One of the fun things to think about when it comes to investing is what happens when your assets reach critical mass – the point at which your money is self-sustaining. Generally that’s when your compounded returns are so large that they could support you if you were to suddenly stop working.
Most of the time the goal for retirement is to reach this point and have our finances start to take care of us. BUT … for fun, let’s consider what would happen if we didn’t.
Let’s suppose you had accumulated $1 million dollars by the time you had intended to retire. But being financially savvy, you decided to work just one extra year. Now let’s assume that during that “extra year”, your assets grossed another average 10% return, and now you’ve got $1.1 million – an extra $100,000 that you didn’t need!
(Isn’t the ability to simply generate $100,000 out of thin-air one of the best real-life cheat codes you could ever have?)
My question: What would you do with that $100,000?
An Extra $100,000 for Me!
At first glance I’m sure a lot of us would be considering putting a decent chunk of money like $100,000 towards buying beach-front property along the Florida Keys or Gulf Shores areas. Six figures could easily be turned into a nice semi-permanent vacation residence.
And then of course there’s all the smaller purchases you could make.
- A cool car.
- The boat you always wanted.
- Cabin up north.
Even if you want to be boring and don’t plan to spend the money outright, there’s always the positive residual affect this extra $100,000 could have on your income for life. 4% of an extra accumulation of $100,000 is an extra $4,000 per year to cover our living expenses – hypothetically for the rest of our lives!
Is There Something Bigger We Could Do with $100,000?
While it’s fun to think about things we might do for ourselves, what if we took a more noble perspective.
Suppose instead of buying something for ourselves, we choose to do something “bigger”. Suppose we choose to give all that “extra money” away to someone or something we believe is a just and gracious cause.
Since we’re so good at managing our money, let’s again play this same scenario out with one million dollars of assets and waiting one extra year to retire so that we can net $100,000 of money that we “don’t really need”.
- Pay off your children’s college. I have two kids, so that would be $50,000 each. How great would that have been if someone gave you $50,000 to pay off your college tuition?
- Donate to your favorite charity. Could you imagine what a donation of $100,000 could do for the Children’s Miracle Network or some other type of worthy cause?
- Sponsor a business. How many young entrepreneurs out there do you think would love the chance to receive $100,000 to get their business going? Suppose you split it up between 5 different candidates. That’s still $20,000 for each person!
- Setup a scholarship. You could actually do this in one of two ways. You could award someone (or group of people) the $100,000 all at once. OR you could get really creative and setup a trust. The trust would contain the $100,000 and each year the gains of the assets (say 10% of $100,000 = $10,000) could be used to sponsor a scholarship for some lucky student. The advantage there is that the award would automatically continue for the end of time until the money ran out.
- Along the same lines, you could setup some sort of trust for a special cause you believe in. That’s $10,000 per year to your favorite benefit. This would be a living trust sort of situation where your money is held by the trustee, rather than yourself. Then, every year, the trust would pay out some of this money to the beneficiary. This is an easy way to keep your assets organized and ensures that the money gets to its intended target, even after you pass away. Putting the money into trust can provide you with peace of mind because no matter what, the benefit of your choice will receive the money and it won’t be divided up with the rest of your assets.
- You could gift the money to your children for a wedding. Think of it for a down payment on a house. Again, thinking of my two kids, I would have loved it if someone gave me $50,000 for a down payment on a house when I was just getting started.
When you realize just how real your ability to generate $100,000 is AND all the potential things you could do with it, the situation becomes increasingly complex! Sure it would be great to retire at whatever age you planned on retiring. But a scholarship? A six-figure donation? These are all things that are much bigger and more significant than a nice beach house in Florida. These are things that could potentially touch and change lives forever.
Who knew that saving your money could actually be a super-power?
How about you? What would be a reason (either self-less or selfish) that would make you continue to work one more year? What would you do with $100,000?