Monthly Archives: March 2022

In 2008, Grant Sabatier was a 24-year-old with $2.26 in his bank account. Hed been jumping around from job to job, and was ultimately laid off in the great recession. Finally, he was forced to move back in with his parents.

Its a story that rings true even today for many Millennials, who are saddled with massive student debt 2020 graduates borrowed 20% more than the class before, averaging $29,927 a challenging job market, and a global pandemic that has thrown nearly everyone off-course.

But Sabatiers story contains a twist: Five years after his move, at the age of 30, he became a millionaire.

It turns out that the home he returned to also provided him with a source of inspiration. Not long after his return, Sabatier found himself at his parents annual 4th of July picnic in Falls Church, Virginia. Many of the guests were older and the conversation seemed to revolve around retirement.

Listening to this, all he could think was, gosh, Im so far away from that.

Sabatier wasnt wrong. Like many of his generation, hed been buying into the American dream of his parents generation: work hard, study hard, and go to a great college.

He did all of that. So, he assumed that this hard work at school would translate into a successful career it didnt.

Welcome to the real world, his dad had told him.

Traditional estimates, from financial firms like Fidelity, recommend saving 10-15% of your income to prepare for retirement.

But this made Sabatier question: How do I even know how much money Im going to need?

The conversation happening at the picnic sent him down the rabbit hole into building a completely new life, and choosing to live differently with my friends and my family, he said.

Interested in the kind of freedom he could achieve by reaching the financial goals required for retirement, Sabatier went about reimagining his American dream and discovered a growing financial movement known as FIRE (financial independence, retire early).

Sabatier now belongs to a new generation of Americans who are viewing retirement as an enduring lifestyle, moving away from the 9-5 grind.

I learned the simple math around financial independence that if you save up enough money, then the interest on that money, whether its invested in stocks or bonds or in real estate, covers your living expenses and more, he explained, so you dont have to work.

He wanted to save a million as quickly as possible.

The FIRE number is the amount you need to live on for the rest of your life. That number depends on several factors, like how much you save, the amount earned in investments, and how much you spend.

To figure out your FIRE number, first calculate your savings, including retirement contributions as well as other investment accounts.

Then, multiply your expected expenses by 25. Finally, try to predict investment returns and savings to see how quickly you can reach your goal. Heres a helpful calculator.

If he could live on $50,000 a year, Sabatier calculated, his FIRE would be $1.25 million.

I started saving 50 percent of my income immediately. I got a crappy apartment and a crappy car, he said.

For Sabatier, a crappy apartment and a crappy car were tradeoffs he was willing to make but, another person may choose a different tradeoff. FIRE has three general levels, depending on how much someone wants to save and the kind of changes theyre willing to make to reach their goals:

FIRE is really just about living life on your own terms, Sabatier explained. Its like a choose-your-own adventure, where your life likely looks different than my life. And the tradeoffs that Im willing to make are likely different from the tradeoffs youre willing to make.

Ultimately, he ended up saving 80% of his income.

But he didnt just lower his costs, he increased his earnings, too. He took on new side hustles, which included constructing websites for lawyers in Chicago. Sabatier did a ton of other things as well everything from cat sitting to helping people move.

He also started investing money smartly. (Research, assuming investments that yield a 6% annually, shows that a 35-year-old today should invest at least $1,050 a month to reach $1 million by age 65.)

The financial freedom he achieved through this hard work, savings, and investment has ultimately led Sabatier to his goal: Having more time to enjoy his life.

At the end of the day, we dont know how long were going to be here, Sabatier said. Why wait to live the life that you want? So how ultimately do you go to live today while still investing in this uncertain future for yourself?

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How Grant Sabatier saved $1 million in 5 years - Freethink

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Every afternoon, Lauren and Steven Keys stroll along the beach near their Florida home with their fellow retirees.

Theyre not octogenarians enjoying the fruit of decades of labor. Theyre not even 65, just beginning their post-retirement life. Lauren is 32 and Steven is 31, and the couple retired at 29.

Every day, I cant believe that this is my life right now, Lauren says.

After graduating from the University of Florida in 2012, the Keyses took a 45-day road trip to Alaska before beginning full-time jobs and grad school. The switch from the freedom of the road to the obligations of work and adulthood was jarring. They began to fear the vacation was a once-in-a-lifetime opportunity before 40-plus years of work. When they discovered the concept of early retirement, it seemed like a path to the life they wanted.

