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Old 05-05-2008, 08:55 AM   #21
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My grandparents had mixed results. One saw expenses decline as he moved in with a daughter and slowly reduced his outside activities. This also roughly coincided with his declining assets and relying on a fixed income. The other grandparent saw expenses increase as she traveled until she couldn't (didn't care to any more?) but her travel expenses did rise with inflation and higher levels of service up until she stopped. Then she moved into a graduated elder living care home where her expenses rose over the years as she accessed increasing levels of care. She also increased her "expenses" in gifts to grandchildren and great grandchildren, sponsoring a family get together every few years, and the like. I now see my parents starting down a similar path. They are more likely to hire help to clean and do heavy yard work that they used to do themselves. They have increased medical expenses and voluntarily increase even that by shopping for the best providers they can - even when it costs more. They hire more services like snow removal as they get older and I expect the trend will continue.

For me, I would rather have the assets and freedom to maintain some degree of independence even though my expenses rise instead of being locked in to a declining income model because that's what some grand average lead me to believe and I didn't save enough. So what if I have assets left over if I was wrong. Much worse if I was wrong and run out when I'm too old to get more.
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Old 05-05-2008, 10:19 AM   #22
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hmmm hmmm hmmm. My spending is erratic but generally trends upward - because it can - the discretsionary amount.

1993 -2008, age 49 to 64/65, on average the core(shelter,food,transportation, etc) has shrink over time relative to the fun and funky part - all praise to Bogle's 'Policy Portofolio' and time in the market.

Soooo - twist my arm and I could agree - BUT I'm not getting any younger and I when 'I believe' more can be spent - then I do.

heh heh heh - .
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Old 05-05-2008, 12:19 PM   #23
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Personally, I think there is a grey area between spending less voluntarily and spending less because you see your savings eroding or age related expenses increasing. Frankly, if money were of no concern, I'd be spending more right now. And as I age I think I'd continue to spend more and in many cases need to spend more.

Here's an example....... DW and I like wilderness experiences. This is not inexpensive recreation, but if you primarily DIY, not out of reach for most. Our canoe trips are becoming problamatic because my knees aren't cooporating on portages. We're considering hiring a guide for the next trip to do the heavy hauling, setting up camp, cooking, etc. We'll be able to spend more time fishing, taking pictures, enjoying the scenery and just enjoying the natural surroundings we love. The catch is that bringing a guide with is an $250 - $300/day incremental expense. And if we do a fly-in, we pay his/her expenses for that as well. This hardly sounds like spending less for travel as we age!

There is no end to anecdotal examples....... But the general point is that, for us, we're deciding between traveling less due to age/health related limitations and continuing to travel but spending more for services to do so.

My feeling about Bernicke is that he'd consider a decision on our part to just stay home and not spend the incremental two grand for a guide as voluntary......... We'd be spending less at our own discretion. But I think we'd be making that decision because we're worried about the expense. So Ty and I just have different outlooks on what's voluntary and what's budget mandated.

I vote for continuing to travel even if you need to pay for special services, stay in your own home even if you need to hire out all maintenance and cleaning, take in entertainment even if you need a limo to drive you there, dine out, gift the grandkids, support charities, etc., as you age. Even if it costs more to do so....... JMHO.
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Old 05-07-2008, 06:55 AM   #24
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So as might be expected, if you are getting older and running out of money, you spend less.
Ha, I think you nailed it.
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Old 05-07-2008, 05:03 PM   #25
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Ha, I think you nailed it.
Bernicke is very specific that the spending patterns are not based on the lack of assets. Repeating myself, my father and in-laws dramatically reduced their discretionary spending except for (in my in-laws case) an illogical amount of church donations. Their traveling went to nothing. It became food and shelter. All the clothing were gifts on their birthdays or Christmas.
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Old 05-07-2008, 09:18 PM   #26
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I also know older folks who have reduced their spending as they age. But I also know people who INCREASED their spending as their need for services increased. And I know people who wanted to spend more but couldn't because they had limited income and assets. Anecdotal evidence is available for all possibilities. Personally I'm going to plan to allow enough assets that IF I want to increase spending I can. I'm happier living with the possibility I may have saved more than I need, than I would be with running out of means because I planned for decreasing spending. But that's a personal choice. If Ty wants to plan a declining standard of living for himself, he's welcome to it. I'm not interested.
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Old 05-07-2008, 09:22 PM   #27
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Bernicke is very specific that the spending patterns are not based on the lack of assets. Repeating myself, my father and in-laws dramatically reduced their discretionary spending except for (in my in-laws case) an illogical amount of church donations. Their traveling went to nothing. It became food and shelter. All the clothing were gifts on their birthdays or Christmas.
Well you see, the problem is that this is a very small sample. Repeating it doesn't make it any more convincing. If someone else, me for example, has counter examples, we don't tie, as I will have shown that Bernicke's assertion is false.

