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Old 08-11-2013, 10:57 AM   #21
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Despite all the studies done, my own personal spending in old age may not conform to averages, so I'm not going to plan so that my spending is not constrained by this pattern. I would like to allow for the possibility of travel (perhaps even more expensive pampered travel) if I feel up to it. Likewise, I expect my spending on household help, lawn service, car service, clever new things or medical advances not yet invented and so on will rise as I get very old, assuming I can stay out of nursing care. If not, then I will want to have enough to afford really good nursing care.

I am not planning on decreasing spending. If I find I do not spend as much as I allowed for, then I can increase my charitable giving. I really do not want to be caught short because I made some assumptions about spending that turned out to be untrue, or only apply in general, but mot to me in specific. Just like I do not plan to run out of money once I reach my forecast life expectancy, I do not want to be limited by over-optimizing my plans.
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Old 08-11-2013, 11:14 AM   #22
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We are spending considerably less on housing and more on travel.

We did not downsize to save money but we certainly notice the difference in what we now spend. And we are much happier with a downsized lifestyle. Next to go will be one of the automobiles. Again, not to save money but to get rid of something that we don't need and has become a millstone.

We anticipate spending much more on travel- for the next ten years at least until we hit 70...and hopefully for another 10 years if we remain healthy. This will probably involve storing everything and going to live overseas for a year at some point.

We have more than we need and more than we anticipated to have. Our thoughts now turn to what we can do for our children some distant point on the horizon. Their chances of having the same income levels and the same retirement nest egg are certainly not as great as ours were. In the meantime they have to learn to struggle financially, budget accordingly, and build lives for themselves.
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Old 08-11-2013, 12:31 PM   #23
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The morningstar article referenced in the first post http://corporate.morningstar.com/ib/...rawalRates.pdf
Thanks.
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Old 08-11-2013, 12:35 PM   #24
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2.8% WR?

I'd better go find out what our SS will be, and put that into my plan.
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Old 08-11-2013, 02:36 PM   #25
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Another thing I observed in nursing homes. My father-in-law lasted 3 years in the nursing home, and outlived many of his roommates. Until his death, he was visited daily and patiently spoonfed by my wife and her siblings. Left alone, he would have been fed via a tube because he had problem swallowing. I suspect many of his roommates did not last as long because they were heartbroken and lonely. Compassion given by the non-relative care takers only goes so far.
If only more people would understand this. One of my biggest fears of getting older is having to rely on non-relatives because there is no one else. Although, I have the greatest respect and admiration for those caregivers who are truely devoted to helping the aged with compassion and attention. At the same time I wouldn't want to be a burdon on any family member that would prevent them from living their own life as they deserve. I would rather walk off into the forest like an old Indian. That or just ride off into the sunset on an Indian motorcycle.

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Old 08-11-2013, 02:55 PM   #26
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While we tried to help our parents as much as we could, I do not expect the same from my children.

And it does not matter how kind a care I could get. I feel that, at a certain point, there would be nothing left for me to hang on, and it would be time to go. People told me that when I reach that point, I may change my mind. It may very well be so, but if we do not reflect about it now, then when do we?

Somewhere on this forum, people talked about the Smith & Wesson insurance policy. In a modern society, people in terminal illness should not have to face that. A way to do it is to take a flight to Holland and to come back in an urn, from what I have read. Oregon may be a possibility. I do not know the exact laws and details, however.
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Old 08-11-2013, 03:04 PM   #27
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My grandmother's biggest complaint at the nursing home, having outlived all her close friends, was "why can't I just die so I don't have to live like this?"

I don't think I'd feel like that, but it's certainly something to think about.
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Old 08-11-2013, 04:21 PM   #28
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While we tried to help our parents as much as we could, I do not expect the same from my children.

And it does not matter how kind a care I could get. I feel that, at a certain point, there would be nothing left for me to hang on, and it would be time to go. People told me that when I reach that point, I may change my mind. It may very well be so, but if we do not reflect about it now, then when do we?