Already frugal, they took an even harder look at their finances and started tracking their net worth. They lived off a small fraction of their combined teacher and marketing salaries, picked up side hustles, downsized to one used car, said no to Starbucks and eating out, and invested the majority of their income. Today, theyve visited every national park, spent six months in Hawaii, and last year, joined TikTok to show others how to live like they do.

Theyre part of a growing online community championing quitting work long before 65, with hashtags like#EarlyRetirement, #RetireBefore30, and #FinancialIndependence. Scrolling through this content can be overwhelming, and its difficult to discern whos a real person with real tips, like the Keyses, who dont charge for their advice, and whos a scammer who just wants your cash (presumably to fund their retirement). But theres no doubt many TikTokers are taken with the idea of leaving the daily grind well ahead of their twilight years.

Long before TikTok, proponents of whats called FIRE (Financial Independence, Retire Early) have pursued early retirement. But on the app, the movement built onaggressive saving, investment, and frugality has found a new audience and come up with new strategies for piling up cash. The generally held advice is you need to reach a net worth 25 times your annual cost of living to theoretically live off your savings for the rest of your life. So, if you make $70,000 after taxes and live off half of it, you would need to reach a net worth around $875,000 to retire early. According to one of the many online FIRE calculators, that could take a little over 16 years to achieve. And thats assuming youll always live off of $35,000 for the rest of your life. If you can bump up your savings and increase your income, you could get there even faster. The methods TikTokers recommend to do that are endless: crypto, affiliate links on Amazon, opening new credit cards, investing in index funds, downgrading your car and home, selling clothes online, monetizing your hobbies, renting out rooms in your house, the list goes on. The key is to not just to save, but continually grow your income and invest the majority of it.

One creator who goes by Dumpster Diving Freegan documents finding everything from coffee and wine to toilet paper and pregnancy tests for free, even though she works in banking. Shes saving for early retirement and reducing waste, she explains in a video.

Some early retirement proponents say they plan to keep working, but only in ways they want to, like Taylor Price, 21, a podcaster, financial influencer, and entrepreneur in Raleigh, North Carolina, with 1.2 million followers, who wants to retire by the time shes 30, but not halt all her projects. The term retirement to me means work is optional, she says. I have a passion to work.

Cherry Tung, 26, a financial coach in Los Angeles, left a career in accounting and now, thanks to good financial planning, qualifies herselfas work optional. She shares financial advice on TikTok and sells a course for others hoping to retire early. I feel really uncomfortable doing nothing, she says. My purpose is in creating some impact and if its not in a corporate job, it has to be something else that Im doing.

Even the Keyses arent after a lifetime of local beach strolls. Sure, theyre planning to travel to other countries. Maybe theyll have children. Or maybe theyll open a coffee shop? That was always the allure of early retirement: opening themselves to challenges, opportunities for growth, and yes, even work, but on their own terms.

Gen Z could be uniquely primed to retire early they get a personal-finance 101 class every time they scroll through social media, and according to a 2021 Goldman Sachs Asset Management report on retirement, 25 percent of surveyed Gen-Zers plan on retiring before age 55, compared to 17 percent of millennials and just 8 percent of Gen X.

But should they? Neha Bairoliya, an assistant professor at USC who studies aging and retirement, says retiring so young is inherently risky: People underestimate the length of their life; nursing homes and retirement communities are exorbitantly expensive; health care costs more as you age; family planning is difficult to predict; access to premium Medicare and pension funds depends on the number of years you work; and the market can be unpredictable.

What worries her more is the potential loss of work experience if, years after your early retirement, you have to go looking for a corporate job again. At 21 in 2022, you might be able to hustle your way to large sums of money. But 20 or even 40 years from now, what happens if unexpected costs force you back into the traditional workforce? Youre closing too many doors behind you by making this decision, Bairoliya says. Your future self might not be very happy with that.

Its also not possible for everyone to do this. The FIRE movement in particular has been criticized for not taking into account the socioeconomic conditions and systemic racism that make it impossible for many people.

Those who retire early have common advantages: a college degree, no student debt, a partner to share expenses with, no children or relatives to care for, access to health care, and a choice about where to live. Charmagne Chi, who retired at the age of 42 in Buffalo, New York, is quick to admit her own early retirement is thanks to a combination of luck, privilege, and lifestyle. To claim otherwise is super tone-deaf, she says.

