Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
The Myth of Outliving your Retirement Savings - EBRI
Old 05-03-2018, 08:53 AM   #1
Thinks s/he gets paid by the post
SumDay's Avatar
 
Join Date: Aug 2012
Posts: 1,560
The Myth of Outliving your Retirement Savings - EBRI

As one pulling the plug in 119 days, 15 hours, 7 minutes and 29 seconds (but who's counting?) this EBRI article comforts me, a little.


"While some people do run out of money, a person with less than $500,000 in savings, on average, spends just about a quarter of it during the first 20 years of retirement, according to a study by Sudipto Banerjee of the Employee Benefit Research Institute."



Apologies if someone beat me to posting this.
__________________

SumDay is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-03-2018, 09:12 AM   #2
gone traveling
 
Join Date: Oct 2015
Posts: 138
Quote:
Originally Posted by SumDay View Post
...comforts me, a little.
It should not.
__________________

joylesshusband is offline   Reply With Quote
Old 05-03-2018, 09:16 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 21,742
I don't see where averages are meaningful at all to an individual.

Are all aspects of your profile 'average' - average pension, average SS, average nest egg, average investment returns, average spending, average medical bills? Do you have 2.6 children?

I'm reminded of the old saw of the 6 foot tall statistician drowning in a pool with an average 3 foot depth.

-ERD50
ERD50 is offline   Reply With Quote
Old 05-03-2018, 09:19 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Location: Crownsville
Posts: 2,406
Personally, I don't know anybody who's outlived their retirement savings. All four of my grandparents passed away with money left over, as did my Dad.

I have one relative who's 93, and is struggling, but she also has family who tends to leech off of her. She's going to put her house up on the market soon, and move into a small apartment. I think she gets around $40K per year with retirement and such, so while she won't have an extravagant life, she also won't be out on the street.
Andre1969 is offline   Reply With Quote
Old 05-03-2018, 09:24 AM   #5
Thinks s/he gets paid by the post
SumDay's Avatar
 
Join Date: Aug 2012
Posts: 1,560
Quote:
Originally Posted by ERD50 View Post
I don't see where averages are meaningful at all to an individual.


-ERD50

I've worked with actuaries for decades. I guess it's rubbed off.
SumDay is offline   Reply With Quote
Old 05-03-2018, 09:57 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 25,536
I agree with this following excerpt from the article:

Quote:
Because people worry about outlasting their savings, most adjust by living humbly - often overly so. Consequently, they make even modest savings last for years longer than expected by researchers....
Recently, I quoted an article saying that many retirees were too frugal. Heh heh heh...

Of course, there are plenty of retirees in destitute, but most posters here will not end up there. They get to ER by being frugal, and know how to tighten the purse string when they need to. Heh heh heh...

The article added:

Quote:
What can devastate financially are divorce, caring for a mentally or physically ill adult child who cannot work, and long-term care expenses, according to the Society’s research.

Still, debilitating healthcare costs are far more rare than people fear, according to the EBRI research....
Many people die quickly from an acute illness, sparing them and the family an expensive drawn-out debilitating period. Many former posters here succumbed to that, sadly.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 05-03-2018, 10:16 AM   #7
Thinks s/he gets paid by the post
Rustic23's Avatar
 
Join Date: Dec 2005
Location: Lake Livingston, Tx
Posts: 3,843
My parents out lived their savings. That does not mean they were out on the street. They did not out live their kids!
__________________
If it is after 5:00 when I post I reserve the right to disavow anything I posted.
Rustic23 is online now   Reply With Quote
Old 05-03-2018, 10:27 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Mar 2015
Location: philly
Posts: 1,118
Quote:
Originally Posted by Andre1969 View Post
Personally, I don't know anybody who's outlived their retirement savings. All four of my grandparents passed away with money left over, as did my Dad.

.
Me neither. My oldest relative (my aunt) at 100 is living with her 70 year old daughter. they are fine on ss, small pensions and of course due to health issues they are not living la vida loca but no chances of becoming destitute. I'm lucky in that I seem to have strong genes. all my parents and their siblings except for one seem to die of natural causes at old age.
My dad at 85 watched a yankee game at home, had his usual night cap of Jack Daniels on the rocks and passed away in his sleep. now that's classy.
__________________
My darling girl, when are you going to realize that being "normal" is not necessarily a virtue? it sometimes rather denotes a lack of courage~Aunt Francis
bclover is offline   Reply With Quote
Old 05-03-2018, 10:44 AM   #9
Thinks s/he gets paid by the post
 
Join Date: Oct 2013
Posts: 1,182
Quote:
Originally Posted by bclover View Post
My dad at 85 watched a yankee game at home, had his usual night cap of Jack Daniels on the rocks and passed away in his sleep. now that's classy.
Having grown up in the city of another American League team, I agree that your DD's passing away was classy *except* for the part about the Yankees.
__________________
“Every tick-tock is a second of life that passes by, that flees never to repeat itself. And it holds such intensity, such interest that the only problem is knowing how to live. May each person solve it as best they can.”