Somewhere on this forum, people talked about the Smith & Wesson insurance policy. In a modern society, people in terminal illness should not have to face that. A way to do it is to take a flight to Holland and to come back in an urn, from what I have read. Oregon may be a possibility. I do not know the exact laws and details, however.
I don't think there is enough knowledge about the effect a suicide may have on those left behind, particularly one's children. I don't know any children of suicides (at least that I know about.) But whenever some act that still has some degree of social disapproval occurs in one's own family, a bit of the taboo on that act disappears. This is clearly seen with children of divorce, who as I remember are quicker to get divorced themselves than children from intact families. I know I am glad that neither of my parents committed suicide. Even the phraseology is interesting, one only "gets" divorced, but he commits suicide.

Every now and then some old guy quietly falls off a ferry on a night passage. It always makes me wonder, and that is the beauty of it. One could never say for certain that it was intentional, if that happened to his parent.

But these things are no good for the worst of all situations, when one is demented beyond being able to understand or do anything much.

IMO, even if religion seems whacky to a person, humans need it. And I doubt that religion light will do it. If your religion is the gospel of happiness and success, what do you do when you are paralyzed and cannot even talk? A good pastor understands suffering and despair.

Ha
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Old 08-11-2013, 04:22 PM   #29
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In my running of Firecalc I don't plan on reduced later life spending. Even so, it isn't as if planning now to be able to spend the same amount at, say, 85 as at 60 isn't something without cost. That is, if you can plan for extensive travel at 85 just on the small chance you will be alive and will feel like it and doing that has no negative impact on your current lifestyle then fine.

On the other hand, if keeping enough money so that you do extensive travel at 85 causes you to not be able to travel when you are 65, then one might choose to spend that money at 65 and recognize that, as a result, you won't be able to travel as much at 85.
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Old 08-11-2013, 05:20 PM   #30
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2.8% WR?
This is not such earth-shaking news. The paper subtracts 1% for fees before arriving at 2.8%. Add it back in, and you get roughly a 3.8% SWR for 30 yrs. Very close to the rule-of-thumb 4% pre-fee that is commonly used.

But ... the paper arbitrarily (?) chops 2% off the historical return for stocks. I didn't see an explanation for this, other than the authors' gut feeling that 11+% was too high going forward.
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Old 08-11-2013, 05:30 PM   #31
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Despite all the studies done, my own personal spending in old age may not conform to averages, so I'm not going to plan so that my spending is not constrained by this pattern. ...
Agreed, I find all this talk of averages interesting.

If I use averages for many things, a 55 YO has an average LE of 27 years., If I plug a 27 year plan and $1M portfolio into Firecalc, and use a 50% success (average performance), I get a 6.4% WR. Might as well take SS at 62 since I may not make break-even, (say $15,000). That gets me up to a 7.3% spend rate. And add the Bernicke model for good measure, we get to 10%. No problem, .... on average.

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Old 08-11-2013, 05:48 PM   #32
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I don't think there is enough knowledge about the effect a suicide may have on those left behind, particularly one's children. I don't know any children of suicides (at least that I know about.) But whenever some act that still has some degree of social disapproval occurs in one's own family, a bit of the taboo on that act disappears. This is clearly seen with children of divorce, who as I remember are quicker to get divorced themselves than children from intact families. I know I am glad that neither of my parents committed suicide. Even the phraseology is interesting, one only "gets" divorced, but he commits suicide.
You do have an excellent point.

I think people would understand the difference between suicide and real self-euthanasia, with the latter being an act of self-mercy.
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Old 08-11-2013, 05:59 PM   #33
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Agreed, I find all this talk of averages interesting.

-ERD50
...and there lies the whole problem. How do you tweak the averages to account for your own uniqueness?

Old age seems so far away for me now (ie. more than 15 years) that I'm just assuming that we'll spend more or less what we do now till the end. I'll adjust that assumption as we go.

I've stopped worrying about portfolio survival. We've adjusted a lot already and will find a way to adjust in the future.
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Old 08-11-2013, 06:00 PM   #34
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This is not such earth-shaking news. The paper subtracts 1% for fees before arriving at 2.8%. Add it back in, and you get roughly a 3.8% SWR for 30 yrs. Very close to the rule-of-thumb 4% pre-fee that is commonly used.

But ... the paper arbitrarily (?) chops 2% off the historical return for stocks. I didn't see an explanation for this, other than the authors' gut feeling that 11+% was too high going forward.
I skimmed the article and missed that. Ah, I feel better now.