She graduated debt-free and inherited some wealth from her parents. She shares living expenses with her husband their city, neighborhood, house, and car cost less than they can afford and they dont have any children.

Shes also vocal about saying that while quitting her job did relieve a lot of stress in her life, it wasnt the magic fix to her anxiety and burnout she thought it would be, offering transparency you dont often see among the early-retirement crew on TikTok.

When @taybeepboop, who asked to be identified only by her TikTok username, shared her bright, disco-ball-enshrined, maximalist home in San Francisco, all the comments demanded one thing of the 28-year-old post-production freelancer: How did you afford this?

She wasnt a part of early-retirement TikTok she just wanted to show off her DIY dcor but answered the question anyway.

By denying herself everything but her most basic needs, she paid off her college debt in under a year and eventually saved enough for her home. When her friends went out to eat, she just ordered water. She found odd jobs on Craigslist, participated in medical trials, opened new email accounts to get food through giveaways, worked overtime on weekends, and often went to bed hungry. She was even in the process of selling her eggs when she realized shed reached her financial goal.

Hers could have been an aspirational tale perfectly packaged in a three-minute video. But for @taybeepboop, all of this deprivation came at a steep price. She thought shed be able to spend more freely after she had enough money saved, but instead still struggled to eat out when she knew she had food at home or enjoy vacations with her friends. Today shes in therapy, dealing with the anxiety that came from her year of living wildly below her means.

Its a paradox common on social media: People praised her for paying off her debt and achieving financial independence, even though it came at a high cost to her mental health. In the video detailing her financial journey, @taybeepboop cautions people against replicating her path, though it hasnt stopped comments like, Youre so inspiring.

The majority of people are just desperate, she says. They want any life preserver.

This is one reason financial content performs so well on TikTok. Young people are overwhelmed by debt, unable to buy homes, and feel ill equipped to one day retire. When someone online is doing well financially, theyre desperate to know how to copy them and might not consider a negative outcome. Even @taybeepboop thinks maybe shed do it all over again.

It was a horrible time in my life that I sort of blacked out, she says. But at the same time, I own my own home and Im financially independent.

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What It Takes to Actually Retire by 30 - The Cut

Sanctuary Wealth acquires minority stake in Indianapolis-based independent firm with almost $400 million in AUM

INDIANAPOLIS, March 18, 2022 /PRNewswire/ --Sanctuary Wealth,home to the next generation of elite advisors, proudly announces that EverNest Financial Advisors, an independent firm based in Indianapolis, has chosen to partner with Sanctuary, which has acquired a minority position in the firm. The two-person team is composed of Managing Partners Frank Esposito, CFA, and Niki Woodworth, CFP, who with Sanctuary as a partner, plan to grow their firm both organically and through the acquisition of other advisory practices.

"Sanctuary's initial growth came from advisors breaking from the wirehouse model, and they remain an important constituency for us, but going forward we're also committed to being a major player in the M&A space, as our investment in EverNest Financial Advisors and some of our other recent initiatives demonstrate," said Jim Dickson, CEO and Founder of Sanctuary Wealth. "EverNest is somewhat different from our usual partners in that they had been functioning independently for seven years. The fact that they chose to affiliate with Sanctuary rather than continue to try and do it all on their own speaks volumes about what the Sanctuary platform has to offer independent advisors who want to take advantage of our scale and extensive resources."

With more than $390 million in assets under management, EverNest Financial Advisors provides comprehensive financial planning and investment advisory services to a sophisticated audience of high-net-worth individuals and families as well as non-profits with unique circumstances and aspirations. Among the team's specialties are helping business owners and corporate executives diversify their assets and prepare for a transition.

"We joined Sanctuary because of their demonstrated commitment to allowing independent firms like ours serve our clients in unique ways and also due to the considerable scale and expertise Sanctuary brings in terms of operational support, compliance, technology, and investment research," explained Frank Esposito, Managing Partner, EverNest Financial Advisors. "We also saw the opportunity to further enhance the services we are providing our clients with Sanctuary's resources."

