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Most retiree will never draw down their portfolio?
Old 07-06-2016, 08:20 PM   #1
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Most retiree will never draw down their portfolio?

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The end result is that while in theory a retirement portfolio is meant to be spent, in practice most retirees faced with an ever-open-ended potential of living many more years will feel compelled to keep extra assets available, just in case… and never actually reach the point of depleting the retirement portfolio at all! Which, notably, isn’t a sign of inefficient portfolio spending or a consumption gap, but merely the prudent reality of dealing with an uncertain future!
https://www.kitces.com/blog/consumpt...94517-57089725

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Notably, in the context of this more conservative scenario, a 65-year-old retiree’s life expectancy is only to their mid 80s (or early 90s as the joint life expectancy for a married couple). Which means a significant number of retirees who use this as their planned retirement spending strategy will pass away before they ever materially dip into retirement principal at all!
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Old 07-06-2016, 08:24 PM   #2
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that's what I love about these armchair actuaries. they assume everyone dies on his/her life expectancy. what about the poor schmo who lives the extra 15 years?

but...that's what FAs do
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Old 07-06-2016, 09:03 PM   #3
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It's OK.

While I am still alive, I enjoy counting my money as much as or perhaps more than spending it. And after I croak, my children will spend it for me, though I hope they will just keep it for counting pleasure.

"Money is much more exciting than anything it buys" -- Mignon McLaughlin
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Old 07-06-2016, 09:50 PM   #4
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Originally Posted by NW-Bound View Post
It's OK.

While I am still alive, I enjoy counting my money as much as or perhaps more than spending it. And after I croak, my children will spend it for me, though I hope they will just keep it for counting pleasure.

"Money is much more exciting than anything it buys" -- Mignon McLaughlin
Same here. I like the financial security and peace of mind. We have a house full of stuff now we are trying to declutter so I'm not sure what we would buy. We're on a not spend principal kind of retirement plan. If we need it for LTC or live unusually long it is there or the kids and charity are welcome to it if we don't need it.
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Old 07-06-2016, 09:55 PM   #5
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I count it once a year and find out I'm not blowing it fast enough.

Imma gonna order up some live spot prawns and oysters and some fresh fish for the weekend from Catalina. That'll blow another hun -
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Old 07-06-2016, 09:58 PM   #6
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While I like to keep my principal constant, meaning have it rise with inflation, there's no guarantee that I will be able to do that. I do not plan to spend it downto zero, however.

I am spending less than FIRECalc says I can. So, if the market return is bad and I have to dip into principal, I hope I still have plenty left when I croak (I do not think I will live to 90 let alone 100). I want to have plenty of assets to feel secure.

Financial security gives me serenity, so it clears my mind to think of pleasant things like cooking new dishes, building electronics, working on my homes, gardening, etc... That's what the excess money does for me. It does not have to be spent.
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Old 07-06-2016, 10:00 PM   #7
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Originally Posted by RobbieB View Post
I count it once a year and find out I'm not blowing it fast enough...
Wish I could say that. I already encountered $18K in unanticipated expenses this year, and we are not past the month of June. Maybe next year we will stop having significant non-recurring expenses. But I have been saying that for a couple of years now.

It's not the same non-recurring charges. That would make them recurrent, duh! Different ones keep popping up.

"If it's not one thing, it's 'nother" -- Gilda Radner
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Old 07-06-2016, 10:01 PM   #8
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Originally Posted by Big_Hitter View Post
that's what I love about these armchair actuaries. they assume everyone dies on his/her life expectancy. what about the poor schmo who lives the extra 15 years?

but...that's what FAs do
This article/blog entry is actually good to cross-link with your mortality salience post.
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Old 07-06-2016, 10:11 PM   #9
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Hehe, done deal. Another hundred bites the dust -

Shopping cart
Product image Description Quantity Price
Fresh Monchong Fillet 1
$ 21.99
Mac's Signature Beach Oysters 1
$ 29.99
Live Sashimi Grade Spot Prawns / Sweet Shrimp (Amaebi) 1
$ 36.99
Cost summary
Description Price
Subtotal $ 88.97
Shipping $ 15.00
Total USD $ 103.97
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Old 07-06-2016, 10:20 PM   #10
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Quote:
Originally Posted by Big_Hitter View Post
that's what I love about these armchair actuaries. they assume everyone dies on his/her life expectancy. what about the poor schmo who lives the extra 15 years?

but...that's what FAs do
That's why it says "most retirees". I still don't see what good a non-COLA'd annuity is going to do the "poor schmo that lives the extra 15 years". Maybe improve his brand of cat food a bit? As far as the assumptions, it's pretty much a waste of time to write articles based on the outliers. That's why those of us who care and who think about it plan for far beyond out actuarial mortality date. I personally made all my assumptions based on no SS and living to 100 (both of us).

Any retiree with half a brain (or a relative with POA and a still functioning one) who is living off their assets and SS is going to be able to adjust their living expenses on an ongoing basis to keep from completely depleting their stash. They may end up with the same brand of cat food as the annuity purchaser, but they "probably" aren't going to run out.

