Running out of money?

[bigcmagor]

MIL passed about six months after running out of money at 87 years old. Said she never figured she would live so long. My folks are still kicking, more like shuffling really. They never indulged in much of anything, retired not by choice at 59 and have amassed a high 7 figure nest egg - and still drive to multiple stores to take advantage of sales and coupons weekly. While I'm grateful I won't have to cover their late-life expenses, I'm sad that their frugality and desire to accumulate superseded living a life outside their home. We are trying to find a balance between these two scenarios.

 

[Zoocat]

I used to post as Oldbabe then disappeared from here about 2010. I have popped in now and then and saw this thread on the issue of early retirees running out of money. I never ran out of money but have to say that the crash of -08-09 scared me a lot. I kept working part time, even though I could have retired earlier than I did. And I'm glad for it.

Can't say I was careful with budgets etc but I did set a goal to be mortgage free with no debts at age 65. I knew I'd have no control over the stock market so kept my allocations very conservative. Missed out on a lot of the big run up in stocks but have felt very comfortable with my choices. so now two years into full retirement I think I'm pretty much set for the long term at this point. But who knows?

I learned a lot from this forum and highly recommend it.

 

[Teacher Terry]

I thought I was posting right under Music Lover about the people cashing out their pensions. That was sad.

 

[COcheesehead]

MIL passed about six months after running out of money at 87 years old. Said she never figured she would live so long. My folks are still kicking, more like shuffling really. They never indulged in much of anything, retired not by choice at 59 and have amassed a high 7 figure nest egg - and still drive to multiple stores to take advantage of sales and coupons weekly. While I'm grateful I won't have to cover their late-life expenses, I'm sad that their frugality and desire to accumulate superseded living a life outside their home. We are trying to find a balance between these two scenarios.

Great post. Life's adventure should continue after FIRE.

 

[Music Lover]

I thought I was posting right under Music Lover about the people cashing out their pensions. That was sad.

One of the fellows that cashed out used the money to pay off their house, buy new cars for him and his wife, and take a couple trips. She was still w*rking so they had regular money coming in. Everything went well for a couple years until she caught him cheating and filed for divorce. Neither one could afford to buy half of the house from the other so it went up for sale and now they both live in apartments.

3 years has gone by since the divorce and sale of the house. His half of the proceeds probably gave him enough to live on for 5-6 years but of course that's not enough. He is now back at w*rk as casual staff 3 - 4 months a year at a far lower wage doing menial work like stuffing envelopes into slots and moving carts around. He left just before turning 50 and is now 55. Had he stayed, he would have been eligible to retire with a COLA govt. pension the day he turned 55 and would have been set for life.

 

[wyecrabber1]

My mom probably is going to run out of money. She had a nice home and downsized to a condo. My step dad passed away about 10 years ago. She has a gov't pension, a small SS check and an annuity and five years ago she had about $350K in investments. She moved to an Erickson retirement community in Baltimore. She started out with a nice two bedroom unit in the independent section -- she was happy and financial well. A couple of falls later -- she had to move to the assisted living facility. The cost was $7000+ per month plus meds. The care at the AL facility was terrible -- we moved mom to another AL center in Southern PA. Mom was there for about a year and her health declined and she was moved to the skilled nursing care section. The monthly cost is $14,000 a month. Mom does have LTC insurance -- 4 years worth -- paying $8000 a month, but she'll exhaust that this year. So within 18 months she'll run out of money. The facility will keep her when her money runs out and she fork over her SS and pension.

The problem is mom's mind is as sharp as a tack. He body is failing her. 30+ year of diabetes has taken it's toll. She's unable to walk from the bed to the bathroom, she cannot do daily activities and is unable to manage her medicines. Even with the care at the assisted living facility mom is extremely unhappy. I get it, she's being warehoused until she takes her last breath. She's lost everything. She's the last of her family. She's suffering and there's not a lot that can be done. She's asked me to take a leave of absence from my job, help her establish a residence in Vermont and find a physician who will provide a lethal dose. Unfortunately, God does not have a good plan for the elderly in poor health.

