After a life of careful spending and even more careful saving, John Hornett remained frugal when he finally retired.

But his thrifty habits got a jolt on Sept. 11, 2001. The disaster at the World Trade Center made him reassess his priorities and he decided he hadn't done enough travelling, so Hornett (not his real name) took $100,000 out of his investment portfolio and spent a year going around the world with his wife — he just kept moving in the same direction until he'd circled the globe.

He could afford it: His financial adviser helped him make sure he wasn't endangering his retirement nest egg. But for many members of the war generation, this kind of indulgence is very much out of character. Unlike their offspring — the freewheeling, debt-loving Baby Boomers — they're known as savers.

And yet, whether it's an epiphany, a brush with death or a simple realization that they have plenty to get them through old age, some retirees are deciding to live it up late in life by spending what would have been their kids' inheritance.

Blowin' some dough

"If the money they now have came to them later, maybe they didn't enjoy things like travel, maybe they want to go back to the old country," said Adrian Mastracci of KCM Wealth Management in Vancouver.

And unless there are financial issues for which they've earmarked the estate, Mastracci tells his clients to go right ahead and spend something on themselves. "There's no need to be chintzy about it."

The desire to indulge isn't the only motivation for these born-again spenders — depleting the estate keeps it out of the taxman's hands.

After all, RRSPs and RRIFs are taxed at the highest marginal rate. Dispositions of property and investment portfolios are subject to capital gains. Provincial probate fees eat up 1.5 per cent or more of the estate.

"Taxes will only grow between now and death," said Sandy Cardy, senior vice-president of tax and estate planning at Mackenzie Financial Corp. "If you’re going to deplete, start with the highest-tax assets like RRSPs. And you may pay less if you spread it over a number of years."

Economic fallout

For some families, taxes aren't the only issue. The very idea of passing on a large estate goes against their principles.

"There is that sense that it will make their kids less disciplined and hard-working," said Cardy.

It's a concern increasingly shared by governments as boomers start coming into their inheritances.

Suddenly flush with cash, property and investments, there are worries that a whole generation may be able to drop out of the workforce early, cutting into the economic growth rate of the entire country.

Alternative strategies

While there is no shortage of businesses thrilled to help seniors spend their savings on luxury goods, exotic trips or real estate, blowing the inheritance doesn't have to mean mass consumption — you can always just give it away.

One option is to pass some assets on to the kids now; handing over the family cottage while the parents are alive may well be more tax-efficient than waiting, for example.

Others turn to philanthropy. Mackenzie Financial has started the Charitable Giving Fund that allows donors with as little as $25,000 to establish the kind of private foundations typically reserved for millionaires.

The capital doesn't get spent, but a certain percentage each year goes to select charities, generating a sense of satisfaction — along with a handy tax credit for the donor.

The danger of late-life spending, however, is that once you start, it may be hard to stop. Financial advisers caution clients to make sure they leave enough to cover themselves for the future.

As lifespans increase, people have to plan for more eventualities — a stretch of failing health, nursing home expenses, a spike in inflation that eats into the real value of your investments.

Stephen Pollan, New York-based author of Die Broke: A Radical 4-Part Personal Finance Plan to Restore Your Confidence, Increase Your Net Worth and Afford the Lifestyle of Your Dreams, writes about seniors who become overly enthusiastic consumers and are ultimately forced to go back to their kids for loans.

Smoothing things over with the kids

Of course, the offspring may grow concerned — often for self-interested reasons — when they see their parents grow uncharacteristically spendthrift.

"Children feel they have an entitlement," Cardy said, "especially the boomers. Heirs need to remember: It's not your inheritance; it's your parents' life savings and retirement fund."

Even with financial experts such as KCM's Mastracci urging retirees to live a little, Cardy, for one, thinks the current generation of retirees will still end up providing a generous legacy to their kids.

"Where I think we're going to see extensive spending is when they leave their estates to baby boomers," she said. "We [the boomers] are more consumption-driven, and that's when we’ll see the kids' inheritance spent in a more lavish fashion."

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