And before you say (again) that the annuity should be COLA'd and it shouldn't be that expensive to do, check around. There aren't many/any, and they're very expensive. I'd like to live in space to decrease the strain on my muscles and joints in old age, but we've got to live in reality.
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Old 07-06-2016, 10:47 PM   #11
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Quote:
Originally Posted by RobbieB View Post
Hehe, done deal. Another hundred bites the dust -

Shopping cart
Product image Description Quantity Price
Fresh Monchong Fillet 1
$ 21.99
Mac's Signature Beach Oysters 1
$ 29.99
Live Sashimi Grade Spot Prawns / Sweet Shrimp (Amaebi) 1
$ 36.99
Cost summary
Description Price
Subtotal $ 88.97
Shipping $ 15.00
Total USD $ 103.97
You've got to post photos of the finished dishes with these ingredients.
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Old 07-06-2016, 11:01 PM   #12
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The oysters will be shucked at the sink and eaten there, no ice or plates needed.

I think we'll do the shrimp tails raw and fry the heads as suggested.

The fish will be boring by comparison (grilled) and consumed the day after.

And you can do the same thing at home just like me!

Live Sashimi Grade Spot Prawns / Sweet Shrimp (Amaebi) – Catalina Offshore Products
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Old 07-06-2016, 11:09 PM   #13
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Well, I do not do raw shellfish or sashimi. They do not work for me.

I would grill them all. You may not care for it, but I like them that way. I am looking for the photos of the grilled oysters and pan-fried sturgeon I prepared myself at a condo in Copalis Beach, WA last year.
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Old 07-07-2016, 12:22 AM   #14
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OK, took me a bit of time to find the photos from that trip last year.

As we stayed for a week in that condo in Copalis Beach, I looked on the Web and found this highly recommended oyster and fishmonger place called Lytle Seafoods. Of course we had to pay them a visit to get some of the oysters they dug up right on their own muddy beach off their shack. I happened to see that they had some sturgeon. My eyes lit right up. The only time I had sturgeon before was many years ago at a Portland restaurant on a day they happened to have it. Sturgeon is somewhat rare and nearly impossible to get. So, I got some to take back to the condo to prepare.





We do not eat raw seafood except for rare tuna, so I had to grill these big oysters. And about the sturgeon, there was no way I could duplicate the excellent white sauce the chef made in that restaurant, so I had to improvise with just some butter and white wine, and served it with a bit of pasta.

If I were at home with more ingredients on hand, perhaps I could research the Web to find something to do the sturgeon better justice. Oh well. It was a good meal, particularly one that I made the best effort with what I had on hand. I still remember that the piece of sturgeon they served me in that Portland restaurant was just a bit more than 1/2 of one of the pieces on my plate in the photo. Yes, it is a lot less expensive if you prepare the meal yourself. Of course it may not be as good, but that gives you a challenge to try your best.

By the way, I had no Tabasco, so ate the oysters with a slice of Jalapeno and lemon juice. Please don't hang me.






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Old 07-07-2016, 04:54 AM   #15
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And before you say (again) that the annuity should be COLA'd and it shouldn't be that expensive to do, check around. There aren't many/any, and they're very expensive. I'd like to live in space to decrease the strain on my muscles and joints in old age, but we've got to live in reality.
I'm talking about in-plan annuities, not retail. you can't shop for those, they are a qualified distribution option.


I was picking nits with the author's assumptions, nothing more. geez
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Old 07-07-2016, 04:58 AM   #16
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This issue is one I think of quite a bit. I have to admit it is hard to actually spend principal, and I guess that means I like to count it too. At some point though, I really need to spend it on something or give more away while alive. I think I can muster up the courage.
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Old 07-07-2016, 05:17 AM   #17
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Being still in my first year of retirement, I am still trying to get comfortable with just how this "decumulation" thing is going to work. I have not been given any reliable inside information on:
The actual date I will die,
the actual date DW will die,
what exactly the markets will do to my stash,
what exactly inflation will do to the purchasing power of my stash,

Hence, I tread lightly, much more concerned about the prospect of living my last days strapped for cash, than I am about not "spending as much as I should".
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Old 07-07-2016, 05:21 AM   #18
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Looking at the study Kitces references, from the executive summary:
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Retirees in the top quintile of financial wealth were spending nowhere near an amount that would place them in danger of running out of money. In fact, the average financial assets of wealthy retirees increased during this period and most retirees spent less than their income.
This seems almost self evident, certainly is no surprise. In fact, reassuring.

NW Bound, that food looks delicious.
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Old 07-07-2016, 06:03 AM   #19
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I doubt that many people want to spend down to nothing. Most would rather live well and leave as much as possible to heir families or charities. If I had no kids I would set up some kind of charitable foundation and leave everything to that. I would still try to maximize the remaining portfolio while living an active, comfortable life. We sold our weekend house earlier this year giving us substantially increased spending power (~4% of the principle + house costs) yet we haven't changed how large we live at all. The main difference we expect is more travel replacing the time spent at the weekend place.
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Old 07-07-2016, 06:07 AM   #20
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It's OK. While I am still alive, I enjoy counting my money as much as or perhaps more than spending it. And after I croak, my children will spend it for me, though I hope they will just keep it for counting pleasure. "Money is much more exciting than anything it buys" -- Mignon McLaughlin
+1. What he said.
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