 

[COcheesehead]

My mom probably is going to run out of money. She had a nice home and downsized to a condo. My step dad passed away about 10 years ago. She has a gov't pension, a small SS check and an annuity and five years ago she had about $350K in investments. She moved to an Erickson retirement community in Baltimore. She started out with a nice two bedroom unit in the independent section -- she was happy and financial well. A couple of falls later -- she had to move to the assisted living facility. The cost was $7000+ per month plus meds. The care at the AL facility was terrible -- we moved mom to another AL center in Southern PA. Mom was there for about a year and her health declined and she was moved to the skilled nursing care section. The monthly cost is $14,000 a month. Mom does have LTC insurance -- 4 years worth -- paying $8000 a month, but she'll exhaust that this year. So within 18 months she'll run out of money. The facility will keep her when her money runs out and she fork over her SS and pension.

The problem is mom's mind is as sharp as a tack. He body is failing her. 30+ year of diabetes has taken it's toll. She's unable to walk from the bed to the bathroom, she cannot do daily activities and is unable to manage her medicines. Even with the care at the assisted living facility mom is extremely unhappy. I get it, she's being warehoused until she takes her last breath. She's lost everything. She's the last of her family. She's suffering and there's not a lot that can be done. She's asked me to take a leave of absence from my job, help her establish a residence in Vermont and find a physician who will provide a lethal dose. Unfortunately, God does not have a good plan for the elderly in poor health.

Wow, thanks for sharing and I am sorry to hear about your Mom.
There are many take a ways from your story. Hopefully we can all learn from her circumstances.

 

[gcgang]

I know several "successful/smart" people - doctors, business owners - that retired during the peak of the late 1990's bull market, assuming 10%+ returns would be easy, who ended up back in the work force after the 2000-2002 correction.

However, I agree with the earlier poster who said most people here, with their attention to detail, frugal habits and 100%+ Firecalc success, are probably underspending and are going to leave a larger legacy than they ever dreamed.

 

[2017ish]

I know several "successful/smart" people - doctors, business owners - that retired during the peak of the late 1990's bull market, assuming 10%+ returns would be easy, who ended up back in the work force after the 2000-2002 correction.

However, I agree with the earlier poster who said most people here, with their attention to detail, frugal habits and 100%+ Firecalc success, are probably underspending and are going to leave a larger legacy than they ever dreamed.

We will play/plan hard not to make our kids even richer at our deaths; already booking trips that we couldn't take the time for while we were practicing. But will be like Athena53 and others--most of our spending is going to be highly discretionary and can/will be slashed if we start getting into grey areas. Have no qualms doing percentage of portfolio with floor at 2% of starting portfolio--even that is more than what we live on now. (of course, most would slot us into the first "successful/'smart'" group anyway--not realizing how much we belong in this forum!)

On the running out, my family history is much like others--you don't need a ton of income if you are healthy (the wildcard) and have inexpensive tastes. Grandma, a prototypical blue-collar widow, up until age 97 had great joy in dumping $10 into the cheap slots once or twice a week--and sometimes she'd win.

 

[ejman]

+1

I track my expenses for the same reason. Same as you, I would save a bunch without charity, gift giving, and travel. If I jettison the 2nd home, I will save even more.

Come to think of it, when one has a paid-for home and is on Medicare, has no car payments, just stays home to surf the Web and cooks own meals, what are the expenses? Food is darn cheap, and then old people do not eat that much. Wine bottles under $10 are plenty good. Heck, my favorite wine currently is a box wine.

The scenario you describe can last a long time even under really difficult economic conditions. I.e as long as one doesn't have any debt and medicare and SS keep going ( assuming "they" don't muck those up), one can survive. What buggers up that scenario is health issues, having to go to assisted living, or a nursing home. Even when the body holds up mental issues can screw up the survival scenario real nice...

 

[Music Lover]

However, I agree with the earlier poster who said most people here, with their attention to detail, frugal habits and 100%+ Firecalc success, are probably underspending and are going to leave a larger legacy than they ever dreamed.

That's me...modest income my whole life but paid off a house and I will be quite comfortable on my modest pension when it kicks in in a few months. Probably due to that modest income, I chose inexpensive hobbies that cost little or nothing and I also became a good DIYer to save having to pay someone $$ every time something broke.

 

[RobbieB]

I don't know any retired people that ran out of dough, only those that are still working.

