What to do with portfolio when pension covers expenses.

[ExFlyBoy5]

If your pension covers 100% of your expenses, then it seems to me that instead of a retirement portfolio, it's just a regular investment portfolio.

I not only would NOT withdraw from it (why?) but also I would invest it differently. With all expenses covered, I don't see any reason to lower risk. Ironically, it seems that those who need the lowest risk are those who need the money to live on and can least afford low returns. Oh well, such is life.

Anyway, since I wouldn't be needing any of the money in it, I'd probably invest 100% in equities .

This is pretty much what I am doing. My pension does indeed cover all my expenses, so I have remained aggressive in my investments. I considered changing my allocation to put some in bonds, etc., but I am just not satisfied with the lack of money you make that way. I don't have an "end goal" for how much $$$ I want to accumulate, but when the DW decides to retire, then I don't want to skimp on travel expenses. It's expensive to fly business class from ATL to New Zealand, but that's the only way I will go. As I grow a little older, I will probably start shuffling the portfolio to safer alternatives, but not anytime soon.

 

[utrecht]

We all know people, a lot of people, who are spend thrifts. Every dollar they have burns a hole in their pocket. What amazes me is how conservative, almost to the point of being cheap, most people here are.

We all lived below our means, saved and invested to get where we are, but once we get there why not enjoy a little? If you are retired with a pension that covers all of your expenses and have another million in your portfolio why wouldnt you enjoy it?

That boggles my mind and I dont see it as any more strange than people who spend everything they have. Its like they are trying to prove a point or something. We are in financial situation like this and we retired and immediately increased our standard of living to a still safe, but higher standard commensurate with our income.

We moved to a new area that we couldnt safely have afforded before retirement, leased a new convertible that we had wanted for a while, greatly increased out travel budget, we eat out much more, go out to listen to live music and order $12 martinis that we wouldve never had before without thinking about how over priced they are. I bought a $1000 guitar when a $600 guitar wouldve done just fine (and my $250 guitar had done just fine for 20 years). I know some people will say none of those things bring them extra enjoyment, but I feel sorry for those people who have nothing else in their life to look forward to. Dreaming of things you would want to do or places you would want to visit is normal. Depriving yourself of those things when you can easily afford them is not normal. We all need extra enjoyment and if we can afford it, we should take advantage.

 

[REWahoo]

We all know people, a lot of people, who are spend thrifts. Every dollar they have burns a hole in their pocket. What amazes me is how conservative, almost to the point of being cheap, most people here are.

I take it you aren't in that category, but it's clear you didn't spend any money on a Dale Carnegie course!

 

[ExFlyBoy5]

We all know people, a lot of people, who are spend thrifts. Every dollar they have burns a hole in their pocket. What amazes me is how conservative, almost to the point of being cheap, most people here are.

We all lived below our means, saved and invested to get where we are, but once we get there why not enjoy a little? If you are retired with a pension that covers all of your expenses and have another million in your portfolio why wouldnt you enjoy it?

That boggles my mind and I dont see it as any more strange than people who spend everything they have. Its like they are trying to prove a point or something. We are in financial situation like this and we retired and immediately increased our standard of living to a still safe, but higher standard commensurate with our income.

We moved to a new area that we couldnt safely have afforded before retirement, leased a new convertible that we had wanted for a while, greatly increased out travel budget, we eat out much more, go out to listen to live music and order $12 martinis that we wouldve never had before without thinking about how over priced they are. I bought a $1000 guitar when a $600 guitar wouldve done just fine (and my $250 guitar had done just fine for 20 years). I know some people will say none of those things bring them extra enjoyment, but I feel sorry for those people who have nothing else in their life to look forward to. Dreaming of things you would want to do or places you would want to visit is normal. Depriving yourself of those things when you can easily afford them is not normal. We all need extra enjoyment and if we can afford it, we should take advantage.

