Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Ty Bernicke...Retirement Spending
Old 05-04-2008, 07:06 PM   #1
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Ty Bernicke...Retirement Spending

FPA Journal - Reality Retirement Planning: A New Paradigm for an Old Science

From Firecalc, is this model believable? I looked for previous threads on this, but didn't find very much discussion on it.

Is Ty saying that spending will go down around 50% from age 55 to 80 or is he saying that spending will go down about as much as inflation will rise? (Assuming 3% inflation)
__________________

__________________
RockOn 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 05-04-2008, 07:12 PM   #2
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,149
RockOn, this has been discussed many times on the forum. You might want to do another search.
__________________

__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 05-04-2008, 07:14 PM   #3
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by REWahoo View Post
RockOn, this has been discussed many times on the forum. You might want to do another search.

FIRECalc even includes the option to use Bernicke's model for your spending plan. See the "Spending Model" tab.
I would have thought so, I must not of used the right search words. All I found was brief comments about it. I'll try again, Thanks
__________________
RockOn is offline   Reply With Quote
Old 05-04-2008, 07:17 PM   #4
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,149
Try this thread: http://www.early-retirement.org/foru...ire-17317.html
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 05-04-2008, 07:32 PM   #5
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by REWahoo View Post
I went through that thread. It started to get a little off track, firearms, LTC, and all. Tell me if you would, in your opinion is there concensus that spending will decrease at about the same rate as inflation increases? I understand and agree that spending will decrease, I just never thought it would be significant. Is Ty a little out there?
__________________
RockOn is offline   Reply With Quote
Old 05-04-2008, 07:52 PM   #6
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,149
Quote:
Originally Posted by RockOn View Post
Tell me if you would, in your opinion is there concensus that spending will decrease at about the same rate as inflation increases?
I don't believe there is anything resembling a consensus on this theory.

Quote:
Originally Posted by RockOn View Post
I understand and agree that spending will decrease, I just never thought it would be significant. Is Ty a little out there?
Although I'm sure my spending will change as I age, I'm not at all convinced the decreases in what I spend on travel and hobbies now won't be offset (or even exceeded) by increases in health care costs in the future. For this reason I prefer to take a less "out there" approach and assume my annual expenses will increase at the rate of inflation.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 05-04-2008, 07:55 PM   #7
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by REWahoo View Post
I don't believe there is anything resembling a consensus on this theory.
Although I'm sure my spending will change as I age, I'm not at all convinced the decreases in what I spend on travel and hobbies now won't be offset (or even exceeded) by increases in health care costs in the future. For this reason I prefer to take a less "out there" approach and assume my annual expenses will increase at the rate of inflation.
Thanks, I'm a little skeptical of going that route myself.
__________________
RockOn is offline   Reply With Quote
Old 05-04-2008, 08:10 PM   #8
Recycles dryer sheets
 
Join Date: Jan 2008
Posts: 160
I believe this study is wrong. Flat out wrong. They correct for means by tracking income - not spending of assets. They confuse spending less BECAUSE YOU HAVE LESS with spending less because you somehow don't want to spend money. It's junk science of the worst sort. We have enough problems with people saving too little without these jokers trying to encourage people to save less or fit some ridiculous academic model of lifetime consumption to make a name for themselves. Publish or perish. Bah humbug.
__________________
quietman is offline   Reply With Quote
Old 05-04-2008, 08:26 PM   #9
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by quietman View Post
I believe this study is wrong. Flat out wrong. They correct for means by tracking income - not spending of assets. They confuse spending less BECAUSE YOU HAVE LESS with spending less because you somehow don't want to spend money. It's junk science of the worst sort. We have enough problems with people saving too little without these jokers trying to encourage people to save less or fit some ridiculous academic model of lifetime consumption to make a name for themselves. Publish or perish. Bah humbug.
You are likely correct. It is reasonable to expect spending to decline some with age, how much is the debate. Unless Ty is dead sure he knows, this is playing with fire. Better evidence may be if those retired for 15 to 20+ years that frequent this site would let us know what happened to them. I suppose that would be all over the board though.
__________________
RockOn is offline   Reply With Quote
Old 05-04-2008, 10:06 PM   #10
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
This theory that you spend less as you get older really depends on what type of expenses you have.

