Updated December 2025

You have heard the old adage “Rags to Riches to Rags”, or “Shirtsleeves to Shirtsleeves in three generations”.  It is not just a dynamic of western culture; it is actually an old Chinese proverb “Rice paddies to Rice paddies in three generations.”

Breaking down the saying

(1) The first generation strives to better themselves, so they create new wealth through innovation and financial discipline.

(2) The second generation, having learned the value of investing and saving, attempts to be good stewards of the fruit of their parent’s efforts.

(3) The third generation often consumes the resources generated by the first two generations.

So what do we learn?

(a) Are you a Creator of wealth that has generated new resources for yourself and others?

(b) Are you a Steward of wealth who has managed well the resources you have been entrusted?

(c) Or are you a Consumer of wealth who has enjoyed the fruits of other’s efforts?

How to build your resources even during retirement

The IRS requires owners of most retirement plans (including most IRAs) to distribute an increasing percentage of their accounts every year beginning at age 73. An exception allows most employees who have an employer-provided plan (such as a 401(k) or a profit-sharing plan) to wait until they retire before taking a minimum required distribution. In addition, no mandatory distribution is required for a Roth IRA or a Designated Roth account until the account holder’s death.

When a minimum distribution is required, the first withdrawal must be made by April 15 of the year after the account holder turns 73. The minimum distribution in each year is based on the account balance on December 31 of the year before the withdrawal is made.

Required minimum distributions are meant to encourage exhaustion of funds from plans that qualified for the deferral of income taxes during the account owner’s lifetime. The minimum required distribution is based on (1) the account holder’s age on December 31 of the year before the distribution is made, and (2) the account owner’s life expectancy as determined by IRS tables.

Which life expectancy table to use depends on whether the account owner is married, whether the owner’s spouse is more than ten years younger than the owner, and whether the owner has more than one beneficiary. Account owners who have only one beneficiary and who do not have a spouse more than 10 younger than they are can usually use an SEC calculator to determine the distribution they must make in each year.

Of course, the IRS does not require retirement account owners to spend the funds they withdraw (although it does require owners to pay taxes on the withdrawn funds). If you want to consider yourself a Steward of resources, you would only spend 1% or 2% of your resources (including the after-tax withdrawals) to ensure that future generations of beneficiaries of your wealth could enjoy a similar standard of living. Such a low percentage reflects the impact of taxes, inflation and the increased number of people in successive generations.

Lessons we can take from the past century

During the twentieth century in the US, the Greatest Generation (born 1914-24) were the Creators of wealth, the Silent Generation (born 1925-42) were the Stewards of wealth and the Baby Boomers (born 1946-64) are the Consumers of wealth. This leaves the Millennial Generation (born 1981-1996), Generation Z (born 1997-2012), and Generation Alpha (born 2013-2025) with the challenge and opportunity to be the new Creators.

Not about judgment

Our true legacy is the impact we have on people and the world, which is much more significant than the tangible stuff (including money) we leave them.  So, whether you are a Creator, Steward or Consumer of resources is not about judgment, the data will simply reflect if you increased resources or depleted them.

(This article was updated December 2025.)