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More difficult then you would think... spending down
Old 01-16-2015, 03:47 PM   #1
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More difficult then you would think... spending down

Like the article says: "When my will is read, it will begin with the statement: 
"Being of sound mind and body … I spent it all.""

The challenge of spending is a tricky one for those that are not looking to leave large inheritances.

Can't say I have any bright ideas, but I do spend some time looking out some 20 years or so and thinking about the minimum $s I want to show up with at the age (approx. 80 yrs old) on the theory that I ought to amortize current excess $s and add to increased spending.

Read more: Planning To Die Rich Misses The Point - Business Insider
Planning To Die Rich Misses The Point - Business Insider
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Old 01-16-2015, 03:51 PM   #2
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Just put all your $ into annuities, both immediate and some that pay later so you have increasing income, and live it up.


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Old 01-16-2015, 03:52 PM   #3
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Hmmmm....maybe I should borrow to pay for my mega yacht. My estate can pay it off.
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Old 01-16-2015, 03:59 PM   #4
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( I want to spend down but can't do that even if I try when I am still doing OMY. )

Isn't "spending down" more of an issue for folks without children? What are their plans to spend down if any?
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Old 01-16-2015, 04:05 PM   #5
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I would rather have money left over when I kick the bucket than risk becoming destitute. I am not going to make any attempt to "spend it down" until at least 5 years after ER, that is, until the retirement risk period is over I am sticking to ~3% WR. If things look good 5 years in, I will loosen the purse strings a little.
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Old 01-16-2015, 04:24 PM   #6
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The classic trade-off, trying to predict your demise or health issues that come up with age vs spend now and enjoy while you can.

I agree, it is not an easy thing to determine. I don't like to think about my mortality.
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Old 01-16-2015, 04:29 PM   #7
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Dying with nothing left means I barely survived pretty much the worst case scenario. It's certainly not a goal. Even if I didn't have heirs, I'd be as happy knowing my money would go to good use wherever I decided to leave it as I would seeing it while I'm alive. If I'm very safe I may get more generous in my later years.

I just don't get some on here who are trying to figure out how to spend more. Seems to me that you spend whatever you need and want up to your SWR. Maybe one of you can explain why you feel like you must find things to spend your money on when you have a low withdrawal rate.
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Old 01-16-2015, 04:44 PM   #8
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I'd love to be able to build my own pyramid but don't believe I can order enough concrete and cut stones since the local builders and Exxon are gobbling it all up.

Given I won't have any pyramid to house me and the collection of toys and gold and jewels I am hoarding, I guess I'll have to start spending more as time goes on. Wait..I believe DW has just volunteered to handle that for me. What a relief!

Seriously, being in the RMD phase adds another dimension to spending. Not only are you making funds available, Uncle Sam is requiring it! (talk about SWR choice!) Moving IRA funds into a Roth at this point is a choice, but like before RMD (and still working), it looked like a taxing event. Now with SS and RMDs, it's still a substantial tax hit to convert funds to Roth.

One thing we are doing is passing assets to children now, rather than at some point in the future. We helped DD buy a small house a few years ago and that worked out well. We give cash to the kids annually. We helped with one grandchild's college costs.
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Old 01-16-2015, 04:46 PM   #9
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Originally Posted by robnplunder View Post
( I want to spend down but can't do that even if I try when I am still doing OMY. )

Target ER -> OMY.
I see your problem. Target ER -> OMY..you never get there... it is always OMY!
(hint) -- you never get there.

I have one too... planned WR 1.5%, 2% when splurging...the kinds will be happy as I can't spend down!
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Old 01-16-2015, 04:53 PM   #10
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We helped DD buy a small house a few years ago and that worked out well. We give cash to the kids annually. We helped with one grandchild's college costs.
Stop! You are setting a bad example for us all.