Maybe if you have a lot of "travel" in your budget, you may take it down a notch as you get older. Maybe the same for "motor vehicle" expenses since old people tend to drive less than young people. However, medical expenses will probably be higher.

If you are living close to your bare bones budget, chances are that budget won't be changing much as you get older.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Old 05-04-2008, 10:14 PM   #11
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by retire@40 View Post
If you are living close to your bare bones budget, chances are that budget won't be changing much as you get older.
If you are not on a tight budget, do you think spending will decrease enough to cancel out inflation? If I understand it right, I think that's close to what Ty says.
__________________
RockOn is offline   Reply With Quote
Old 05-04-2008, 10:38 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by RockOn View Post
If you are not on a tight budget, do you think spending will decrease enough to cancel out inflation? .
No.

Personally, because I am on the leading edge of the boomers, I think competition for elder services will drive prices of those services up as I, and the rest of the boomers, age. The price of buying services that allow you to stay independent will increase to offset savings from not traveling, giving up your Bears season tickets, etc.

That's my plan and I'm sticking to it.

Why are you asking? Are you trying to justify RE'ing with a smaller nestegg? Or are you already RE'd and want to spend more now assuming you'll spend less later? Or?
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 05-04-2008, 11:07 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,387
Quote:
Originally Posted by RockOn View Post
Unless Ty is dead sure he knows, this is playing with fire. Better evidence may be if those retired for 15 to 20+ years that frequent this site would let us know what happened to them. I suppose that would be all over the board though.
Well, IMO, even if Ty is dead sure he is right, he is still likely wrong. There have been many people who knew they were right, but were actually full of _-_-.

I am half way between the ages he gives. My spending goes up every year, just like you might think it would. And it is mostly on life necessities and fun.

It's like somebody said above- you can't spend what you don't have.

So as might be expected, if you are getting older and running out of money, you spend less.

The only way this is different from a younger person running out of money is that the young person will usually go to work rather than spend less. So would most older people if that course were open to them.

Wow! Give that genius a Nobel Prize.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 05-05-2008, 12:36 AM   #14
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,620
Quote:
Originally Posted by RockOn View Post
I went through that thread. It started to get a little off track, firearms, LTC, and all.
I'm shocked, shocked I say, to find that we have trouble sticking to the subject at hand. We shouldl go back through those off-track threads and remove all references to "Bernicke" so that the right keywords will turn up in the search.

Or maybe we should tag all the Bernicke threads for "firearms", "LTC", and "politics".

Quote:
Originally Posted by RockOn View Post
Tell me if you would, in your opinion is there concensus that spending will decrease at about the same rate as inflation increases? I understand and agree that spending will decrease, I just never thought it would be significant. Is Ty a little out there?
I think he failed to adequately analyze the expenses of geriatric, long-term, and end-of-life care. Even if his solution had been "buy insurance and annuities", the SWR would have still been dangerously high.

Ty's research started with the anecdotal evidence of dozens of FPs telling him that all their clients reduced their spending as they aged. Then he dug up spending data to support that conclusion.

I wonder how many of today's older retirees (born & raised during the Depression) have put so much of their portfolio into fixed-income assets (like my parents-in-law) that they feel obligated to cut spending every year. As others on this thread have mentioned, the prophecy is self-fulfilling.

OTOH spouse spent a couple days with her uncle & his wife in Miami a few months back. They're in their high 70s but they still managed to rack up over $300 at Joe's Stone Crab... plus dessert.