I don't necessarily agree with this. My Dad is very conservative with his money and will most likely die leaving behind a large portfolio. It's not a case of "Look at me!", he's exactly the opposite of that. If he doesn't need it, he just doesn't buy it. As an example...he spends a LOT of his day on the computer. He has had the same 17" monitor for YEARS and so for Xmas, I got him a big 'ole 27". He was miffed at the fact that his 17" was "good enough" and that's why he "has glasses". Material things simply bother him; he doesn't want for anything. What HE DID WANT was financial security. He wants to know that NO MATTER WHAT, his expenses will ALWAYS be taken care of. When my Mom got ill (extended, for several years) she was able to STAY HOME. When it got bad (2 years worth), they were able to afford 24 hour in-home care. How many people could afford 24 hour IN HOME care for 2 years? Not very many, I would guess.

So...it's not wise to paint with a broad brush as to what OTHER people do with their money. It's not yours, it's theirs. In the end, the ONLY person that needs to be satisfied when the appointed hour comes is the one they see in the mirror.

 

[Danmar]

Really faced this question when I retired 9 years ago. Pension started after 6 years and would cover what most people would consider an affluent lifestyle. Had enough cash on hand to fund the first 6 years. So now the portfolio has grown quite a bit and we have set our lifestyle to the sum of divs and pensions (includes a large giving component). I really treat the portfolio as something we draw income from but manage for the next generation. Consequently have invested in 100% equities.

Alternatives considered include a charitable foundation, trust structures, etc, but so far have kept it simple.

 

[Midpack]

Interesting thought, but... We expect to withdraw less than SWR, but 100% covered by a pension is science fiction to me too. I don't think we'd change from our current AA, but there is no right answer.

Having a different POV is absolutely fine, but 'feeling sorry' for others POV and assuming they're 'deprived' is wrong...

Some may value splurging, while others may value the extra security of excess resources more. I suspect most of us fall somewhere in between. We can't know what unexpected expenses might arise (LTC just one example), so 100% covered is theoretical.

 

[Danmar]

We all know people, a lot of people, who are spend thrifts. Every dollar they have burns a hole in their pocket. What amazes me is how conservative, almost to the point of being cheap, most people here are.

We all lived below our means, saved and invested to get where we are, but once we get there why not enjoy a little? If you are retired with a pension that covers all of your expenses and have another million in your portfolio why wouldnt you enjoy it?

That boggles my mind and I dont see it as any more strange than people who spend everything they have. Its like they are trying to prove a point or something. We are in financial situation like this and we retired and immediately increased our standard of living to a still safe, but higher standard commensurate with our income.

We moved to a new area that we couldnt safely have afforded before retirement, leased a new convertible that we had wanted for a while, greatly increased out travel budget, we eat out much more, go out to listen to live music and order $12 martinis that we wouldve never had before without thinking about how over priced they are. I bought a $1000 guitar when a $600 guitar wouldve done just fine (and my $250 guitar had done just fine for 20 years). I know some people will say none of those things bring them extra enjoyment, but I feel sorry for those people who have nothing else in their life to look forward to. Dreaming of things you would want to do or places you would want to visit is normal. Depriving yourself of those things when you can easily afford them is not normal. We all need extra enjoyment and if we can afford it, we should take advantage.

A man after my own heart but this will not sit well with the people here. Spending money unnecessarily is a mortal sin. Didn't you learn that somewhere?

 

[MichaelB]

So...it's not wise to paint with a broad brush as to what OTHER people do with their money. It's not yours, it's theirs.

Well said.

 

[nun]

We all lived below our means, saved and invested to get where we are, but once we get there why not enjoy a little? If you are retired with a pension that covers all of your expenses and have another million in your portfolio why wouldnt you enjoy it?

You don't have to spend money to "enjoy it". I plan to be in an accumulation stage right through retirement so I can leave money to a couple of charities and my nieces. Knowing that my money will be helping them when I'm dead makes me feel better than buying a bigger car.

 

[audreyh1]

I can understand why people want to save more, or invest more for the future if they have concerns about higher expenses in old age like LTC, or they want to leave a goodly amount to their children/heirs/charities.

We try to do both. Our withdrawal rate is conservative compared to our net worth. Most of our net worth is in long term investments. So we set aside unspent budget for near term spending - splurges, travel, buying a nicer car than we might otherwise, more gifting.