Frida Kahlo
candrew is offline   Reply With Quote
Old 05-03-2018, 10:46 AM   #10
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Location: Crownsville
Posts: 2,406
I think one area where I've been fairly lucky is that, when the time did come, my family members all went pretty quickly, so they didn't have a long, agonizing process that dragged on and ran up a lot of medical bills. I'd say the longest was my maternal grandmother, who went into the emergency room in August 2014, and passed away in May of 2015. She did run up around $50,000 in bills in that timeframe, but that included her funeral, plus about $14,000 to remodel the bathroom in her house to make it wheelchair accessible...for awhile, there was actually hope that she would come back home.

My paternal Granddad was the longest to live...he had to go into the emergency room on September 16, 2016, and passed away on September 28. If he had made it to October 25, he would have been 102!

My Dad was in bad health, but refused any medical treatment, and ended up alienating everyone in the family, except for me. I'd stop by a few times per week to check up on him, get him groceries and, I'm ashamed to admit, cigarettes. Then one morning, when I called to see what he wanted from the store, there was no answer. I had a gut feeling that was it. I went over to the house, opened the door, and found that he had passed away on the couch. It was rough finding him like that, but it looked like he had gone peacefully, at least. And, on his own terms...at home. He hated hospitals with a passion.
Andre1969 is offline   Reply With Quote
Old 05-03-2018, 11:00 AM   #11
Thinks s/he gets paid by the post
Teacher Terry's Avatar
 
Join Date: Jun 2014
Posts: 4,222
My mom outlived hers dying just short of 90. But she was able to live just fine on SS and small pension. She pre-paid her funeral expenses. She told us to sell her car and take that $ and pay for everyone to have a nice lunch at a restaurant she chose after the funeral. I am glad she spent her $ traveling, etc.
Teacher Terry is offline   Reply With Quote
Old 05-03-2018, 11:04 AM   #12
Full time employment: Posting here.
 
Join Date: Jul 2013
Posts: 726
Quote:
Originally Posted by bclover View Post
My dad at 85 watched a yankee game at home, had his usual night cap of Jack Daniels on the rocks and passed away in his sleep. now that's classy.
Friend of a friend type story:

Two men had been out on the lake fishing all day. The one guy backed the trailer into the lake at the boat ramp. The other guy brought the boat around and drove it up onto the trailer. When he went to see why the man driving the pickup didn't come back to help him out, he found him sitting in the driver's seat, pickup in Park, dead. I think it was a massive heart attack or stroke or similar.

Not a bad way to go.
__________________
In alcohol's defense- I've made some pretty bad decisions while completely sober.
Clone is offline   Reply With Quote
Old 05-03-2018, 11:13 AM   #13
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,973
Quote:
Originally Posted by ERD50 View Post
I don't see where averages are meaningful at all to an individual.

Are all aspects of your profile 'average' - average pension, average SS, average nest egg, average investment returns, average spending, average medical bills? Do you have 2.6 children?

I'm reminded of the old saw of the 6 foot tall statistician drowning in a pool with an average 3 foot depth.

-ERD50
Most of us don't want to be termed "average", but on the whole we are. I agree with you to a degree, but I think we all think we're more unique than we truly are. I think it is better to rely on average and median studies for planning than it is to rely on anecdotes. You can make an educated guess at where you're above average and where you are below and maybe end up with a better plan.

But, it is always better to go to the actual study and read it before using a snippet in the news to do any planning. Here's the issue brief from EBRI
https://www.ebri.org/pdf/briefspdf/EBRI_IB_447.pdf

I am not surprised by the study. Just look at people here. 2%, 3% SWRs when studies show that 4 to 4.5% SWRs survived 90+% of the time based on historical studies. And this is a cohort that for the most part already lives below their means, pays attention to finances and are thus more likely than average to make adjustments fast based on portfolio returns and expenses.

I thought the reasons for the underspend is sound too. There is a lot of uncertainty in our society (I'm referring to the US here) that does not exist (or does only to a lesser degree) in other developed countries.

BTW, I am one of those people. I should have retired earlier because there isn't much added utility in increasing my spending to match what I am able to spend.
walkinwood is offline   Reply With Quote
Old 05-03-2018, 11:23 AM   #14
Recycles dryer sheets
Tallman4123's Avatar
 
Join Date: Aug 2014
Posts: 133
My mother outlived her savings as of age 86 (she is now 89) and my three siblings and I support her. She remains in the house I was born in and lives on less than $18k per year with ~$4k of that coming from Social Security. We supply the rest. At age 58 she was diagnosed with chronic leukemia and at that time was told that survival ranged from 6 to 20 years. Thirty years later, with significant advances in treatment, we are grateful to still have her with us and physically and mentally functioning at a fairly high level.

