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Should we eat dessert first
Old 05-05-2011, 09:07 AM   #1
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Should we eat dessert first

I was beginning to despair that Scott Burn's columns were going downhill, but I think this one is a gem.

Should We Eat Dessert First?

He discusses mortality probabilities (most of us are going to die before our best case scenarios) and talks about balance between spending now and portfolio longevity. One idea - a small reduction in lifetime income can fund an account to augment income while we're still young and able.
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Old 05-05-2011, 09:32 AM   #2
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Very interesting column and I will agree with it....

Thanks...
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Old 05-05-2011, 09:39 AM   #3
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I think this makes sense. If you feel your spending is going to go down during retirement, you might want to manage your spending with buckets. One bucket provides lifetime income at your "comfortable retired" lifestyle. Another provides near term spending on things that you want to do while your health is still good enough to enjoy them. The buckets give you permission to spend some money sooner.

I did a very small amount of this by considering my non-COLA'd pension "extra" money. Because I expected the real buying power to go down over time, I knew I would have less for "extras" as I got older.

(And, that frosting in the middle of the cake looks great.)
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Old 05-05-2011, 09:53 AM   #4
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Great article....thanks for posting it.
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Old 05-05-2011, 09:59 AM   #5
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I don't know about taking SS any earlier (looks like a previous Scott Burns column on when to take it spurred the responses about retirement spending/aging) but totally agree with the premise about balancing time and money. Thanks for posting the article!
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Old 05-05-2011, 10:07 AM   #6
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Thanks for removing the suggestion that we should eat desert, first or anytime.

As a nation we have eaten enough desert lately; time for some dessert.

Ha
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Old 05-05-2011, 10:17 AM   #7
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Originally Posted by Independent View Post
I think this makes sense. If you feel your spending is going to go down during retirement, you might want to manage your spending with buckets. One bucket provides lifetime income at your "comfortable retired" lifestyle. Another provides near term spending on things that you want to do while your health is still good enough to enjoy them. The buckets give you permission to spend some money sooner.

I did a very small amount of this by considering my non-COLA'd pension "extra" money. Because I expected the real buying power to go down over time, I knew I would have less for "extras" as I got older.
What you actually seem to be saying is work longer and have a larger FIRE portfolio. To have a "comfortable" FIRE portfolio in place plus "extra" money for higher spending while young sounds like a fine idea. But you have to also weigh that against working longer in order to acquire the "extra" money.

If having "extra" happens as a result of your desired career, great! If accumulating "extra" can only result from additional years pulling the plow in a situation you find uncomfortable, that's another decision altogether.

BTW, I don't do the "buckets" thing prefering to manage with an AA outlook. But I did keep spending at my planned level, including discretionary spending, during the recession for some of the reasons given in the Scott Burns article. I'm truly glad I did.
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Old 05-05-2011, 10:32 AM   #8
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The SS aspect confuses the simple message that we should spend more money early.

In fact, my plan at this point is to spend more of our savings now, and delay SS so that it will be enough to live on if we happen to live a long time.
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Old 05-05-2011, 10:43 AM   #9
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Quote:
Originally Posted by walkinwood View Post
He discusses mortality probabilities (most of us are going to die before our best case scenarios) and talks about balance between spending now and portfolio longevity. One idea - a small reduction in lifetime income can fund an account to augment income while we're still young and able.
Yeah, baby, this column would've gone over big in 2008-09. People would've been eating dessert because they weren't sure there'd be any dinner. Ever.

For most Americans, the ones with BMIs in the high 30s and sedentary lifestyles, I think Scott's right. Might as well get your hands on the money while you're still mobile enough to enjoy it. But the margarita analogy has little to do with endurance or longevity-- just a reflection that the human body loses its ability to tolerate alcohol. Longevity may not be within our control, but we can certainly observe how our ancestors did and plan accordingly. We sure can affect our endurance and overall health. Scott is every bit as capable of enjoying a world cruise (or a new roof) in 10 years from now as he was 10 years ago.

My FIL, while he may have a number of social and logical issues, is every bit as physically healthy at 77 as he was at 60. Looking at his parents, I suspect that trend to hold for another decade. I bet he's glad he didn't ramp up spending during his 60s in a fit of "Do it now!"

From a survivor's perspective, I bet Mrs. Burns would be a lot happier if Scott holds off the SS until age 70...
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Old 05-05-2011, 11:08 AM   #10
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As with almost everything, this article's premise makes perfect sense...as long as it's heeded in moderation. Realistically, young retirees will - and are better able, physically - be more active and therefore spend more. I'm still working [sigh] but I had previously given this a lot of thought and independently came to a similar conclusion.
I don't intend to squander our resources, but it doesn't make logical sense to me to presume an equal amount of cash outflow throughout one's retirement/lifetime. Like I said, as long as it is in moderation.
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Old 05-05-2011, 11:23 AM   #11
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In my opinion, this advice from Burns is based on nothing. To look around at the world today, to have some understanding of US federal and local budgetary and financing problems, to realize that in a very weak recovery crude prices are already quite high, to see that politiciuans are ready to talk openly of ditching generations of promises to seniors- doesn't this make you at least wonder if anyone promoting spending could possibly know what he is talking about?

