Donald Trump’s One big beautiful bill is making its way through Congress. The bill will make permanent the tax breaks given to the wealthy in his first term. It will make the rich richer and add to the national deficit. His argument is that it will generate growth. But we know that trickle down economics doesn’t work. It is not that difficult to understand. The wealthy already have the lifestyle that they want and they have surplus money anyway. Giving them more money won’t make them want to spend more than they already do, they will just have a bigger surplus.
Financial planning meetings with retirees is all about ensuring that they are enjoying life without the fear of running out of money in the future. Having had a number of financial planning meetings with retirees recently, they are really enjoying retirement. They are in good health and are travelling a lot. The car is changed, the house has been done up a bit. They are enjoying life.
Using prudent assumptions for the future growth of their assets and expenditures, we can see that they will die with substantial assets. I read lots of comments online that retirees should be encouraged to spend more. But I find that people tend not to change their lifestyle. If you didn’t have an extravagant lifestyle before, you are not going to start having one later in life. Knowing you have more than enough money takes away any worry that you will run out but it will not make you spend more.
Going back to trickle down economics, what should be done is give the lower paid more money. Research in Kenya has shown that giving poor people money directly lifts them out of poverty (who could have guessed 🤷♂️). It gives people the capital to start their own businesses and create their own wealth and to become self sufficient. This can be handed down to future generations who have been lifted out of poverty.
Traversing back to our retirees, they should also look at giving money away. Changing cars every two years won’t bring them joy, nor will buying new clothes constantly. It is meaningless. Giving money away to their (adult) children will bring them joy. And it will make a big difference to your children who can really benefit from it.
Use the annual gift exemption where you can gift anyone €3,000 a year and it doesn’t impact on your children’s lifetime CAT allowance. By giving a relatively small amount each year, you are not committing on giving away too much of your wealth in one go and you can stop and start it.
If you are comfortable that you have more than enough assets for the rest of your life, consider giving larger lump sums to your children/ grandchildren. Yes, it will come out of their lifetime allowance, but which is more beneficial; giving your child a lump sum to help them buy their first home or giving them money when they are in their 60’s (and you are dead)?
If you have too much, it is better to give the money away rather than just spend it on stuff that you don’t need.
Steven Barrett
09 June 2025