Has the wealth effect changed your spending?

[Teacher Terry]

We spent much less our first year then in the past 5 years.

 

[athena53]

Yes, compared to five years ago I now:

<snip>

-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)

And don't forget the day passes to an airline lounge when you have a long layover and are flying Coach! Heavenly.

Typically when I embark on a vacation, I've paid for the airfares and maybe even the accommodations months ago, so when it comes to a few frills en route, I go for them.

 

[NW-Bound]

I guess CPP is a pension. I expect it to start about $620 per month in today’s dollars, in 2022...

Wow! Here in the US, people who are not eligible for SS because they do not have enough work credit can get SSI, which can be as high as $750/month. It is however based on needs, and only goes to people who show no assets. Workers who work their entire life earning low wages do not get much more than this $750 for their earned SS, and I have seen that causes some resentment.

Sorry for the interruption. We are now back to blowing more dough from this bull market.

 

[bada bing]

I have spent about 10% more this year than last, but I don't know that it is
connected to equities "wealth effect". My spending is up without any notable
expenditures, just more frivolous stuff.

I am still working full time and on ~2MY glide path. I made my savings targets
for the year by max'ing out all the tax advantaged accounts available to me and
I'll make a deposit to my taxable brokerage account before the end of the year
about equal to last year. My wage cola this year was 3.5% and my sideline biz
did better, but all that evidently got spent on scotch, restaurants and toys.

If the market had been down this year, it might have influenced my spending
though, now that I think of it. My NW increased $250K this year - $90K savings
+ $160K Mr. Market. I am perhaps too aware of that fact from checking mint.com
a few times a week. I should probably stop doing that.

 

[daylatedollarshort]

We try to find ways to live better but spend less every year.

 

[RobbieB]

Ah yes, more dough and less years here also. I think my net worth has increased 15% during the 3 and a half years I've been retired.

And if you put more dough and less years into any calculator it will tell you to Blow More Dough -

 

[Meadbh]

Wow! Here in the US, people who are not eligible for SS because they do not have enough work credit can get SSI, which can be as high as $750/month. It is however based on needs, and only goes to people who show no assets. Workers who work their entire life earning low wages do not get much more than this $750 for their earned SS, and I have seen that causes some resentment.

Sorry for the interruption. We are now back to blowing more dough from this bull market.

CPP is funded by employer and employee deductions, currently 4.95% of earnings up to $55,900. I have paid my dues.
https://www.canada.ca/en/revenue-ag...p-contribution-rates-maximums-exemptions.html

To obtain the maximum CPP benefit (currently $1114 per month) one would have to have worked at least 40 years in Canada, which I have not.
https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html

The calculation allows elimination of up to 17% of years with low or no income, but for an early retiree, those years can easily be exceeded, thus curtailing the maximum amount available. Therefore, it does not benefit the early retiree to wait too long. OTOH, taking CPP prior to age 65 means CPP is discounted by 0.6% per month (a 36% haircut if taken at age 60). For people who continue working up to and beyond 65, it may be beneficial to wait till age 70 to take a CPP, because they get a bonus of 0.7% per month of delay, a 42% increase in monthly benefits if they wait till age 70.

There is a Canadian program called OAS (old age security) which sounds more like what you are describing. However, it is clawed back if total taxable income is above a certain threshold. I do expect that any OAS I might be entitled to would be clawed back. That equates to an extra 15% in income tax.

OTOH, my healthcare premium in 2018 will be $37.50 per month.
https://www2.gov.bc.ca/gov/content/health/health-drug-coverage/msp/bc-residents/premiums/rates

 

[pb4uski]

Ah yes, more dough and less years here also. I think my net worth has increased 15% during the 3 and a half years I've been retired.

And if you put more dough and less years into any calculator it will tell you to Blow More Dough -

When I saw the OP I was thinking it was a particularly silly question for RobbieB.

 

[flintnational]

When I saw the OP I was thinking it was a particularly silly questions for RobbieB.

+1 The early posts were, "No I have not increased my spending" I was waiting for RobbieB to turn the tide.

 

[NW-Bound]

CPP is funded by employer and employee deductions, currently 4.95% of earnings up to $55,900. I have paid my dues.
https://www.canada.ca/en/revenue-ag...p-contribution-rates-maximums-exemptions.html

To obtain the maximum CPP benefit (currently $1114 per month) one would have to have worked at least 40 years in Canada, which I have not.
https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html

We have talked about this before, but I forgot the details. Put aside SSI (US) and OAS (Ca) which none of us here would be eligible, here's the US system for non-US citizens to compare.

The maximum US SS benefit is $2639/month at FRA (full-retirement age) which is 66 for those born between 1943 and 1954. And one must have worked more than 35 years to get that. One gets more if he delays till 70. Both employees and employers contribute 6.2% each, up to the income limit of $127,200.

And so, the US SS is not really more generous than Canada's. However, if people complain that SS is not enough to live on (it is not), then Canadians must really have a better savings rate outside of the CPP if they want to survive.

OK, obviously people must have their own substantial savings, either before or after tax, in order to even contemplate "blowing off dough". And to this subject, we are now getting back.

 

[audreyh1]

Since retiring in Aug of 1999, our net worth has grown 113%. In real terms (adjusting for inflation) the growth is 66%. That's after over 18 years of living expenses, taxes, plus buying a fancy motorhome and upgrading to a more expensive home.

