If I have $5 million but only need $3 million to retire – should I use on my kids for things like weddings or spend it on myself?

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For those who comfortably reach their FIRE number, it can feel like a huge weight off your shoulders. In the case of this Redditor posting in r/ChubbyFIRE, we have a Redditor who achieved their goal of hitting their FIRE number of $5 million. 

What’s interesting about this Redditor’s posting is how he wants to handle splitting up this money. Instead of using all $5 million to enjoy retirement more comfortably, they are looking at how to split their net worth into two separate and distinct funds. 

I’m quite intrigued by this Redditor’s take on the situation and how they may or may not be overthinking how to handle this nest egg of theirs. 

The Scenario 

This Redditor has posted one of the more interesting scenarios, discussing how to best separate their money. While we don’t know their exact age, we do know that their target FIRE number was $5 million, which they recently hit. 

After hitting this number, they now have a couple of different options for managing this money best. The prevailing scenario is for them to split the $5 million into a $3 million and $2 million pot. 

The post indicates their intention to take the $3 million and create a portfolio that follows the 4% SWR (safe withdrawal rate). At this rate, you’re likely looking at having $120,000 annually to live on. What’s missing from this post is whether or not that would be enough money, but we have to assume it would be based on what we know. 

The other $2 million would create “generational wealth” for their children. It could be used to set up a trust fund for the kids and to help pay for weddings, home repairs, medical issues, changing homes, etc. A scenario also allows this money to float back and forth between the two separate investment accounts, so there are a few options on the table. 

The Recommendation 

It’s very difficult to provide an exact recommendation without knowing this individual’s age, the age of the children, the cost of living, or any other income sources. I’m not a financial advisor, so this is, at best, my personal opinion on how this should play out. 

All of this said, I don’t see much of an issue with using two buckets of money, and I don’t think it’s uncommon to do so, either. The real question is whether it’s smarter to keep two separate buckets or try to find a scenario that allows, say, a 3% SWR on the full $5 million. 

If you did the latter and kept the money grouped at 3%, you’re now talking about having $150,000 to live on. This additional $30,000 could be used (and saved) for any issues the Redditor is concerned about saving for, like a wedding or emergency medical expenses. 

Personally, I don’t think the Redditor is overthinking their scenario, as they mention it is a real possibility. This said, one potential scenario I don’t think the Redditor is considering is that they take the 3% SWR on all $5 million, and whatever they don’t spend on the $150,000 annually gets moved into a savings account for the kids. 

This account would then become the start of a trust, and whatever is left of the $5 million when this Redditor is no longer with us gets passed into the trust as an inheritance. 

The Takeaway

If the biggest concern is whether the Redditor is overthinking this scenario, the answer is no. While some Reddit comments certainly disagree, having this thinking is good for determining how to use your money best. 

Unfortunately, we don’t have more details to develop a more specific insight, like their age. If we knew their age, we might be able to make a different judgment call about whether they are close to retirement age. The recommendation here would change dramatically if we learn that this Redditor is 35 or 55. 

For now, I’d say go with the existing plan and see how everything works. The good news is that you can always change it and split the money up again or bulk it all together.