We have all heard of the famous English idiomatic proverb “You can’t have your cake and eat it too”. It is an obvious impossibility. The proverb’s meaning is similar to the phrases “you can’t have it both ways” and “you can’t have the best of both worlds.” However, there are instances in financial planning where this can be achieved.
As an expression of love, many people want to leave assets behind for their descendants – and they want to leave as much of that as possible. There comes the contradiction. If they want to leave as much as possible for their descendants, it means they have to scrimp on themselves during their retirement years. For every dollar that they spend, it means a dollar less that they would leave behind. In other words, if want to leave their cakes for their descendants, they themselves cannot eat them. They may try to mitigate this by investing their money. However, for those who are older, they are likely be less risk tolerant, thus only earning rates of return that barely beats inflation.
The good news is that it is possible to have your cake and eat it too! Let’s say there is a retiree by the name of Mr Tan who has amassed $1 million. He can set aside $400,000 and use the remaining $600,000 to enjoy his retirement, without having to worry that his descendants would have $600,000 less to inherit. Upon his demise, the $400,000 that he has set aside would pay out $1 million to his descendants. Yes, it’s $1 million, not $400,000. Has Mr Tan just had his cake and eaten it at the same time?
The figures are for illustration purposes. You may have more or less than $1 million. Speak to our team to see if we can help you design this wealth creation strategy for you and your loved ones.
Disclaimer: All information are for informational purposes only and should not be relied upon as financial advice.