Has the wealth effect changed your spending?

[Lsbcal]

If people don’t spend more when times are good, and certainly won’t spend more when the bear hits, why be in equities at all? Why not just annuitize? Why take the risk for no reward?

Risk for no reward ... nice way to put it.

 

[audreyh1]

If people don’t spend more when times are good, and certainly won’t spend more when the bear hits, why be in equities at all? Why not just annuitize? Why take the risk for no reward?

Yeah!

Or haven’t increased their spending during these good times but still think they are going to spend less when the bear hits

 

[NW-Bound]

(and I do now buy prosciutto rather than ham and sopresetta rather than salami.... so I'm trying :>)

Thanks for reminding me to look for Jamón Ibérico on the Web. Been 10 years since we were in Spain, and I forget how it tasted.

 

[Danmar]

I took the reward early. I spent on more things in the last few years, and so have less need to spend now. If I feel like a new car, I will get one. But cars do not turn us on, and we can only travel so much. And I can only eat and drink so much.

Can't see myself upgrading to bigger houses. A lot of work!

I could give my children more money, but they already feel bad receiving so much from us. My son told me "Dad, you should get a decent car", because he felt bad driving his Audi S4 (bought with his money) while we still have clunkers.

My older sister and her husband have more than we do. They do not care about cars either. And she enjoys her work so much, she has not quit her job. And they have traveled plenty too.

So looks like you are left with giving it away to charity?

 

[NW-Bound]

I have been giving to charity, but it was not that much (one year, it amounted to 0.5% of WR or something like that).

No, I will leave the bulk of it to my children. They don't know really how much I have, hence my son's comment about me getting myself a "decent car".

 

[Danmar]

Yes. Since we have retired 6 years ago, our retirement portfolio is 25% higher despite buying a winter condo, a new truck and building a 2 car garage... all for cash. Our targeted spending is about 25% higher as well. But we still like the thrill of finding a good deal.

Some of the increase is due to more confidence with the increase in our nestegg and some is due to more comfort with living off of our savings... I think in the first couple years of retirement that I was unduly conservative due to fear of the unknown.

That said, if the SHTF there is a lot of leeway to adjust... we have a fair amount of discretionary spending that could be belt tightened... we could apply for SS.... etc. but even now our WR is only about 3% so I'm sleeping well.

I actually fear "depriving" ourselves of good experiences now while we are young and can do things, travel, etc and end up dying rich and leaving large inheritances to our kids and charities than I fear running out of money.

(and I do now buy prosciutto rather than ham and sopresetta rather than salami.... so I'm trying :>)

This reflects my attitude as well. Retired 11 years, portfolio up a lot, base spending quite high but can easily up the spending/gifting. Can easily go back to only spending divs and pension if necessary. Life is really good.

 

[2017ish]

...

That said, if the SHTF there is a lot of leeway to adjust... we have a fair amount of discretionary spending that could be belt tightened... we could apply for SS.... etc. but even now our WR is only about 3% so I'm sleeping well.

I actually fear "depriving" ourselves of good experiences now while we are young and can do things, travel, etc and end up dying rich and leaving large inheritances to our kids and charities [more] than I fear running out of money.

...

+1. I would say that we fear the two equally (but we are just getting started on this retirement thing). Like you, we can easily slice the majority of our spending if SHTF; thus, our fixed percentage withdrawal rate appears to be sound.

 

[flintnational]

(and I do now buy prosciutto rather than ham and sopresetta rather than salami.... so I'm trying :>)

Costco still has the whole boneless Serrano ham on sale for $150. Ours came last week. It is marvelousssssss.

 

[Scuba]

Yes I see it your way also and actually makes more sense. My thinking is I need a little more confidence being a newly retire I need to get down the road a little more before I spend more. You have made a great point though.

+1

 

[Meadbh]

If people don’t spend more when times are good, and certainly won’t spend more when the bear hits, why be in equities at all? Why not just annuitize? Why take the risk for no reward?

Because some of us do not have pensions, so our retirement sustainability is at the mercy of the markets. And because we take a long term view.

 

[Moemg]

I had already decided that 2017 I would spend more since I had accumulated a large cushion.Between a few expensive trips , a few expensive house projects ,lots of gift giving and a new car I put a dent in that excess and the market just made it easier . All that spending did make me uncomfortable so next year back to my regular spending.

 

[Danmar]

Because some of us do not have pensions, so our retirement sustainability is at the mercy of the markets. And because we take a long term view.

I understand, but if you don’t spend a little more when times are good, when? I take a long term view too. If I don’t start spending more, our legacy will be too high. Sounds like you should annuitize some of your wealth? Might reduce some anxiety?

 

[Meadbh]

I understand, but if you don’t spend a little more when times are good, when? I take a long term view too. If I don’t start spending more, our legacy will be too high. Sounds like you should annuitize some of your wealth? Might reduce some anxiety?

