Running out of money?

[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]

Quote:

Originally Posted by wyecrabber1 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]

Quote:

Originally Posted by COcheesehead 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]

Quote:

Originally Posted by bradaz2488 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]

Quote:

Originally Posted by 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.

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

[Texas Proud]

Quote:

Originally Posted by ElizabethT 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]

Quote:

Originally Posted by Texas Proud 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.

[mickeyd]

Living the life that is guided by LBYM insures that one does not spend more than is available. Don't most REers live this way?

[stepford]

For the various folks talking of parents or parents in law running out of cash in their 90s and then having to shoulder the burden of paying for nursing home care - isn't Medicaid supposed to cover this. Perhaps not the nicest facility, but something (?).

Or are we already assuming that Medicaid is soon to be abolished?

[Fermion]

When I am 90, whatever is left in SS will be enough.

I want to have enough money in my 50s 60s, 70s and 80s though.

[mpeirce]

Quote:

Originally Posted by stepford For the various folks talking of parents or parents in law running out of cash in their 90s and then having to shoulder the burden of paying for nursing home care - isn't Medicaid supposed to cover this.

In my DGM's case, the place she lived was above the level medicaid would pay for. Since the family could afford it if we had to, we wouldn't move her from the place she had lived in for many years. It would have been very tough for her to leave her friends behind.

[nun]

I planned for a 0% WR because I'm the eternal pessimist.

[RunningBum]

Quote:

Originally Posted by COcheesehead 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 "worry" about money in that sense of identifying underperforming investments or overspending. I don't want to get to the point of near disaster and having to take drastic action. I think most of us here are that way, though it sounds like a few don't need to. I want to know as early as possible if I'm heading toward failure so I can cut back on luxuries not so important to me, and not have to give up extras I really enjoy, and certainly not basic comforts. I don't ever want to go into survival mode, and I'm pretty certain I won't.

If you're happy as long as you can keep a roof over your head and adequate nutrition, you probably don't need to worry. If you have higher hopes for living in comfort, maybe you do want to be at least somewhat concerned.

If you're talking about people outside this forum, yes, I do know people who have lost their house and gone bankrupt, or are basically living on a meager SS and will be in subsidized housing soon.

As far as obsessing about AAs, withdrawal strategies, and returns, for me, that's as much of a hobby as it is worrying. I like playing the numbers game. I'll look for a better credit card deal, CD interest rate, plane fare, and discounts. I do it more to feel good about finding these things rather than feeling like I have to or I'll run out of money.

I wouldn't have gotten to where I am, ER'd before age 50 and living very comfortably, without managing my money well, and I'm not going to stop now.

[Danmar]

Quote:

Originally Posted by Texas Proud I, for one, do not think a $2 million house is frugal.... just sayin.....

They bought it for $150,000 in the '70's. Nothing special. Poorly maintained and decorated. This is Toronto.

[Bigdawg]

Quote:

Originally Posted by Danmar 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.

+1

[Danmar]

Quote:

Originally Posted by stepford For the various folks talking of parents or parents in law running out of cash in their 90s and then having to shoulder the burden of paying for nursing home care - isn't Medicaid supposed to cover this. Perhaps not the nicest facility, but something (?). Or are we already assuming that Medicaid is soon to be abolished?

The compararable program in Toronto would be pretty grim. I would rather pay for a better place for my mom.

[Fermion]

Quote:

Originally Posted by Danmar The compararable program in Toronto would be pretty grim. I would rather pay for a better place for my mom.

Do we have any actual proof of this or just stories? Do they beat you every Saturday and twice on Sunday? Serve cat food just once per day?