Cut-Throat said:
If you really want to leave nothing on the table in the end, the time to spend your money is when you are younger. Obviously the problem is the risk that if you spend alot now you will run out in your old age. To cover this risk you have two choices. Either you can get longevity insurance (a COLAed pension and/or annuity) or you can self insure. The problem is that when you self insure you are forced to violate the idea of spending a larger portion of your assets while you are young and leaving nothing on the table when you die. So it appears that the only way to have your cake (insure to cover longevity risk) and eat it too (spend lots while you are young and leave nothing on the table) is to get longevity insurance (a COLAed pension and/or annuity).
So now the questions become how much longevity insurance and what kind of spend plan for the rest of your assets? To ensure that you aren't going to have to eat cat food at any time in your future your longevity insurance should completely cover your bare-bones retirement expenses where bare-bones means the minimum amount you would be able to live on (no cat food or cardboard box housing) if the worst happened. As an illustration of this life style think about the life style you would go to if after retiring without the longevity insurance the market started to drop and drop and your portfolio got smaller and smaller. If this were to happen you would cut back on your lifestyle to compensate so that you wouldn't run out of funds. How far back would you cut? That is one way to determine your bare-bones retirement expenses.
Now that you have your longevity insurance what is your spend plan for the rest of your assets? This is a little harder question as there are so many possible answers. You could do something that follows the Bernicke "Reality Retirement Plan" OR you could pick a really risky WR with a FIRECalc success of say 50% (or whatever you choose) OR you could just spend whatever you want whenever you want OR you could spend it down based on your current life expectancy with or without changing that expectancy as you age OR... The point is that you have alot of options and you can spend more since your bare-bones retirement expenses are covered.
I now expect that some won't like the way I determined the bare-bones number. If that is the case pick it in a way you like but remember the bigger you make it the less money you have for the spend it while you are young plan. I also expect that some will say how bad an investment an annuity is, to which I say in this post I am using it as longevity insurance so that your risk of running out of money in your old age is mitigated. Think of this post as an exercise in thinking outside the box about ways to increase your current spendable $$.
