[quote=AN] I don’t see how ER can condemn debt and stating people who yo-yo by using debt. While, he himself, took major risk and cash out his 401k to start his business. I too have seen people did exactly what he did, but wasn’t as lucky and their business crash and burn. So, just because you pay things for cash doesn’t mean the risk is any different. Sometimes, it’s even greater, because you have nothing left to try again.
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No, I’m not “condemning” anyone at all. I’m just throwing out the other side of the argument that it’s foolish to pay off one’s home or avoid debt.
Yes, I took a risky move cashing out part of my 401K to finance my business and buy some investment properties (also without leverage). I’m certainly NOT advocating that for anyone. It worked out for me.
I wouldn’t have done it if I was older or married or had kids. We all have different levels of risk and comfort with leverage.
What works for one person won’t for another. And I think that is what this thread shows. We can agree to disagree. There isn’t any need for anyone to justify the merits of using leverage.
[quote=UCGal]
AN – will you adopt me? $5M is a lot to leave your kids.
My kids will get a paid for college education… and our paid for house. We are *NOT* budgeting in an inheritance. But we also aren’t going to be a burden to them. They will need careers, same as we did.
We’re planning on using our nest egg to live. If the economy tanks for longer/deeper than historically has happened, then they might not get our house – since that’s our plan B. (Sell the house and live off the proceeds.) If we die younger than age 100 – they may get some inheritance…
Hopefully a 3% withdrawal rate should last me 40-50 years. Compounding and all that.
I’m also not of the mindset that you go 100% cash/CDs… not with longevity the way it is. You need to come up with an asset allocation that includes equities/bonds/cash/real estate/precious metals/whatever… pick your percentages based on your risk tolerance. but putting 100% in one asset allocation (cash) is a sure way to see a serious decline in your nest egg.[/quote]
You sound like us UCGal. We don’t feel a need to leave millions to our kids. First of all, who knows how long you will live to. These days it’s not uncommon to live until 80’s 90’s or even 100. So I don’t think it makes sense to really worry about leaving adult kids a huge sum of money.
If my estate happens to have millions of dollars left in it after we are gone I’ll be happy. But I wouldn’t feel guilty if I spent every last dollar in my retirement by the time my wife and I pass. Hopefully by then our kids will also be senior citizens with their own families. And I won’t feel obligated to leave millions to grandkids.
More likely, my kids will inherit our real estate portfolio (rental properties) and primary house that we have at the time we die. I’d like to think they wouldn’t sell and just keep them as they spin off dependable cash flow each and every month.
I think the biggest gift I can give my kids is to fully cover any University, and post grad education they have. MBA, law school, medical school, etc. I hated the feeling of graduating with a huge college tuition bill so I think that’s the best gift you can give your kid to start off life debt free after college.
I also agree with UCGal that 100% in any investment class isn’t the way to go in retirement. While I agree that no way I’d want too much in the stock market at all, I’d probably want to have some exposure (not much). But I think my favorite will still be non-leveraged real estate that is paid off and generating cash flow.