Frank Esposito is in his 30th year in financial services, having started as an intern with Merrill Lynch in 1992 before spending a decade working with institutional investors at Goldman Sachs and Strong Capital Management. After leading investment teams at both JP Morgan Private Bank and UBS Financial Services, he concluded he could best serve clients as an independent registered investment advisor. In 2015, Esposito merged his practice with Windsor Wealth Management, which led to the creation of EverNest Financial Advisors. He earned a Master's degree in Business Administration from The Kellogg School of Management at Northwestern University in 2001 and is a CFA charterholder and a member of the CFA society of Indianapolis.

Managing Director Niki Woodworth began her financial services career when she joined Windsor Wealth Management in 2017, where her roles included Client Service Manager and Director of Client Service. Since earning the Certified Financial Planner (CFP) credential, she has been working with clients regarding retirement and estate planning, college funding, and debt and tax management. She was awarded a BS in Economics and Spanish and graduated with Cum Laude honors fromthe Andre B. Lacy School ofBusinessat Butler University.

"Our platform and all that Sanctuary has to offer was the genesis of Frank and Niki's attraction to Sanctuary, but it was our commitment to their firm's M&A growth that really sealed the deal,"saidMichael Longley, Chief Growth Officer, Sanctuary Wealth. "We're tremendously excited to have them join Sanctuary as true partners and look forward to providing the resources and support that will help grow EverNest Financial Advisors into the substantial enterprise they envision."

About Sanctuary WealthSanctuary Wealth (sanctuarywealth.com/) is the advanced platform for the next generation of elite advisors, who have the entrepreneurial spirit to build and own their own practices and desire the freedom to deliver the tailored service their clients deserve. Sanctuary's ecosystem of partnered independence provides a complete technology and operations platform, as well as support from a community of like-minded advisors and the resources of invaluable affiliated businesses. Currently, the Sanctuary Wealth network includes partner firms across 23 states with over$20.0 billionin assets under advisement. The Sanctuary Wealth Group includes the fully owned subsidiaries Sanctuary Advisors, a registered investment adviser, and the broker-dealer Sanctuary Securities, as well as Sanctuary Asset Management, Sanctuary Insurance Solutions, Sanctuary Global, and Sanctuary Global Tax and Family Office.

CONTACT: Michaela MoralesJConnelly973 224 7152[emailprotected]

SOURCE Sanctuary Wealth

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EverNest Financial Advisors Builds on its Independent Position by Partnering With Sanctuary Wealth - PR Newswire

The first thing you notice about Dasha Kennedys Instagram page probably isnt her robust following of more than 181k. Or even the beautiful images of her striking face. Its the handle: @TheBrokeBlackGirl.

As you can imagine, theres a story behind the name. A really inspiring one.

The Georgia native, 34, grew up as most middle-class Black people do, in households that prioritized keeping food on the table and a roof over heads, but seldom talked about financial literacy.

Those conversations were not happening in my home, Kennedy shared with Essence. And now that Im older, I wish they were. But one of the things Ive come to realize is that talking about finances can be a very emotional ordeal, especially in our community.

Kennedy said that because her parents kept their financial behaviors very private, she made some unnecessary missteps along the way while navigating early adulthood, including plummeting in more than $20,000 in debt following her divorce seven years ago. Used to being in a two-income household and not making her own finances a priority, she began to drown in bills. This, she says, was a turning point in her financial literacy journey.

My experience with money was an interesting one because despite working in the finance sector for years, I still got caught up in debt, she said, referencing her time working as a relationship manager at US Bank and at Kemper as an accountant. I was abusing credit cards and taking out payday loanssomething I never thought Id have to do. It wasnt until life actually started to happen that I realized what I thought I knew about money was very minimal in comparison to the actual experience of different financial hardships. It was an eye-opening experience.

She said her divorce taught her to always put her personal financial health first even while in a life partnership and advises women, specifically Black women, to do the same.

When I think of Black women in relationships with Black men, money discussions get lost in the minutiae, she says. We hear so many conversations about whos paying the bills, the 50-50, and all of these expectations of Black women not only being in the workforce, but then also coming home to cook and clean, which is unpaid labor within itself. So, when I think about Black women, relationships and money, one of the things I encourage is to never take the backseat to your finances, regardless of the type of relationship you have. I always empower women, especially Black women, to stay involved, ask questions and not to fall under the trope of, oh, if youre too deep into asking the finance questions, youre going to come off like a gold digger or someone whos only concerned about the money.

She also correctly points out that financial security for Black women is a key element to not only our survival, but our familys as well.