What anxiety?

My annuity will be CPP, which I plan to take at 65. It’s index linked, secure and has no fees.

 

[NW-Bound]

During the melt-down of 2008-2009, many posters here bragged about scoring good deals on merchandise and travel.

Perhaps, subconsciously people still remember that, and want to save the splurging for later, when a dollar buys more.

That would also be beneficial to society in helping out various industry workers when the next recession hits.

 

[Another Reader]

I do expect to spend more when the economy tanks. I hope to buy more assets on sale at deep discounts, get a really good deal on a nice car if I happen to need one then, and enjoy cheap travel to less crowded places. I will also give more to groups that help abandoned cats and dogs, as pets are usually one of the first "luxuries" to be discarded when the income disappears.

 

[audreyh1]

Because some of us do not have pensions, so our retirement sustainability is at the mercy of the markets. And because we take a long term view.

We have no pensions, SS, and live off investments only. We’re spending more now partly because we might have to spend less later. Unspent excess is going into the rainy day fund too.

I do remember big travel bargains in the last recession.

 

[Danmar]

What anxiety?
.

You sounded a little defensive about “not having a pension” and seemed worried about having to rely solely on your portfolio? I guess you must have been referring to others, not yourself?

 

[gayl]

Wealth definitely changed my spending and I'm not even mid7s rich. I used to be on another site where no one got why I would gift so much. Like I've given:

• 50k to DS for downpayment (mini farm)
• 10k to DD SO for their mfg house downpayment
• 10k car for each kid
• French horn to a kid for college
• multiple family vacations (there's 15 of us)
• their Roths

Mom used to have a saying: it's my money I can burn it if I want

 

[happy8]

Yes, compared to five years ago I now:

-No longer sweat the "small stuff", i.e. I don't argue with merchants over stuff less than $50, even when I think they are eggregiously wrong or unreasonable. This has been a wonderful change, as the psychological and probably physical toll of getting worked up over a few dollars is a cost far more than the dollars saved, at least for me. Wish I knew that many years ago.

-Eat whatever and wherever I want. Don't pay much attention to menu prices. Fortunately, I don't drink wine!

-Take great pleasure in giving very generous tips, to those who I think deserve it.

-Fly business class on long haul flights (still fly economy on domestic but pay for premium economy, and paying for privileges of choosing seat, priority boarding, priority security if available)

-When on vacation, will pay high $$ for private guides/tours. This has made vacations so much more enjoyable, interesting, safe, and time efficient for me.

I have read many studies that say over about $75k/year, there is not much correlation between extra money and happiness. For me, that is not true!

 

[Meadbh]

You sounded a little defensive about “not having a pension” and seemed worried about having to rely solely on your portfolio? I guess you must have been referring to others, not yourself?

Not having a pension is a fact. I have incorporated all the relevant facts into my retirement planning. I happen to be a very analytic INTJ. If I were worried about having to depend on my portfolio, I would not have retired early.

 

[ExFlyBoy5]

I can't say that our spending has increase much than before I retired. I pulled up my VG account (first time in about 2 months) and was surprised at how much it's grown over the last couple of years. On one hand, I feel like we could spend 50% more than we do now and not really have any anxiety doing so, but on the other hand we don't really want for anything more than what we have now. I do expect that we will take a trip late next year (New Zealand, and we will not be flying in the cattle car section, so those plane tickets will NOT be cheap) that will come with a pretty high price tag, so that will burn some cash.

 

[Danmar]

Not having a pension is a fact. I have incorporated all the relevant facts into my retirement planning. I happen to be a very analytic INTJ. If I were worried about having to depend on my portfolio, I would not have retired early.

Ok excuse me, but now we know you do have a pension, and rental income I believe. So you are just being conservative. Cheers.

 

[gcgang]

I've got less years to live, more financial assets to spend. Of course I'm spending more.

 

[flintnational]

I've got less years to live, more financial assets to spend. Of course I'm spending more.

Yes, the math works in our favor. I think? If I could choose, I would rather have more years and less money.

 

[Meadbh]

Ok excuse me, but now we know you do have a pension, and rental income I believe. So you are just being conservative. Cheers.

I guess CPP is a pension. I expect it to start about $620 per month in today’s dollars, in 2022. I do not have an pension from an employer, like your generous one. You, I believe, will also be entitled to CPP, no? I have seen your previous posts in which you write of CPP as immaterial. To me, $620 per month is material.

After 5 years of ER, my annual spending has been pretty stable despite market increases. I have not been miserly with myself; that’s just my comfort level. I am happy to have enjoyed a favourable sequence of returns so far. As I get further from ER, the risk of portfolio failure lessens. I plan to give myself a modest increase in 2018 and in fact have mulled over the idea of buying a nicer home. Now if only I could find one that keeps all my favourite features of my present one....