If what one wants to say is that "As people age, some will spend more, some will spend the same, and some will spend less" I think it might be safe enough.

But it isn't news, is it?

By the way, my former FIL flies all over by himself, at age 94. Last summer he took his 85 year old wife on a Danube Castle tour. The summer before they went to Alaska, a few years earlier they went to a celebration of the Allied landing in Normandy, where he had parachuted in 60 years earlier. I havenít heard yet what his plans are for this summerís travel, but it won't be to stay home and let his money pile up.

Ha
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Old 05-07-2008, 09:51 PM   #28
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but it won't be to stay home and let his money pile up.

Ha
I just shed a tear for you

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Old 05-07-2008, 09:56 PM   #29
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By the way, my former FIL flies all over by himself, at age 94. Last summer he took his 85 year old wife on a Danube Castle tour. The summer before they went to Alaska, a few years earlier they went to a celebration of the Allied landing in Normandy, where he had parachuted in 60 years earlier. I havenít heard yet what his plans are for this summerís travel, but it won't be to stay home and let his money pile up.

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Old 05-07-2008, 10:07 PM   #30
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Bernicke is very specific that the spending patterns are not based on the lack of assets.
My biggest problem with Bernicke is his implication that reduced spending is true for all people as they age. I'm sure it's true for some.....you gave three examples. It might even be true on average. But I'm betting it isn't true for all and, most importantly, not true for me.

Ty's problem lies in defining the rules for determing whether reducing spending is due to lack (or perceived lack) of funds vs just a simple loss of interest in discretionary spending. What the RE'd person considers a financial reason for declining a discretionary expenditure Ty may say was not financial and simply a matter of choice. Who defines how much $$$ is enough assets that spending patterns are or are not being affected?

It does make for interesting discussion though...... If your knees give out and you can't carry that canoe over the long portages anymore, will you dish out a couple grand extra to bring a guide along to do it....... or just sit at home and pout? If you decide not to spend the money on the guide because in the five years you've been RE'd your portfolio has dropped from $3 mil to $2 mil and you think you need to cut back on spending, would Ty say that was a financial reason or non-financial reason for spending less? After all, you still have $2 mil!

It's way too subjective for me to make the assumption I'll spend less. Especially since I'm several years into the period Ty says my spending should be declining in, and my spending is increasing!

Edited to add: BTW 2B, I'm not disagreeing with you. You are 100% correct that Ty says that spending patterns are not based on the lack of assets. I'm disagreeing with Ty. He shows charts with gov't stats that show that on average folks spend less as they age past 55 and on average their portfolios grow as they age past 55. He assumes the data has zero variation. That is, everyone spends less as they age and everyone has their portfolio grow as they age. Blaaaah. I'm not going to start digging up data, but I'll bet that some people in the data making up those averages spend more as they age and some people making up that data have their portfolios shrink as they age. Ty shouldn't report the measure of central tendency of the data without also reporting the dispersion. That's my story and I'm sticking to it.
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Old 05-07-2008, 10:12 PM   #31
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When I grow up, I wanna be like you FIL.
Yeah, me too.

He actually is my former FIL. And he is an amazing person. He looks maybe 70, he is interested in almost everything, he never gets stuff messed up or perseverates like some older people do. After he retired from the regular army, he had a whole other career as a college professor. Even now he does a volunteer teaching gig at their local junior high.