Research shows that nearly 80 percent of Black mothers are sole breadwinners for their families, which means their households are reliant on their wages to make ends meet and get ahead. Nearly four million Black families are headed by Black women and more than 1 in 4 of those households live below the poverty line.

These sobering numbers heavily underscore Kennedys mission to empower Black women in their financial wellness journey.

We have every right to ask the right questions in our relationships, to inquire about debt, to inquire about credit, to inquire about incomebecause on the other side of that, when we have to go out into this world, we are being paid less, we are struggling with paying off debt and being met with other factors that impact us simply because we are Black women.

After finalizing her divorce in 2015, Kennedy said it took her about three years to pay off everything. While organizing her own finances, she decided to share her learnings with other women along the way. Her personable and authentic way of articulating tough financial concepts caught on like wild-fire. Now shes teaching people around the country how to make their money make more sense for them. One of her partners in this process is National Debt Relief, an organization dedicated to assisting millions of Americans achieve financial independence.

National Debt Relief reached out to me after seeing some of my content and the authentic way I discuss debt on my platform, she shared. I really aim to present financial conversations in a way that humanizes the impact of debt. National Debt Relief is equipped with debt specialists that are there to help you and walk you through this journey because youre going to feel so bad about even being in debt, youre not going to want to tackle it alone.

Along with regularly disseminating in-depth financial tips on her social platforms, she hosts classes, workshops and courses attended by thousands of participants. This is particularly rewarding because Kennedy says she sees herself in the people she helps.

When I was going through stressful financial situations, I named my platform Broke Black Girl because that was who I was at the time, she shared. I kept the name because so many women resonate with it and now consider it a safe space. Thats what its all about for me.

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This Financial Activist Says Black Women Should Assert Their Fiscal Independence Even While In Relation - Essence

If you ask Francis the best way to retire early, his answer is simple: don't.

For years, the now 42-year-old went to great lengths to achieve FIRE, which stands for "financial independence, retire early." But in reality, a lifetime without work isn't actually what most people want, he says. It's a lesson he himself discovered after retiring at age 37 in 2017.

"I think pursuing FIRE is probably the wrong idea," Francis, who requested to have his last name withheld for privacy reasons, tells CNBC Make It. "I don't think most people want to retire early. I think what most people want is a sabbatical of sorts. They're disgruntled with their careers and they want to take a really, really long time off. Maybe a year or two."

That same disgruntlement led him to leave his job as an electrical engineer where he earned a $120,000 base salary plus $30,000 to $60,000 in equity and bonuses. But Francis describes life without a job as getting "really boring." In his case, he decided to lean into his YouTube hobby full time, and now earns money making videos for his 350,000 followers.

I don't think most people want to retire early. I think what most people want is ... to take a really, really long time off.

Francis quit his job in 2017 with $1.2 million in savings and investments. He had first heard about FIRE in 2013 and decided to dedicate himself to achieving it. His strategy to getting to an early retirement came down to one main factor: spending as little money as possible.

The first step was to pay off the mortgage on his home, which cost $22,000 a year. As he tackled this, he also worked to cut his spending anywhere he could.

"I jumped through a lot of hoops in order to save money and get my expenses as low as possible," Francis says. His cost-cutting measures ranged from not paying for any streaming services to making sure he used every single item of food item in his refrigerator to even a short-lived stint without a cell phone.

Going phoneless "turned out to not work very well, but I think it's important to push a little bit too hard, get a little bit too uncomfortable," he says. Eventually, with his house paid off, Francis was able to cut his annual spending down to less than $15,000.

His background in electrical engineering helped him slash household spending as well. He installed his own water heater and fixed the door to his garage when the power supply broke. He also built a solar panel system in his backyard that supplies a low amount of electricity for free.

"I never call a handyman because I am the handyman," Francis says. "All my appliances are really, really old because they never break. If they break, I fix them and they're good as new."

I never call a handyman because I am the handyman.

Francis is a also master of collecting credit card points. He employs a process known as churning, which involves cycling between different credit cards to maximize points, and has more than 20 active credit cards at any given time.

"In order to churn these credit cards, you need to have a really high credit score," he says, adding that his own score is 835. "A lot of people think it's a hassle, but for me personally, it's giving me a lot of value."

After two years of early retirement, during which he enjoyed his time off from work and made a point to travel, Francis came face-to-face with the boredom he warns most people will experience if they quit their jobs at a young age. His solution? Getting back to work.

