Retirement Spending Is Not a Straight Line

[NW-Bound]

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.

 

[Animorph]

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.

 

[haha]

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

 

[Katsmeow]

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.

 

[Onward]

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.

 

[ERD50]

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.

-ERD50

 

[NW-Bound]

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.

 

[walkinwood]

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.

 

[NW-Bound]

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.

 

[walkinwood]

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.

 

[MasterBlaster]

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

 

[NW-Bound]

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.

 

[MichaelB]

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.

 

[youbet]

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.

 

[youbet]

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.

 

[haha]

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 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.

It just spent a week with some guys 1 year older than me. I spent more than I ever had before in my life. And that was just food and drinks. I'd say if people are counting on eating less as they age, they had better start the countdown quite a bit later.


Ha

 

[NW-Bound]

Youbet, you are telling real stories, and Katsmeow and myself have observed reduced spending with our relatives, which did not have to do with lack of funds. For people who have exhausted their savings and depend solely on SS, they really do not have a choice, in that case there's not much to talk about.

If we are talking about reducing true discretionary spending, then we have seen different stories. It will be up to the individuals who will decide whether that extra spending is worthwhile. When I can no longer wander the streets of Europe by myself, I think I will just stay home, while somebody else may pay to have his wheelchair pushed around for sightseeing. There is no right or wrong, is there?

And haha, yes, I can see one wanting to move up in the "food chain". But boy, one has to eat a lot to spend much money, and I have seen my own geezers eating so little as they aged. Of course they were older than you are right now, and definitely not in the same health condition.

Anyway, as all this talk does not change my planned 3.5%, it is just chat, as youbet said. And chat is what I have been doing, until I recover and hit the road again. But that will not happen for a while, so this is my past time right now, hanging around here...

 

[haha]

And haha, yes, I can see one wanting to move up in the "food chain". But boy, one has to eat a lot to spend much money, and I have seen my own geezers eating so little as they aged.

Not sure about that. I have been to dinners for 5 with a $2300 check. I guess that is not much compared to buying a new 911, but it is a helluva lot for one meal. Fortunately I was a guest at these, or I would not be here now. I might have died on the spot.

Ha

 

[NW-Bound]

You surely keep higher-class company than I have. My friends thought I was a big spender compared to themselves.

 

[youbet]

Anyway, as all this talk does not change my planned 3.5%, it is just chat, .

By this I assume you mean that your chosen 3.5% WR is not impacted by an assumption that you'll spend less as you age?

The "age related spending" talk is only "chat" if your opinion is not affecting your decisions regarding today's spending level. For example, DW and I do spend a bit less today than we would if we were comfortable assuming we'd definitely spend less as we progress deeper into geezerhood.

BTW, I too have seen examples of folks spending less as they age. Especially if you do not include LTC expenses during the final years. But my point is, we're willing (and able) to spend a bit less today to empower us to continue spending at the same rate through our final years. If we don't want or need to, that'll be great news for the grandkids' inheritance I guess!

There's no doubt that overall financial well being has to do with our decision. There are folks here on the board who have described how they are living on a small fraction of our yearly spend. I think I recall $20k being tossed out. I doubt they'd want to reduce that to enable constant spending throughout life since they'd likely be giving up some basic necessities.

 

[NW-Bound]

As described earlier, although I anticipate spending less as I age, I like to stay at 3.5%, so that my stash hopefully will stay the same, if it does not grow. And the latter seems unlikely, given my gloomy outlook of stock return.

Yes, I derive some pleasure from successfully managing my money and watching that bottom line of Quicken. I do not have to convert that into spending to be happy.

Go ahead and call me Scrooge. I do not mind as I call myself that repeatedly here in this forum.

Still, if and when my stash grows beyond expectation like the wildest traces in FIRECalc, then I may visit each of the fancy and expensive restaurants the like have been described in a book by Michael Ruhlman to see for myself. However, it is likely that I may just say I can't really tell the difference from my hometown bistro. But that of course may just be my peasant's palate.

