story isn't to highlight what a horrible son I am. It's to highlight how 'lifetime giving' in retirement can be so much more impactful than leaving 'assets after death.'

As Mike Piper points out in his book 'More Than Enough'

“The average age of someone inheriting money is 51, and over 25% of people who inherit assets are over 61”. 

Don't get me wrong; any inheritance can have a powerful impact on retirement security no matter when you receive it. But at that life stage, our trajectory is often well-established. Meanwhile, a smaller gift earlier in life could have a more significant impact by helping a family member find their feet in the world. It could make all the difference.

And, without a doubt, seeing your money put to good use during your lifetime beats having it pass after your death.

To be clear, this isn't some petition to get parents to sign over their entire retirement savings to their money-hungry kids. Nor is everyone lucky enough to have this problem. It's simply food for thought for those with room to be flexible.

There seems to be this preset assumption: ' I must remain frugal and save in retirement, then I can pass on any assets I have to the next generation once I die.'

But doing what you have always done is the easy option. It can't just be about endlessly building a bigger and bigger pot.

To what end?

Money as a priority from a young age is almost mandatory. You are starting out in the world and need to earn to achieve many of the initial goals in your life. I get it; I'm there myself (houses in Cayman ain't cheap). But after a certain point, without realising it, the utility of money will diminish for many.

However, without solid convictions about what you want from life, you will always default to just collecting more money. 

To be fair, this is understandable. Money is quantifiable, which means it's easy to gamify. That makes it incredibly tempting to revert to money as a measure of success when you don't have other easily measured metrics.

So, the first step? Take some time to identify some new metrics of success.

• Firstly, If you're in a strong position regarding retirement savings, allow yourself to live a little. Be flexible. Start actively thinking about the life experiences you'd like to have and the number of times you'd like to have them. Think about what you really want out of this life in terms of meaningful and memorable experiences and use some of these excess savings to achieve them. These are hard questions, but the answers could dictate the direction and success of your 'golden years.'

• Secondly, If you have it, start to think about giving smaller gifts earlier when your loved ones are getting started. Maybe help them with a downpayment or help them start a new venture when they are finding their financial footing.

As Adam Chapman details below, you never know what this' lifetime giving' could lead to.

The sooner you start thinking about this, the better. I promise, if you're in retirement, all the things on your 'bucket list' will be a lot less fun in 10 years.

Go on a holiday with all your family. Spend it on matching full-body tattoos for all I care. Exactly what you do is not the point. Each to their own.

Just don't take the easy option and revert back to stockpiling because it's what you've always done. You are literally running out of time.

In short, if you can, be more like my father. A stoic man, who has influenced my life in ways he would never dare take credit for.

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