In 2019, Francis began to double down on his YouTube channel and release videos regularly. He originally started the channel in 2013, posting videos ranging from how to make imitation shark fin soup to strategies for beating the popular game "2048."

After two years of retirement, Francis decided to spend more time with his YouTube channel.

Tri Nguyen

He pivoted to financial topics, teaching viewers about credit scores and investing. As his views started climbing up, so too did his earnings. Though his workload fluctuates depending on his mood some weeks he works almost full-time while others he does as little as eight hours he has built up a following of more than 350,000 subscribers.

On his best months, he brings in close to $10,000 in YouTube revenue. He still keeps his same $15,000 annual budget and uses the income to pay his living expenses. The rest goes into his investment accounts.

It's a project that brings him more joy than his old 9-to-5, and one he plans to stick to for years to come.

"Now I no longer call myself 'retired' because I am putting in my full-time effort into YouTube," Francis says. "I'd like to put a lot more work into it and grow it ... I think it's a work in progress."

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Don't miss: Warren Buffett is worth $117 billiononce again making him one of the 5 richest people in the world

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This 42-year-old quit his job with $1.2 million. Here's how he did itand why he started working again 2 years later - CNBC

By Mel Casey, CFA

Millennials (those born between 19811996) are now the single largest generation group in the U.S., having surpassed baby boomers (born between 1946-1964), 72.1 million to 71.6 million, as of 2019. Much has been written of the varied challenges facing millennials, whether it be the trauma of global events like 9/11 and the Great Financial Crisis, being saddled with burdensome levels of student debt, or the loss of trust in societal institutions due to growing wealth inequality and a perceived double standard in criminal justice.

Mel Casey

There has long been a narrative that millennials are somehow losing out on the American dream, that the odds are stacked in their favor and traditional avenues for success are no longer open to them. There is, however, a contrasting narrative: that we are in the early innings of a transfer of between $30 trillion and $68 trillion from the baby boomers to millennials over the next decade. Investment professionals may ponder what implications this can have for markets and the industry, but how should millennials themselves approach this transfer and what should they be thinking about as they take on this new role within the distribution of U.S. household wealth?

Recent episodes such as Meme Stocks demonstrate that millennials are happy to embrace the financial markets at a relatively young age, even if in the form of a protest! Surveys conducted by the CFA Institute have shown that this generation saves and invests at a younger age than their predecessors, embraces disruptive technology both as users and investors (crypto, electric vehicles, ride-sharing, alternative proteins, etc.), and seeks out financial education proactively in order to achieve a feeling of agency over their own finances.

It is clear then that this is unlikely to be a group that would sit passively on their inherited wealth, disengaged from the investments, the investment process and the opportunity to affect change. We can expect significant shifts in investing priorities as this wealth transfer occurs. But as millennials become more influential in the economy and the markets, what are some of the likely priorities?

It is understandable that a generation growing up in a world of continuous information flow would have a greater understanding of the myriad challenges facing our world and wish to invest in companies that are actively engaged in solutions to these problems. The good news for principled investors is that in an evolving marketplace, doing well and doing good need not be mutually exclusive.

U.S. companies are increasingly focused on highlighting their roles as good corporate citizens, so a diversified ESG- (environmental, social and governance) compliant portfolio is getting easier to construct. You could argue that were already starting to see some of this shift as large, mainstream investment firms, such as BlackRock, prioritize social change in their investments. An appropriate portfolio will likely contain a deliberate balance between newer companies engaged in emerging technologies, established companies who have steadily reformed their historic practices, and legacy companies who are evolving their business models to solve and capitalize upon these challenges.

Millennials should consider their tax liability as a social capital obligation. They may choose to pay this directly to the IRS in full or take appropriate charitable deductions and allocate some of that pool towards private causes that are personally meaningful. While there may be a great sense of urgency surrounding some of these causes, millennial heirs should consider that they generally cannot change their minds once a gift has been given. It is important not to give so much that it will impair the overall financial picture.

Gifting over time can also allow the asset base to grow and compound, allowing for a larger ultimate gift in the aggregate. Charitable remainder unitrusts are one estate planning vehicle to allow heirs to benefit from a regular distribution from the trust (typically a percentage of the market value) while the trust can still grow with a capital gains tax advantage as the ultimate beneficiary will be one or more named charitable organizations. Family foundations or donor-advised funds are other vehicles appropriate for estates of differing sizes.