Sure, if someone is comfortable (and I mean really, experientially comfortable) with "Live today, and let the devil take tomorrow", then why not. That person is signing a note that can be called at any time by anything.

But after reading this board for a while, I think I can day without danger of being wrong that this atitude represents at most 0.001% of us.

Ha
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Old 05-05-2011, 11:25 AM   #12
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Originally Posted by TromboneAl View Post
The SS aspect confuses the simple message that we should spend more money early.

In fact, my plan at this point is to spend more of our savings now, and delay SS so that it will be enough to live on if we happen to live a long time.

Yes... agree with this.... if I know that I am going to get SS in the future and it is COLAd... then it is better for me to get that income stream as big as possible... so delay to 70....

But I would be able to spend more from the current stash because I know that I will be replacing the current spending with a bigger SS check later... and if I do not live long enough to get that check... well, I spent more early anyhow....
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Old 05-05-2011, 11:30 AM   #13
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I don't agree with the article at all, based upon my retirement, our lifestyle, and our age (over 60, and enjoy more wine than we did in our earlier years). BTW, DW/me spend much more now, than in our earlier decades (we're the same age).

As usual, he (as a writer) is pandering to the masses (and getting paid for it).

We ate our "veg" before retirement; now we're "eating" our dessert ...
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Old 05-05-2011, 11:36 AM   #14
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Lest my response was misunderstood, I did not mean to imply being wasteful with retirement assets. But if I subscribe to the 4% -or whatever -rule, maybe I'll make it 4 1/2 or 5% in a given year, to allow for some selfish splurging. Knowing me, I'll probably make up for that in the next year by taking out less. My only point was not to feel guilty about it.
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Old 05-05-2011, 11:37 AM   #15
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From the article,

Quote:
Fortunately, this problem has a simple solution. Put as much of your savings as you can afford into an “I want it and I want it now” fund that you intend to spend over the next 5 or 10 years. Then spend it down over that time period.
Normally I wouldn't say this about Scott Burns, but in this article he has got to be out of his everloving mind!

Besides, his whole article rests on a solitary assumption: That all of us are completely mad to spend, spend, spend and that we are longing for consumer items or travel that we are denying ourselves for decades. Oh, and also that this compulsion to spend overrides any value we may hold for the sense of extra financial security from having both belt AND suspenders.

Just a thought - - - by the time any of us here need a walker, you KNOW they will cost ten times what they cost today, in inflation-adjusted dollars. I expect the same to be true for other expenses of old age.
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Old 05-05-2011, 11:45 AM   #16
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I don't agree, either. Though I do expect to be drinking fewer margaritas 20 years from now, there are other expenses that may go up steeply, which is obvious and which Scott Burns seems to have forgotten.
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Old 05-05-2011, 11:45 AM   #17
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We are all struggling to find some "optimum" spending/saving method which will see us through our years yet allow the utmost degree of nestegg utilization. Nobody ever wants to go on the dog-food plan in their old age. Yet what a waste to die with that big nestegg unused. Do you want to go out regretting what could have been ?

The article talks to that issue.

The Bernicke (front-loaded) Reality Retirement Spending plan attempts to addresses some of those issues based on empirical evidence of falling spending patterns and nestegg depletion of retirees.
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Old 05-05-2011, 12:09 PM   #18
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Originally Posted by haha View Post
Thanks for removing the suggestion that we should eat desert, first or anytime.

As a nation we have eaten enough desert lately; time for some dessert.

Ha
I've been misspelling dessert since I started to write!
Thanks to the kind admin who corrected it.
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Old 05-05-2011, 12:17 PM   #19
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Originally Posted by Independent View Post
I think this makes sense. If you feel your spending is going to go down during retirement, you might want to manage your spending with buckets. One bucket provides lifetime income at your "comfortable retired" lifestyle. Another provides near term spending on things that you want to do while your health is still good enough to enjoy them. The buckets give you permission to spend some money sooner.

I did a very small amount of this by considering my non-COLA'd pension "extra" money. Because I expected the real buying power to go down over time, I knew I would have less for "extras" as I got older.

(And, that frosting in the middle of the cake looks great.)
I agree with this definition of "buckets" to fund different aspects/periods of retirement. (I am not fond of Ray Lucia's buckets).

When we ER'd, we had a bucket for our mortgage money which would deplete in 10 years, another one for emergency funds, and then the large one for us to take our living expenses from. It has worked well for us - keeping us from panicking too much in 08/09.
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Old 05-05-2011, 12:29 PM   #20
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I do agree with this...

The basic task here is a delicate balancing act.

When you or your loved one is diagnosed with cancer...even a 'curable' cancer, your way of thinking may change somewhat.

I've always been true to my budget..but not so much anymore. I'm walking a delicate tightrope...and hope I don't fall.
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