I think many financial gurus have reduced their projection of stock return from the historical average, and I agree with them. The past included wonderful development such as the industrialization at the beginning of 20th century and the technological advances since. Once we go from horse carriages to automobiles, the next step such as EVs just does not have the same oomph.

I remember as a kid in the 60s, during the advent of the space age, there was talk about future personal flying saucers and the like. And now, all I see is that we scuttle the Space Shuttle because it costs too much and is too risky. All we have recently are tech toys like iSomethings, but those are hardly the more profound developments we had in the past. I am still waiting for a oral pill that would take care of our cancer patients.

Anyway, 3.8% is good. And I am still holding out hope for more, of course.
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Old 08-11-2013, 06:02 PM   #35
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Old people spend less on every day activities - so even if they travel the world, their annual spend may be less than when they were younger. On a daily basis, they eat less, drive less & buy fewer new clothes, toys & household items.
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Old 08-11-2013, 06:20 PM   #36
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This retirement spending pattern topic is not new and has been an academic topic for years.

The Bogleheads website has a very thourough discussion here:

Models of spending as retirement progresses - Bogleheads

I am surprised that nobody yet has posted links to the work of Bernicke and his ''Reality Retirement Planning'' approach
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Old 08-11-2013, 06:24 PM   #37
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People here know about Bernicke's work, but they do not think it applies to themselves because 1) they will remain active to the end, or 2) the medical expenses will get higher and that replaces discretionary spending.

PS. As stated earlier I myself plan for a flat 3.5% because I do not like to see my stash going down, even though it is most likely my spending will go down as I age.
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Old 08-11-2013, 06:32 PM   #38
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Building a plan based on a real decline in future spending is a dangerous approach. The downside risk is much greater than the upside and represents a scenario with few options if the reality is different. I'll continue to assume our later years will be just as expensive even if the spending mix is different.
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Old 08-11-2013, 07:15 PM   #39
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There's more to this than just the academic question of whether spending will decrease in later years or not. It seems like the real issue is whether or not to actually spend more while you're younger assuming you'll spend less when older.

If the question as to whether or not an octogeneran will spend less is strictly academic, it makes no real difference other than as a chat topic. But, if your intention is to actually spend more today on the assumption that you'll desire to spend less later, then you have to accept the risk of that being true and your opinion matters and has consequences.

For those of you who feel that beginning in your late 70's, you'll desire to spend less, who of you are actually spending more now because of that belief? If you're not actually spending more now, it makes little difference what your opinion is other than as chat.
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Old 08-11-2013, 07:43 PM   #40
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People here know about Bernicke's work, but they do not think it applies to themselves because 1) they will remain active to the end, or 2) the medical expenses will get higher and that replaces discretionary spending.
I agree with the two items you mention as a cause of continued spending into geezerhood. But you may be missing an important factor for some folks: independence.

DW and I cherish being on our own and calling our own shots. If the time comes when we can't stay in our own home independently due to physical limitations, we want to be able to afford expensive services to allow us to do so. Our family won't have the time to be our independence enablers but will likely be able to oversee our expenditures to ensure we're not ripped off. With an on call handyman, house cleaner, lawn and garden service, driver, shopping service, etc., we've seen older friends and relatives stretch their years of independence significantly.

7 years into FIRE and at age 66, we haven't needed any help traveling yet but we just saw an example of folks who did. We just returned from a week fishing in northern Minnesota where we stay at an American plan lodge on a lake in the NW corner of the state. Older (than us) folks arrived with a grand-nephew in tow. They just didn't feel physically comfortable being out on the lake alone, hauling trolling motor batteries around, etc. anymore. They paid for meals and accomodation for the young, strapping lad and gave him a nice stipend as well. He was a well spoken 18 yr old who loves to fish and the outdoors and he helped his uncle with the driving (it's 12 hours from Chicago) and heavy lifting. He helped me with a few things too.

There are a few things we'd do more of today if we were comfortable that we'd be spending less in the future, so there is some sacrifice involved. But we're fortunate that our FIRE situation is adequate enough that the things we'd spend the extra on today aren't that meaningful to us. If circumstances work out that we can buy some independence down the road, we hope we're prepared to do so.
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