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Although this demographic is viewed as being comfortable with risk-taking, it is worth noting that investor attitude toward risk varies greatly depending on the source of the wealth. Investors who earned their wealth actively through investing in or starting businesses, tend to have higher confidence in their ability to recoup losses or earn back lost capital than those who accumulated their means over their careers, or via inheritance. There can be a tendency for those who inherit wealth to exhibit greater loss aversion as they view this inflow as a one-off and feel uncertain of how they would replace it. There are competing instincts here given this is a demographic who generally understands emerging themes and feels comfortable investing in them, even if the company is small, new, or is currently unprofitable.

While taking on too much risk in investing is a genuine concern, taking too little is equally perilous. Longevity risk, or the risk of outliving ones assets, is a real concern, particularly in an environment of rising inflation. Millennials should, upon inheritance, consider inherited assets and their own assets as the same, avoid the mental accounting bias of treating different monies differently and take a holistic view of their balance sheet, regardless of whether earned or inherited.

The FIRE or Financial Independence, Retire Early lifestyle movement popular among some millennials ought to benefit from this large influx of wealth, right? Well, not necessarily. The objective here is to accumulate sufficient financial assets by around 40 years of age in order to live off the passive income, i.e., dividends and interest. While a large inheritance would significantly increase the size of the corpus generating this income, human nature is what it is, and the clear and present danger is lifestyle creep. The financial discipline and minimalist lifestyle enabling the FIRE movement can be a lot harder to adhere to once-great wealth is transferred as opposed to earned. A decadent lifestyle coupled with a long time horizon (50 years +) doesnt usually score well in a financial plan!

Many millennials who are inheriting lump-sums may feel the burden of making prudent financial decisions all at once and soon after losing a loved one. The timing of an inheritance may not always align well with the recipients stage of life, personal maturity or financial needs.

As millennials look to the future and their own heirs, they may consider taking a different approach. We dont necessarily control when we pass from this life, but we can exercise control over what happens to our assets, even from beyond the grave. Millennials may wish to consider distributing to their heirs over time using an irrevocable trust. This can include commencing those distributions during their own lifetimes. Working with financial and estate planning professionals can help determine the appropriate structure and amounts.

One issue a millennial should consider is whether this promised inheritance will materialize at all. Baby boomers are expected to live 10 to 15 years longer, on average, than the Silent Generation before them, but these can be the most expensive years. The U.S. Centers for Disease Control and Prevention (CDC) says baby boomers are more stressed, less healthy, and have less health coverage than the same age group did a decade earlier. As life spans increase, wealth tends to be spent down, particularly in those final years as healthcare costs can spike.

The wealth of baby boomers need not be spent down on healthcare costs alone. Baby boomers spend more on travel and leisure than the generation before them. As we (hopefully) emerge from the COVID-19 global pandemic, there is a lot of pent-up demand for travel and experiences. Many baby boomers are expected to take a carpe diem attitude toward their sunset years and get working on the many bucket list items that have accumulated over the past 24 months. Inflation in travel costs has been particularly noticeable in the past year and we could see a multi-year surge in demand, which will impact what is left over for inheritance.

The universal takeaway here is that regardless of your expectations of an inheritance, it behooves millennials to maximize the traditional tools for wealth creation available for them, whether they be 401(k)s, IRAs, Roth IRAs and 529s for those with children.

A windfall is always nice, but as things stand, millennials control only 8.4% of U.S. wealth as of the third quarter of 2021, according to the Federal Reserve. Not all members of this generation will inherit large sums, but they all share a long-term time horizon, and can utilize the tax-advantaged vehicles above to experience that eighth wonder of the world, compound interest! Millennials can steadily make up that wealth gap over time through regular saving and taking advantage of periodic market volatility to accumulate solid, long-term investment gains regardless of what baby boomers have in store for them!

Mel brings nearly two decades of financial services and investing experience to the FBB team. As a Senior Portfolio Manager, Mel is responsible for managing client relationships and client investment portfolios.

A native of Dublin, Ireland, Mel received his Bachelor of Commerce degree from University College Dublin. He is a CFA, and CAIA charterholder, a member of the CFA Institute, and a member of the CFA Society of Washington, DC.

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Millennial Investors and the Great Wealth Transfer - TheStreet