 

[street]

I guess it could be possible with some catastrophe event. Nursing homes will empty the bank in a hurry. If stocks went south and never rebounded we all would be in the same boat.
With SS and savings I should never run out unless some event I can't foresee.

 

[ggbutcher]

With all our discussion here about withdrawal strategies, returns, AA's and such, has anyone run out of money or known someone who has or nearly has? I am assuming people take action as they see the inevitable and ward off disaster. I wonder sometimes if we worry too much or if the threat is truly real.

I personally think you have to worry enough to manage the risk. Sitting here today, there are a few things I cannot know: 1) how long DW and I will live, 2) how healthy we will be (imoldernu's sugar post is freaking me out right now...), 3) how reliable are our income sources in retirement. These constitute risks that require some consideration.

Risk is all about managing consequences and their associated probabilities. For longevity, I use the six-sigma tail value of age 100, plan for savings withdrawals to last at least that long. For income source reliability, I am arranging multiple sources, both pensions and savings, if one falters it won't take us down the tubes. For health, well, doggonit, I'm going to go and throw all the sugar we have in the trash. Oh, when DW gets home....

 

[marko]

I don't know any retired people that ran out of dough, only those that are still working.

+1
My God, what a great observation!

I suspect knowing there's a limited source of income people better regulate themselves.

At the same time, people in retirement might slowly find themselves downsizing unconsciously if they have to. ("oh, we decided to not go to Europe this year" "Let's get rid of the other car" "Let's eat in more").

As noted however, readers of this forum will skew the responses.

 

[Danmar]

I've seen both ends of the spectrum. My in laws continued to save all through retirement. Started with about $1-2 million now have over $5million plus their $2million house. Frugal to the point of cheapness. Great for us so not complaining.

Other end is my mom. She was never frugal and actually a little frivolous and vain. She may very well run out of money. But she is 91 and has about 6 years of funding left. If she runs out, we will pay her nursing home bills which are quite high at about $85,000 per year.

Running out of money would be painful and difficult to talk about, Pretty sure they would simply drop out of the discussion.

Also agree that most smart planners would have several alternative mitigating plans that would prevent the actual event of running out of money. This is why I find the almost anal discussion of Firecalc scenarios of little use, especially for those in drawdown mode.

 

[marko]

On second thought, we had an early retiree neighbor who blew through a $2MM inheritance on Keno/Scratch tickets. Ended up selling her house (and two other income properties) and now living on the other side of town in subsidized housing.

 

[travelover]

I just spend as much as I want because I know that if I need help, all the super frugal people here will chip in and help me maintain the standard of living that I deserve.

Hello.......hello?

 

[bradaz2488]

Only 3.5 years into ER so I'll be concerns about out living my money for awhile. Like others I run many scenarios on various RE tools to continue to give me the reassurance that I made the right decisions. I do worry that I underestimated healthcare costs and inflation in my ER plan, but I also have buffer with assuming no SS or Medicare. We could also cut a lot out of the budget with travel & dinning out. If it gets really bad we could down size the big house and sell a couple of cars. I will do want ever it takes to not to go back to w*rk. Once you get a taste of the ER "freedom" the thought of going back to the "rat race" make me sick.

 

[athena53]

She moved to an Erickson retirement community in Baltimore. She started out with a nice two bedroom unit in the independent section -- she was happy and financial well. A couple of falls later -- she had to move to the assisted living facility. The cost was $7000+ per month plus meds. The care at the AL facility was terrible -- we moved mom to another AL center in Southern PA. Mom was there for about a year and her health declined and she was moved to the skilled nursing care section. The monthly cost is $14,000 a month. Mom does have LTC insurance -- 4 years worth -- paying $8000 a month, but she'll exhaust that this year. So within 18 months she'll run out of money. The facility will keep her when her money runs out and she fork over her SS and pension.

Wow- there's an Erickson community near me and from the newsletters they used to send it looked like a great place (ladies in their 90s working on a prairie grass restoration project and putting up bird houses made by residents in the woodworking shop). I had no idea costs escalated that much if you needed more intensive care. Well, they don't have one near DS and DDIL anyway, and that's where I plan to move when I want to get out of my current house.