 

[Lsbcal]

...(snip)...
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.
...

Well said, youbet. We only have our son and I cannot imagine him (currently living and working in another city) doing much of the care giving. So I'd like to ensure we have plenty of $'s for the future. And when the time comes to sell the big house, that will free up more cash. Hopefully there will be some really nice choices to make the transition easier but who knows for sure. That may be 15 years off, or more.

Right now I do all the gardening and we use very few services. A lot of this is not to save money but because we prefer it this way.

We find that DW is more challenged by trips that involve long plane flights and maybe cold (unseasonable) conditions. So age takes its toll on our versatility. Little aches and pains. Shorter hikes, etc.

 

[Lsbcal]

...(snip)...
Go ahead and call me Scrooge. I do not mind as I call myself that repeatedly here in this forum.

As a Srooge, you have lots of company here.

If and when my stash grows beyond expectations like the wildest traces in FIRECalc, then I may visit each of the fancy and expensive restaurants the like have been described in a book by Michael Ruhlman to see for myself. However, it is likely that I may just say I can't really tell the difference from my home-town bistro, but that of course may just be my peasant's palate.

Instead of going to a fancy restaurant, we are more likely to do more nights out at the current favorites. Seems there is an amount of spending beyond which one just buys pretentious living -- too uncomfortable for my tastes.

 

[youbet]

As described earlier, although I anticipate spending less as I age, I like to stay at 3.5%, so that my stash hopefully will stay the same, if it does not grow. And the latter seems unlikely, given my gloomy outlook of stock return.

Yes, I derive some pleasure from successfully managing my money and watching that bottom line of Quicken. I do not have to convert that into spending to be happy.

OK, that makes perfect sense. You're just saying that you've seen examples of folks voluntarily spending less as they age and that you think that will be the case with yourself as well. But you're uninfluenced by that belief in your current spending which is more determined by the desire and enjoyment of seeing your portfolio grow.

We're a bit the same way. We spend a bit less now than we might if we believed we'd definitely want to spend less later on. But, we're comfortable with our current spending and have people that are important to us that will receive any residual if in fact we don't spend it later on.

Having the resources to maintain independence as long as possible is important to us however.

 

[NW-Bound]

As a Srooge, you have lots of company here.
Instead of going to a fancy restaurant, we are more likely to do more nights out at the current favorites. Seems there is an amount of spending beyond which one just buys pretentious living -- too uncomfortable for my tastes.

I am never pretentious, but often wonder if all the luxury things that are hyped are really real, or if I could tell the difference (or care). Hence, the willingness to try, if I have the dough that is.

Sometimes, it's not even scrooginess that makes me spend less.

For example, when we discovered a nice bistro in town, after dinner, I told my wife I liked to come back next week to try different dishes. My wife talked me out of it, saying that we then would not appreciate it as much and need to space it out. The place is not too expensive that we cannot eat there every week.

In fact, I was thinking that if I were a single old gentleman who lived nearby by myself, I could even walk there for dinner everyday and just have their lower-cost du jours to save the hassle of cooking. But then, I suspect I would soon get tired of the cuisine and have to intersperse that with some Cup-o-Ramens.

OK, that makes perfect sense. You're just saying that you've seen examples of folks voluntarily spending less as they age and that you think that will be the case with yourself as well. But you're uninfluenced by that belief in your current spending which is more determined by the desire and enjoyment of seeing your portfolio grow.

We're a bit the same way. We spend a bit less now than we might if we believed we'd definitely want to spend less later on. But, we're comfortable with our current spending and have people that are important to us that will receive any residual if in fact we don't spend it later on. Having the resources to maintain independence as long as possible is important to us however.

Some posters have said that they would regret not spending more if they end up with a lot of money. Hence, they tried to optimize their spending now. I think it's OK to die rich (again, not too likely given the stock prospect). I would enjoy watching it while alive, then other people can partake in it later too.