Perhaps, it's not too late for you to adopt me. I don't eat much but can take your money at will.
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Old 01-16-2015, 04:57 PM   #11
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Originally Posted by aja8888 View Post

Seriously, being in the RMD phase adds another dimension to spending. Not only are you making funds available, Uncle Sam is requiring it! (talk about SWR choice!) Moving IRA funds into a Roth at this point is a choice, but like before RMD (and still working), it looked like a taxing event. Now with SS and RMDs, it's still a substantial tax hit to convert funds to Roth.
See, that's another aspect I don't get. Uncle Sam requires you to take RMDs. You don't have to find things to spend it on. You can just invest the money in a taxable individual account. I mean, if you use the logic that you have to spend RMDs, wouldn't the same logic say that you have to spend your whole paycheck that you get from your job? Not exactly, I know, but just because money is taxed doesn't mean you can't set it aside.
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Old 01-16-2015, 04:58 PM   #12
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The VPW Retirement Calculator is a good way to put flesh on this topic. See this thread and then go to Bogleheads for the actual calculator:
VPW - Best Withdrawal Calculator I've seen to date.....
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Old 01-16-2015, 05:15 PM   #13
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See, that's another aspect I don't get. Uncle Sam requires you to take RMDs. You don't have to find things to spend it on. You can just invest the money in a taxable individual account. I mean, if you use the logic that you have to spend RMDs, wouldn't the same logic say that you have to spend your whole paycheck that you get from your job? Not exactly, I know, but just because money is taxed doesn't mean you can't set it aside.
And setting the RMDs aside in a taxable account is mostly what we are doing. I just hate to pay the taxes on it. But it is accumulating since we spend less than what we have available from SS and RMDs (no pension).
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Old 01-16-2015, 06:20 PM   #14
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From my perspective I am not trying to die with one dollar in the bank: or anywhere near it. However, I also do not want to end up with 100% of what I have now. That would mean way, way too many $s left unspent. Hence, my thought is to set milestones for net worth to drop to as I age. And have 80 be the end point to arrive at with x dollars (which would still be a very substantial amount....).

And by the way, spent includes substantial donations in my book...
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Old 01-16-2015, 08:00 PM   #15
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I would be very happy to be able to insure our security and then leave an inheritance and fund a charitable trust!
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Old 01-16-2015, 09:16 PM   #16
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I would be very happy to be able to insure our security and then leave an inheritance and fund a charitable trust!
+1
We have set our trust to disburse funds to 2 well known charities, and a local no-kill animal shelter.

I recently learned (unfortunately)of a new charity to help cancer patients. I'll investigate it, I have a personal relationship with the founder. Maybe I'll volunteer to assist him.

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Old 01-16-2015, 09:38 PM   #17
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I would be very happy to be able to insure our security and then leave an inheritance and fund a charitable trust!
+1. I am okay with leaving money to the kids, food bank and a local elephant sanctuary. As our kids get older and seem settled in careers, maybe we will leave more to the elephants. I am okay with using our NW more as a financial security blanket for when we are older than having the last check bounce.
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Old 01-16-2015, 11:27 PM   #18
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As gcgang points out you can buy annunities and have nothing left at death (better buy a funeral in advance though or your survivors will be stuck paying for it). But that then is essentially making a bet with the insurance company (exactly the opposite bet of life insurance) that you will live longer than the company things, just like life insurance is essentially a bet you will die sooner.
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More difficult then you would think... spending down
Old 01-17-2015, 02:52 AM   #19
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More difficult then you would think... spending down

'Spending it all' is likely going to be a big problem for many on this board as we will adjust WR to the safe zone as indicated by Firecalc, et al for a 95% success rate.

However if returns exceed the 5% bear market scenarios - retirement accounts are going to have an embarrassing wealth of surplus riches - which it will be difficult to spend.




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Old 01-17-2015, 07:30 AM   #20
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Love this line from that article:
Quote:
Your gravestone will have two dates separated by a hyphen. You have no control over the dates, but you do have control over the hyphen … that’s your life. Make the most of that hyphen.
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