If You’re Under 50, You Might Not Need To Save for Retirement
By: Rocco Pendola
Tags: Saving, Retirement, Personal Finance, Inheritance, Money

The other day my Mother gave me an update on what houses in my parents’ neighborhood have been going for. Based on this rough assessment, the house they live in would likely fetch around $150,000 today.

My parents bought their house for $85,000 about 28 years ago.

If you picked up their house, slapped on a Victorian facade, and moved it to the San Francisco neighborhood where I spent the last few days, it would go for well over a million dollars. In pretty much any neighborhood in The City, you’re looking at $1,000,000. In most parts of California, you could probably ask and get no less than half a million.

Location, location, location!

The house my parents live in, along with what I think is a modest amount of cash. That’s my inheritance.

I’m probably looking at approximately $200,000 to $250,000 total.

Here’s the upside — I have an insanely low cost of living that I expect to continue to go lower.

I live in Los Angeles. I spend relatively very little on rent. I have a modest car. As my income continues to increase (fingers crossed!), these expenses look to trend even lower.

I’m in a solid situation. I look at $100,000 or $200,000 the way other people — with higher costs of living — might look at a million dollars.

This is the one thing we don’t fully comprehend about having a low cost of living.

We riff condescendingly about inflation. We platitude about making our money go further. But we don’t consider how a low cost of living changes how we value money and decisions such as whether or not to be in the stock market:

If you make the decision to get out of the stock market, it should have very little, if anything, to do with making or losing money. It should have everything to do with a realization that you can meet your needs — and then some — with consistent cash flow and a focus on using money to essentially love yourself and love the ones you’re with.

Which leads directly to the touchy subject of expecting or counting on or considering however you choose to consider your inheritance (assuming you’re going to get one).

As I detailed in a November 2020, Making of a Millionaire article, young people stand to inherit a considerable amount of cash over the next several decades.

Call me a callous tool, but this absolutely figures into my financial planning:

…I have a pretty good idea how much money I stand to inherit when my parents pass away. My dad just turned 86. My mom is 73. Here’s hoping the inevitable doesn’t happen for a good 20 or 30 years (knock on wood!). But it’s going to happen. Even if I don’t run around thinking about it every day, the relative certainty of receiving what will probably be somewhere in the low-six figures plays into my long-term financial planning. It has to. I’d be stupid to ignore it.

The more I think about it, the more I think if you’re in a situation similar to or better than mine, you’d be really stupid to not factor an inheritance into your financial planning.

In fact, if you’re under 50, it could be one of the cornerstones of your personal financial situation as you enter relative old age. It’s another reason why young people have the modern luxury of eschewing the notion of traditional retirement.

In other words, you don’t have to save for retirement. You save for living.

This is not to say you run reckless with your money because you know you’re getting a windfall at some still unknown date in the future. That would be really, really stupid.

However, it is to say it’s perfectly okay to acknowledge that the money you’ll likely receive can, probably will, and definitely should have a material impact on your life and future, even if it simply means it lends a hand in facilitating the future you envision.

You get a lot of backlash when you talk like this. When you factor in the money your parents or some other relative or friend will leave you.

People love to say things like, what if your parents blow through their money or what if they get really unhealthy and need it for medical expenses or what if the housing market collapses?

They’ll say anything to detract from what is one legitimate component of many of our future financial landscapes and if you believe in such a thing, retirements.

Yet, they go rhetorically crazy on you when you say you prefer to keep your money in cash rather than the stock market.

It doesn’t make any sense. Not to me, at least.

Counting on inheriting a house, cash, or anything else comes with risk. But it’s no different than any of the other risks we consider when we look ahead to how money — or a lack thereof — will shape our futures.

I wrote about risk in a recent Medium article. It’s relevant to the matter at hand:

Simply put, you must manage risk no matter the strategy you adopt. Because no matter the strategy you adopt, there will be risk. You can’t tell me my risk is worse than yours. Just as I can’t tell you my risk is less risky than yours. It’s almost wholly subjective unless your strategy is blindly day trading stocks or something. Risk isn’t some objective thing we compete over.

I’m willing to forgo aggressive investing in the stock market. I opt for a cash-focused strategy alongside a low cost of living.

This alone affords me the life I want to live now and intend to continue to live as I grow older. That’s enjoying each day and traveling with my amazing partner while ensuring my 17-year old daughter morphs into a north of decent adult human.

I’m also counting on a low six-figure windfall when my parents pass. Because I live simply (but still like nice things!), one or two hundred grand will go incredibly far for me 10 or 20 years down the line. I tend to label it a wildcard, but one I am quite certain will be there to enhance my situation with money at what will likely be a pivotal time in my life.

Not an easy subject to talk about. It’s even taboo in some circles. However, it’s important to take it into account because assessing your anticipated inheritance does and absolutely should influence the money decisions you make while your parents are still alive.

If you choose to ignore this element, you’re not budgeting, saving, and spending as effectively and smartly as you otherwise could.