Why I plan to die with $0 in my bank account

If 2020 has taught us anything, it’s that life is uncertain. Through this lens, I’ve started to abandon some conservative personal finance principles. This summer, for example, I went against the adage of “staying the course” with retirement and stuck my hand in my individual retirement account to shed some stocks. I also bought a house in what can be considered a risky environment. To date, I have no regrets.

In my latest move away from what many financial experts preach, I’ve forgone the aspiration of leaving a financial legacy. The concept of bequeathing an inheritance just seems to make less sense today. Instead, I want to experience my legacy by spending most, if not all, of my money on meaningful experiences and investing in the people and causes I believe in – all before I leave Earth.

This financial philosophy has grown increasingly popular with the ultra-wealthy. Laurene Powell Jobs, who inherited more than $20 billion from her late husband, Apple co-founder Steve Jobs, vows to give away all her assets during her living years, contributing to social and economic causes that need financial support. Before that, Sting, Bill Gates and Warren Buffett all pledged to not leave their children much, if any, inheritance.

But the idea should become mainstream. After speaking with Bill Perkins about his new book, Die with Zero: All You Can From Your Money and Your Life, I was shocked to find myself convinced that spending more money while you're alive is more fulfilling than leaving behind a nest egg.

“With each year that passes … our ability to convert dollars into positive life experiences declines over time,” Mr Perkins says. The “optimal utility of money”, as he calls it, is using money to have the maximum greatest experiences you can in your living years. It’s important because experiences are what actually drive fulfilment and happiness. “I’m more about saving your life than saving your money,” he says.

Of course, the challenge with this approach is to not die with less than zero, leaving debt behind for someone else. The philosophy doesn’t give my husband and me permission to overspend. Instead, it forces us to practise restraint and deliberation as we choose how to allocate our money while we’re alive.

Nail down “enough”

Yes, we still need to save for retirement, but primarily with only our personal needs (and the needs of any remaining dependents) in mind. Instead of accumulating for its own sake, we’re determined to have a specific monetary goal.

In his book, Mr Perkins, who first made his fortune in finance, calls this your personal “survival number”. It’s the amount you need to support yourself with regards to health, shelter and food when you no longer have much income.

Your survival number is more bare bones than the standard retirement savings recommendation of needing between eight and 10 times your salary or living off of 80 per cent of your pre-retirement income. Maybe that figure can be closer to 40 per cent or 50 per cent, especially if you downsize earlier or live in a more affordable place.

For example, we just bought our home in New Jersey and plan to stay here for the next 15 years or so until the kids are finished with high school. After that, it wouldn’t really make financial sense to keep our residence, given the enormous town taxes, which mainly serve the public schools.

Optimise spending

After determining what’s “enough”, Mr Perkins advises mapping out the expenses and experiences that are critical to your fulfilment and the impact you want to have on the world. For us, that’s putting money towards supporting our kids’ education and well-being, travelling and giving back.

Before aiming to die with zero, I wanted my family to be able to spend an entire month each summer living in a foreign country. Now, this dream looks all the more worthwhile as the type of enriching experience I value. And, depending on what happens with travel post-Covid, it can be more achievable, since I won’t be putting it off just to have a bit more saved for retirement.

The idea of leaving non-profits money in our will also feels a bit detrimental to the causes we want to support. Why not give sooner if we can? To that end, I’ve automated some of my giving plans similar to how we contribute for retirement.

Rethink retirement

One of the first books on this concept, Die Broke by Stephen Pollan and Mark Levine from 1998, prescribes a four-step plan to ensure you utilise every dollar while alive. Step three is to "not retire". It was a radical suggestion back then. Today, not so much.

This is an important consideration for those (outside the super-rich) who want to die without any debt and spend their later years living on “just enough”. I’m already thinking about getting my real estate licence in my 50s to generate some additional income and supplement our needs in retirement.

Have a plan for the kids

Not leaving an inheritance to your children doesn’t mean you don’t care about them. Instead, it means that you bestow your wealth upon them when they’re young and most likely working to start a business or a family or investing. The best part is you can bear witness to it all.

“If we're trying to have the maximum impact on our kids’ lives, we want to basically deliberately choose to give them money in a certain time frame, not when they’re in their 60s and their health is declining,” says Mr Perkins.

Do we risk spoiling them? Not if we explain our plan and if they understand that the money they’re receiving in portions is to help them build a strong and meaningful life for themselves and their kids. And yes, we’re fully aware of the gift tax (the US taxes the transfer of money or property to another person above $15,000 per year). So while our kids are young, we’re filling up as many investment buckets as we can for them that carry tax advantages, from a college savings plan to a custodial Roth individual retirement account. We also have life insurance, as that’s integral to taking care of our kids, should one of us pass away sooner than expected.

I’m not sure what the afterlife has in store for us, but I do trust that this alternative financial framework will enable us to make the most of our living years. And the kids? They’ll be alright.

Farnoosh Torabi is a financial journalist, author and host of the So Money podcast