To get back to the OP's question- I know of two, both actuaries, who had to re-think their retirement. One left and planned to make money day-trading and got caught in the dot-com bust. He went back to work PT. Another was written up someplace (NY Times?) and the link got posted on an actuarial discussion board. His portfolio tanked during the financial crisis and he was looking for a job again. I could see that happening if the withdrawals you needed for a bare-bones budget exceeded 4% of your reduced portfolio. In a way it's pure bad luck- there are plenty of stories on sequence-of-returns risk and you really start off on the wrong foot if the market tanks right after you retire.

 

[Tom52]

With all our discussion here about withdrawal strategies, returns, AA's and such, has anyone run out of money or known someone who has or nearly has? I am assuming people take action as they see the inevitable and ward off disaster. I wonder sometimes if we worry too much or if the threat is truly real.

Well I do know that my FIL, who is 84 and long retired has virtually exhausted whatever savings he may have had when he retired many years ago. Over the years to cut costs he cancelled the newspaper subscription, cable TV, land line, even dropped house insurance. He lives in a huge house that is falling down around him because he cannot afford to repair anything.

Unfortunately, it appears that his total savings consist of a checking account with about $2,500 in it. He also receives $1,200/mo in SS. He has been able to subsist like this for a number of years, but he has been unable to have, in my opinion, any reasonable quality of life. He depends on family for support but it has been expected more than appreciated.

He recently went into a VA hospital with serious heart problems. He may never get to go back to his home again. If he has to go into a nursing home that will be a problem because he can't afford it.

 

[ElizabethT]

I will do want ever it takes to not to go back to w*rk. Once you get a taste of the ER "freedom" the thought of going back to the "rat race" make me sick.

This. Even after six years of FIRE I still have the occasional nightmare about this.

And similar to what others have indicated, we have multiple back up plans if things go south on the financial, or even medical, front. Our biggest back up plan is holding our fixed expenses (fuel/repairs/groceries/insurance/HOA/taxes/utilities) to a minimum of $40,000, which represents a WR of just .7%. It's also why I ignore my children's frequent jokes about our home running a tad warm in the summer and cool in the winter, Mom's from-scratch cooking vs convenience foods, and why we continue to live sans Cable TV.

Alternately, we're far less concerned about minding our pennies with regard to our discretionary spending, which represents the remaining 2% of our WR. We are value conscious for sure, but not intent on maximizing our discretionary spend down to the dollar level the way we are with our fixed expenses.

We sleep very well at night as a result.

 

[Texas Proud]

I've seen both ends of the spectrum. My in laws continued to save all through retirement. Started with about $1-2 million now have over $5million plus their $2million house. Frugal to the point of cheapness. Great for us so not complaining.

Other end is my mom. She was never frugal and actually a little frivolous and vain. She may very well run out of money. But she is 91 and has about 6 years of funding left. If she runs out, we will pay her nursing home bills which are quite high at about $85,000 per year.

Running out of money would be painful and difficult to talk about, Pretty sure they would simply drop out of the discussion.

Also agree that most smart planners would have several alternative mitigating plans that would prevent the actual event of running out of money. This is why I find the almost anal discussion of Firecalc scenarios of little use, especially for those in drawdown mode.

I, for one, do not think a $2 million house is frugal.... just sayin.....

 

[Texas Proud]

This. Even after six years of FIRE I still have the occasional nightmare about this.

And similar to what others have indicated, we have multiple back up plans if things go south on the financial, or even medical, front. Our biggest back up plan is holding our fixed expenses (fuel/repairs/groceries/insurance/HOA/taxes/utilities) to a minimum of $40,000, which represents a WR of just .07%. It's also why I ignore my children's frequent jokes about our home running a tad warm in the summer and cool in the winter, Mom's from-scratch cooking vs convenience foods, and why we continue to live sans Cable TV.

Alternately, we're far less concerned about minding our pennies with regard to our discretionary spending, which represents the remaining 2% of our WR. We are value conscious for sure, but not intent on maximizing our discretionary spend down to the dollar level the way we are with our fixed expenses.

We sleep very well at night as a result.

I think you got your WR % wrong... unless you have about $57 mill stashed somewhere...

 

[ElizabethT]

I think you got your WR % wrong... unless you have about $57 mill stashed somewhere...

The decimal points always trip me up . . .

Edit: Fixed. I think.