March 13, 2016

How To Die Penniless

Lets say theoretically that you're single with no kids.   Does it make sense to die with a pile of money in the bank or wouldn't you rather enjoy spending that money while you're still alive?     I think optimally you should try to die broke after spending every last dime.   But thats easier said than done. If you plan wrong and run out of money you'll spend your retirement broke.   Thats no fun.     If you plan wrong and die with money then you'd miss the enjoyment of having spent it when you're alive.  So how do you die penniless?

You can accomplish the goal mostly by buying an annuity.    On the day you retire, you could take 100% of your assets and then use that money to buy a single life fixed income annuity with a cost of living adjustment.   You're basically broke, but you've got a large check coming every month which you can squander on a month by month basis until you pass.

It would be easier to rent a house instead of owning.    Its easier to rent in general too.   This plan will maximize your monthly spend so you can rent whatever you want.    Renting will also give you a lot of flexibility to live wherever you want.    Course the downside with renting is that its not permanent and your landlord can stop renting to you unexpectedly (with proper notice).    And if you're elderly then moving with little notice is likely to be a big pain.   For that reason owning a house may be preferred.

If you own a house you could mortgage it with a reverse mortgage.   That will allow you to tap the equity in the house and convert it into fixed income and then leave virtually zero equity when you pass.   This however may not work out if you pass early.   You could have equity left in a home even with a reverse mortgage if you pass shortly after taking out the loan.    Instead you could do a cash out refinance on the property for the highest LTV you can and then add a HELOC on top of that.   You could use HELOC to drain as much equity as possible from the property on an ongoing basis.   You likely can't get 100% out but after costs of sale, and settling other debts you could get close.

You don't want to have $0 in the bank since you'll need some money to operate your life.   But you can negate that equity with some ongoing debt.   You can use credit cards to float some debt.   If you use a card to pay all your bills you'll have up to a full months expenses floating on credit at any given time.

If you want to have $5-10k in the bank at any given time to pay bills and live your life, then you might get one of those 0% promo deals for $10k and then float that $10k all the time.   Shortly before the promo time period is up, you could transfer that $10k debt to another 0% promo deal.

You can prepay your funeral costs.

You can lease a car instead of owning.   Leasing isn't a great financial deal usually, but in this case it will let you drive a nice car for cheap and minimize equity if when you die.

This isn't Brewsters Millions.   I'm not necessarily advocating you squander all your money or spend it needlessly just to spend it.     Give away unneeded money while you're alive alive.   Most charities would like to have your money today instead of tomorrow.   You'll get the satisfaction of being around to see your money doing good.   Plus you can even get a tax deduction for giving it now too.     You can also do a charitable gift annuity which will both help your favorite charity and provide a fixed income stream.


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