Why did she run out of money? Due to a couple strokes, my father had to retire about 6 years before he planned to, so their nest egg - and his pension - was not at the level they had hoped (he was a high school teacher and she was mostly a SAHM). Given my mother's health status and my father's forced health-related retirement, they decided to take a significant risk and took his pension with no survivorship in order to maintain a reasonable standard of living. When my father passed away 20 years later, my mother was able to stretch their depleted savings another 7 years before running out of money.

I suppose that's a story that demonstrates a "below average" situation where running out of money happens even when the people involved lived a modest existence.
__________________
"Doubt is not a pleasant condition, but certainty is absurd." Voltaire
Tallman4123 is offline   Reply With Quote
Old 05-03-2018, 11:46 AM   #15
Administrator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: lumpen slums of cyberspace
Posts: 30,153
Quote:
Originally Posted by SumDay View Post
As one pulling the plug in 119 days, 15 hours, 7 minutes and 29 seconds (but who's counting?) this EBRI article comforts me, a little.


"While some people do run out of money, a person with less than $500,000 in savings, on average, spends just about a quarter of it during the first 20 years of retirement, according to a study by Sudipto Banerjee of the Employee Benefit Research Institute."



Apologies if someone beat me to posting this.
Interesting article, thanks for posting.
MichaelB is offline   Reply With Quote
Old 05-03-2018, 11:49 AM   #16
gone traveling
 
Join Date: Mar 2015
Posts: 3,508
Quote:
Originally Posted by SumDay View Post
As one pulling the plug in 119 days, 15 hours, 7 minutes and 29 seconds (but who's counting?) this EBRI article comforts me, a little.


"While some people do run out of money, a person with less than $500,000 in savings, on average, spends just about a quarter of it during the first 20 years of retirement, according to a study by Sudipto Banerjee of the Employee Benefit Research Institute."
So as long as you are willing to "end your retirement" after 20 years, you should be fine!

That, or "practice fiscal restraint" later on. That used to be called "eating cat food" I believe.

Realistically, most people adjust their spending based on whatever they have left. Some have to adjust more than others. And some aren't able to make that adjustment.

I don't believe this is a myth. I have several friends who are supporting their older parents for the rest of their lives. I'm glad my parents arranged so that they won't need support. I have done the same.
joeea is offline   Reply With Quote
Old 05-03-2018, 12:06 PM   #17
Recycles dryer sheets
fosterscik's Avatar
 
Join Date: Jun 2013
Posts: 296
Interesting. Here's the original article:
https://www.ebri.org/pdf/briefspdf/E...ion.3Apr18.pdf
summarized in the previous post
fosterscik is offline   Reply With Quote
Old 05-03-2018, 12:18 PM   #18
Recycles dryer sheets
Olbidness's Avatar
 
Join Date: Jan 2009
Location: W. Galveston Bay
Posts: 263
Quote:
Originally Posted by Clone View Post
Friend of a friend type story:

Two men had been out on the lake fishing all day. The one guy backed the trailer into the lake at the boat ramp. The other guy brought the boat around and drove it up onto the trailer. When he went to see why the man driving the pickup didn't come back to help him out, he found him sitting in the driver's seat, pickup in Park, dead. I think it was a massive heart attack or stroke or similar.

Not a bad way to go.
My second cousin died sitting on a deer stand. My mom thought it was sad that he was alone. I told her he wasn't alone, I never felt closer to my maker than when in nature doing what I love.
__________________
The cure for everything is saltwater. Sweat, tears, or the sea.
Olbidness is offline   Reply With Quote
Old 05-03-2018, 12:39 PM   #19
Full time employment: Posting here.
davebarnes's Avatar
 
Join Date: Dec 2015
Location: Berkeley, Denver, CO, USA
Posts: 771
Some of us want to leave money to our kid(s).
If all goes perfectly, according to the simulations, my younger wife could leave as much as $10M to our daughter. That would be awesome.
__________________
Dave Barnes
Old (71.0) Fart Nerd
AA 73/24/3, WR=3.6%, 91.6% retired, still working 1/2ish hrs/day
davebarnes is online now   Reply With Quote
Old 05-03-2018, 12:46 PM   #20
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 10,421
Quote:
Originally Posted by davebarnes View Post
Some of us want to leave money to our kid(s).
If all goes perfectly, according to the simulations, my younger wife could leave as much as $10M to our daughter. That would be awesome.
Or she could remarry and her and the new guy could spend it all.
__________________

__________________
I'm out of signature material at this time.....
aja8888 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
EBRI report: Estimating health costs in retirement SumDay Health and Early Retirement 3 03-03-2015 08:50 AM
Confidence in retirement continues to flail - EBRI survey obgyn65 FIRE and Money 4 03-19-2013 01:23 PM
Outliving your money may not be all that bad... REWahoo Life after FIRE 34 05-20-2010 08:56 AM

» Quick Links

 
All times are GMT -6. The time now is 02:42 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×