Ha
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Old 05-08-2008, 05:14 PM   #32
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Belief in Bernicke's conclusions becomes a central part in planning retirement spending. If you think you'll be wanting to cruise the Nile, climb Mt Everest when you are 104, you can't spend as much as when you are 64. It makes "The Number" much larger which delays retirement.

This is the "buy your ticket and take your chances" time. I am personally planning on a core amount of assets to follow the 4% SWR for a nice lifestyle but without the nice vacations and other luxuries. The rest of my assets will be geared to a Bernicke spending plan where it starts out at a pretty high level and drops to about 50% in real spending terms by the time I'm 70.

If my asset growth exceeds "average," I can refigure my spending and boost the vacations and extras. If it's below, my extra spending will go into maintaining the basic lifestyle. There really isn't a way to plan for all alternatives except to demand that your assets on retirement meet your wildest expectations at a 4% or less SWR. That leads to employment longer than a more aggressive approach.
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Old 05-08-2008, 06:11 PM   #33
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Belief in Bernicke's conclusions becomes a central part in planning retirement spending.
True, but it even goes beyond your estimate of discretionary spending patterns as you age. It's your total aggregate forecasted retirement budget that needs to be central.

I RE'd 2 yrs ago and won't be returning to work so my accumulation phase is history. All I can change now is my spending pattern/budget. I have a number of things built into the budget including being self-insured for LTC, providing a significant trust for my physically challenged grandson and funding ESA's to help the grandkids with college. I'm pretty much doing what I want to do now, although our tastes are not extravagent. I am budgeting for extra services as we age and I need someone else to portgage the canoe, do the yardwork and household chores, escort us on international travel, etc. And all that is just up to us and has nothing, absolutely nothing to do with Ty Bernicke.

His article was an interesting read and because I'm fairly adept at statistics and analyzing data, I understood he was talking about averages and trends that don't necessarily hold true for everyone. But it was a little disconcerting that he aimed the article at his fellow FA types to suggest they counsel their clients that they'll all be spending less as they age and therefore might be saving too much.
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Old 05-09-2008, 02:37 AM   #34
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I believe we spend less as we age. I have witnessed it with my grand parents, my parents, DW parents. I have read several papers that conclude the same.

It seems that the wild card is health care services inflation. Or some longer-term increase in general inflation.

As you age, you will become more sedentary. Many people (like folks on this board) will likely die with a pile of money because they are too conservative (i.e., fear). A good conservative projection of expenses and understanding what is discretionary vs non-discretionary spending is important. Add to that some reserves for an emergency... and spend the excess (if you have it).

We are planning to spend more in the early years, but not to the point of jeopardizing necessities in late life. Of course, we have acquired more than we need to fund Retirement... I have every intention of enjoying it.
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Old 05-09-2008, 10:08 AM   #35
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I believe we spend less as we age. I have witnessed it with my grand parents, my parents, DW parents. I have read several papers that conclude the same.

How do you explain the fact that five years into the period during which DW and I should be spending less according to Bernicke, we're not? In fact, we're spending a little more.

And, going forward, we're looking at ways to extend the years we can participate in outdoor activities by switching from DIY adventures to adventures involving professional help and more expensive equipment. All with a price of course.

Frankly, it would be a bummer right now to have to say no to solutions to issues of more limited physical abilities due to aging just because we planned on spending less. We're enjoying continued spending and a bonus round of activities we love.

Just a suggestion that before you pencil in a budget that reduces spending from 55 on, you think about it. You just might enjoy doing some more of the same old things or even doing some new things if you can afford the services to make them possible. Or not, up to you of course.
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Old 05-09-2008, 04:58 PM   #36
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I personally plan to dramatically increase my spending after retirement but it will be for vacation travel and outdoor recreation. I also assume my ability to do this will to dramatically decrease as I get up to the mid 70's. Yes, you can create this healthy, fit at 100 scenario but it is atypical.

If you assume your expenses continuously go up with inflation and that you will need your assets forever, you will work far longer than necessary to attain the massive nest egg required and you are also probably going to make your heirs very happy.