I have tracked our net worth since retiring, both in nominal and real terms. I started doing this after the 2008 debacle when our nominal net worth was slammed so hard it was below where we retired in 1999 for a short while.

After the 2008/9 slam, net worth had already recovered in real terms before the end of 2009. It took a bit longer to recover to end of 1999 "peak" levels - didn't recover that in real terms until late 2012.

We're quite happy for net worth to keep up with inflation. Anything above that is gravy. Actually keeping up is gravy, as we are OK with spending down a good bit of our investments.

I forgot what the point of this was supposed to be, LOL! Something about spending and portfolio growth.

Oh yeah - when your net worth is ahead of inflation, it just seems smart to take a bit more off the table while you are alive and healthy, and can use the funds, right?

That's why we don't reinvest unspent funds even though our income (the withdrawal) is growing faster than spending at the moment. Don't see the point in having the long-term pile get even bigger. You never know when the long-term pile is going to take another nasty hit and several years of income/withdrawals go up in smoke. We prefer to lock in that excess with short-term funds not subject to the volatility of equities.

 

[bclover]

ok, I apologize but I have to ask, what is CPP?

 

[NW-Bound]

Ah yes, more dough and less years here also. I think my net worth has increased 15% during the 3 and a half years I've been retired.

And if you put more dough and less years into any calculator it will tell you to Blow More Dough -

You made me look.

From 5/18/2012 when I last had earned income (it's easy to look up Quicken), my stash has grown [-]25.4%[/-] 35% in nominal terms. And that's after I have spent a whole lot more than I initially thought I would.

Should I spend more? Don't think so. In just the last 5 trading sessions, the market has taken away almost what I spent YTD.

 

[MRG]

We've been spending more. Why?

I'm more comfortable almost 5 years into retirement. At 60 I can see SS closer, perhaps at 65-70. Who knows if I'll receive what's estimated for my contributions. I'd love it if it's real.

We've cut down on some worthless things, $5000 yearly savings in personal property taxes!

Is this because of the markets? Maybe my comfort factor has changed? Obviously the change in ppt is a substantial cut in expenses.

 

[NW-Bound]

I made a simple error. The return in the 5 years since I stopped having earned income was 35%. If I did not spend anything, it would have been a lot higher.

I spent a lot early, and got away with it. Have no need to spend now, else I would.

 

[Walt34]

ok, I apologize but I have to ask, what is CPP?

In this context it is Canada Pension Plan:

https://en.wikipedia.org/wiki/Canada_Pension_Plan

 

[RobbieB]

I don't need to spend more, I just want to.

 

[NW-Bound]

I don't need to spend more, I just want to.

OK. I understand now.

Many of us, myself included, don't need to, nor want to.

 

[ejman]

You made me look.

From 5/18/2012 when I last had earned income (it's easy to look up Quicken), my stash has grown [-]25.4%[/-] 35% in nominal terms. And that's after I have spent a whole lot more than I initially thought I would.

Should I spend more? Don't think so. In just the last 5 trading sessions, the market has taken away almost what I spent YTD.

You made me look too. According to Quicken my stash has grown 125% in nominal terms since retirement 12/31/2002 to the close today. Heavens I really do need to do something about this! But I already have a wonderful sound system - maybe I'll really should consider those Utopias after all...

 

[audreyh1]

Anyone wanting to know the real growth of their stash, https://inflationdata.com/inflation/inflation_calculators/Cumulative_Inflation_Calculator.aspx is a handy calculator. For inflation at the start of any year, select Dec of the previous year as the starting point.

 

[ejman]

Anyone wanting to know the real growth of their stash, https://inflationdata.com/inflation/inflation_calculators/Cumulative_Inflation_Calculator.aspx is a handy calculator. For inflation at the start of any year, select Dec of the previous year as the starting point.

Thank you for the calculator link although I still have a lot of difficulty correlating the official inflation rate with my personal inflation rate. According to Quicken our expenditure level pretty much has remained level year to year since ER so I guess we must be doing a lot of stealth substitutions I'm not consciously aware of. Definitely Medicare has helped immensely with HC expenses but our "normal" standard of living feels pretty much the same over the years.

 

[dtbach]

OK. I understand now.

Many of us, myself included, don't need to, nor want to.

I've upped my spending a fair amount since my NW increased by more than 140% in the last 9 years. Why not? Not a lot, but I do get better grades of food and buy appetizers, and upgrade to balcony on cruises. I could go on and on but upgrading to better stuff really only adds about 25% to the costs and does improve our lives in meaningful ways.

Don't worry, I'll still leave plenty to the kids.

 

[audreyh1]

Thank you for the calculator link although I still have a lot of difficulty correlating the official inflation rate with my personal inflation rate. According to Quicken our expenditure level pretty much has remained level year to year since ER so I guess we must be doing a lot of stealth substitutions I'm not consciously aware of. Definitely Medicare has helped immensely with HC expenses but our "normal" standard of living feels pretty much the same over the years.

I just do the real calcs as a measure against various models since they all use CPI. It has no bearing on our personal inflation rate.

 

[Aerides]

I'm not increasing anything based on the current bull, or anything recent.

But once we get close to SS/MC age, and have a good decade of ER behind us... well let's just say if we end up in one of the really good firecalc lines then yes I will definitely increase.

 

[Danmar]

ok, I apologize but I have to ask, what is CPP?

Canada Pension Plan.