From http://www.early-retirement.org/foru...d=384895&pp=25 I got:

http://www.early-retirement.org/foru...tml#post522921
bernicke input
Withdraw plans, Bernicke, Social Security????
Paranoia reigns
http://www.early-retirement.org/foru...tml#post492681
Ty Bernicke
http://www.early-retirement.org/foru...tml#post490134
http://www.early-retirement.org/foru...tml#post483795
http://www.early-retirement.org/foru...tml#post482878
http://www.early-retirement.org/foru...tml#post469922
http://www.early-retirement.org/foru...tml#post468734

If other posters want to add their Bernicke links to this thread, I'll round them all up for a new FAQ Archive post.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 05-05-2008, 04:39 AM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Here is a report from BC on spending as we age.

http://www.urban.org/UploadedPDF/411...e_patterns.pdf
__________________
chinaco is offline   Reply With Quote
Old 05-05-2008, 05:01 AM   #16
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
I have seen both my father's and in-laws' spending go down as they aged. In my father's case, he went from barely getting by on his pension and SS to saving a considerable sum before he died. My in-laws reduced their spending but increased their giving to almost 40% of their income to their church.

I have read the Bernicke article and have no reason to doubt that it is correct. Spending at a higher level than 4% is somewhat of a heresy here but the choice is either delaying retirement or going to the great beyond with a big pile of money left behind.

My personal plan is to have a "decent" life style which is fully linked to inflation. The extras which include traveling is covered by a Bernicke plan. I'm willing to take the "risk" of not being able to travel as much at 85 as I'd like to get more at 60 when I know I'll be in good enough shape to do it. Then there is a minimum cash level that I put into the FIRECalc run to cover end of life costs should I be unlucky enough to need it.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 05-05-2008, 06:36 AM   #17
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
A little microcosm of a real life example (mine). Age 55 Base Line for BOTH expenses (spending) and income (money AVAILABLE for expenses) in INFLATION adjusted dollars (nominal 3% per year; the approximate nominal CPI according to US Government) through Age 70. Expenses INCREASE but slower than INCOME. So yes spending (Expenses) relative to income DECREASES. However, if income did not increase faster than expenses the opposite could be true. So again, "it depends".
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 05-05-2008, 07:27 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,291
My mother is 88 and her expenses have gone down over the years in real dollars...

Now, this last year I think they have gone up, but am not sure as I have not done any checking... but with food and gas up like they are, I think there is no way she could have paid less....
__________________
Texas Proud is offline   Reply With Quote
Old 05-05-2008, 08:36 AM   #19
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by youbet View Post
Why are you asking? Are you trying to justify RE'ing with a smaller nestegg? Or are you already RE'd and want to spend more now assuming you'll spend less later? Or?
I am almost retired....I'm trying to figure out if I have a built in safety factor in my plan since I did not take decreased spending into account. I just use 3% for inflation and leave it at that.
__________________
RockOn is offline   Reply With Quote
Old 05-05-2008, 08:44 AM   #20
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Quote:
Originally Posted by chinaco View Post
Here is a report from BC on spending as we age.

http://www.urban.org/UploadedPDF/411...e_patterns.pdf

I don't have time to read it all but by scanning it, it looks like spending does go down, but not enough to offset inflation. It's hard to know if there are other factors at work though, such as running out of money to spend. Agreed?
__________________

__________________
RockOn 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
Retirement Spending mickeyd FIRE and Money 1 08-21-2007 06:56 PM
Spending in retirement aenlighten FIRE and Money 17 08-20-2007 05:45 PM
Spending In Retirement bookman51 FIRE and Money 45 07-23-2006 04:10 PM
Bernicke "Reality Retirement Plan" 2B FIRECalc support 3 05-21-2006 06:10 PM
spending less in retirement maddythebeagle Young Dreamers 1 06-28-2005 03:31 PM

 

 
All times are GMT -6. The time now is 03:10 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.