I'm ready to run the risk that I'll want to travel the world at 95 by traveling the world at up to age 70. After that I'll have "enough" but the lifestyle is expected to slow down.
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Old 05-09-2008, 05:09 PM   #37
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I personally plan to dramatically increase my spending after retirement but it will be for vacation travel and outdoor recreation. I also assume my ability to do this will to dramatically decrease as I get up to the mid 70's. Yes, you can create this healthy, fit at 100 scenario but it is atypical.
You seem confused about the age ranges Bernicke is talking about. He says start reducing spending at 56! I agree with you regarding diminishing abilities in your 90's and my plan calls for being dead at 100, not healthy and fit as you say. But Bernicke calls for me to already be pulling in my horns and cancelling travel for this summer, etc. BS! We're enjoying what we're doing and have no intention of stopping because some FA named Bernicke wrote an article.

I take it you'll be RE'd long before 56 since you're talking about increasing spending....... At 56, Bernicke has you decreasing at a fairly aggressive rate so that you're down to less than 50% by the time you're 76 yo.
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If you assume your expenses continuously go up with inflation and that you will need your assets forever, you will work far longer than necessary to attain the massive nest egg required and you are also probably going to make your heirs very happy.
Well, I'm already done working so can't do anything about accumulating less . Time and the markets will tell if my heirs are happy...... if I start spending less as Bernicke is directing me to, I guess that increases their chances of being happy. But they can generally take care of themselves, so I'm gona keep spending, Bernicke or no Bernicke!
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I'm ready to run the risk that I'll want to travel the world at 95 by traveling the world at up to age 70. After that I'll have "enough" but the lifestyle is expected to slow down.
I'm also figuring world travel will decrease by 70. Problem is, Bernicke wanted me to stop 4 years ago in my mid-50's! He doesn't have a clue IMO .

You're throwing out these ages of 95 and 100...... That's not Bernicke. He says spending starts decreasing at 56, drops to about half by 76, and then levels off. It's just not working out that way for me. And from the way you described your plans, it doesn't sound like you're planning on following Mr. Bernicke's directives either.......

From FireCalc:
Ty Bernicke's Reality Retirement Planning: A New Paradigm for an Old Science describes extensive research showing that most people see significant reductions in spending with age (not related to reduced assets or income). If selected, this option will reduce your inflation-adjusted yearly spending by 2-3% per year starting at age 56, and then stabilizing at age 76 to keep up with inflation. You should read his article for details if you plan to use this option.
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Old 05-09-2008, 05:53 PM   #38
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All of my personal experience says this is correct. My grandpa had 8 brothers and sisters, who all spent less and less as time went on. My grandparents spent very little in the years between 75 - 85 or so. They did not want to travel, they just liked hanging out in the garden. The same thing is happening with my mom who is 73. she has 1.5M and has not travelled in 3 years other than a jetblue ticket to visit me.

My husband's family was the same way. They had health issues, stopped spending. with a pernsion and SS, their estate kept growing and growing.

We will have enough either way, but I have yet to see an example of someone running out of money in any of my family members.
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Old 05-09-2008, 06:03 PM   #39
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I would guess my in laws spend less in their mid 80's as compared to being just retired at 62. They havent travelled much in the last 8 years due to health and energy. My fil hates boats my mil hates planes. They already got rid of the RV years ago. They very well could donate more money to their favorite charities.

Im not planning on spending less if I make it that far. Who knows what will happen. Id rather have it than not.
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Old 05-09-2008, 07:10 PM   #40
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Im not planning on spending less if I make it that far. Who knows what will happen. Id rather have it than not.
How about planning on spending less at 56 yo as the Bernicke plan/data suggest?

It seems like folks aren't actually reading the Bernicke article and are assuming he means that when geezerhood arrives, probably in your late 70's or 80's, you'll spend less. But Bernicke actually says the reduced spending starts at 56 and continues sloping downward until 76 when it levels off. That's very different...... That's saying that long before geezerhood, you voluntarily cut back on spending so that by 76 you've reduced by over 50%.

He has data that shows that that is the case. But his data also shows there are no/few retirement financial issues because people's portfolios increase in value as they age.

Maybe I've just got a guilt complex going. A distinguished FA like Ty Bernicke says that at 60 yo DW and I should have already made significant cuts in our spending compared to when we were 55 yo and we haven't. We're not usually trend busters....... I feel very strange about this, yet have no intention of telling DW to cancel having the hardwood floors refinished.....
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