We also gift to charities and siblings every year. They can use the money now, not just after we're gone.

 

[RetireAge50]

For me I would increase spending so most of the money gets spent over my lifetime. I might keep enough aside in case I need someone to assist me later in life.

 

[Bestwifeever]

We all know people, a lot of people, who are spend thrifts. Every dollar they have burns a hole in their pocket. What amazes me is how conservative, almost to the point of being cheap, most people here are.

We all lived below our means, saved and invested to get where we are, but once we get there why not enjoy a little? If you are retired with a pension that covers all of your expenses and have another million in your portfolio why wouldnt you enjoy it?

That boggles my mind and I dont see it as any more strange than people who spend everything they have. Its like they are trying to prove a point or something. We are in financial situation like this and we retired and immediately increased our standard of living to a still safe, but higher standard commensurate with our income.

We moved to a new area that we couldnt safely have afforded before retirement, leased a new convertible that we had wanted for a while, greatly increased out travel budget, we eat out much more, go out to listen to live music and order $12 martinis that we wouldve never had before without thinking about how over priced they are. I bought a $1000 guitar when a $600 guitar wouldve done just fine (and my $250 guitar had done just fine for 20 years). I know some people will say none of those things bring them extra enjoyment, but I feel sorry for those people who have nothing else in their life to look forward to. Dreaming of things you would want to do or places you would want to visit is normal. Depriving yourself of those things when you can easily afford them is not normal. We all need extra enjoyment and if we can afford it, we should take advantage.

You probably don't need to get all your money back from that whole Brooklyn weekend rental thingie then?

Because pension (survivor gets same amount) and SS from highest earner amply covers our routine living expenses, we travel on our dividends from our 40/60 portfolio. If we stayed home more, we would reinvest them. We don't go out of our way to indulge ourselves but I notice we no longer consider pricing when we want something--weird to find we don't look at the righthand column on the menu of life anymore. We have kicked up our charitable donations a lot too.

 

[Mulligan]

A man after my own heart but this will not sit well with the people here. Spending money unnecessarily is a mortal sin. Didn't you learn that somewhere?

I don't believe it is perceived so much as a "mortal sin" as other people may find no "utility value" in it. As an example, lets use the $12 martini. If you have the money and choose to buy or not buy it instead of an $8 shelf drink, isn't so much depriving yourself as it is individuals perceived value in the purchase.
I am never going to "waste" money on a $50 bottle of wine, because I enjoy the taste of the $10 ones... Spending a $100 on a bottle will not increase my pleasure in the drink. But that is just me, and I do not feel deprived at all.
But on the other hand, I am sure I blow money on things wealthier people would not. They in turn on this purchase would not perceive the "utility value" I do in it.


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[utrecht]

So...it's not wise to paint with a broad brush as to what OTHER people do with their money. It's not yours, it's theirs.

Really? Because people here do it all the time when they make fun of their relatives who spend every cent they have.

 

[utrecht]

You probably don't need to get all your money back from that whole Brooklyn weekend rental thingie then?

No I didnt need that money back solely for the sake of having the money back. That was about principal. I dont mind spending money. I just dont like wasting it or having it stolen from me.

PS..I won that dispute.

 

[RE2Boys]

I don't have a withdrawal plan from my portfolio. My pension, SS, and part-time work (Jan to April and I enjoy, keeps me mentally active) pays for all day to day and month to month expenses. The entire portfolio is my reserve fund for out of ordinary expenses. In past, I've used it for the occasional newer car update, major vacation, or remodel project. Loosely monitor withdrawal rate but as long as under 2% per year, I don't give it any real thought. Most years it is closer to 1% and some years next to zero. I have noted that I've gotten much less concerned over LBYM..... no need to deliberately save for future.

But when I retired, I had two small boys to raise so was careful with spending at first to insure we could live comfortably for next 20 years. In setting our lifestyle, I chose to lead by example and not set a standard that each boy may struggle to maintain as adults. They see their parents earning money by working and giving spending on "wants" careful consideration.

Through the wonders of the FAFSA formula, I expect my withdrawals to be about 5-6% for the next five or six years due to college expenses, then drop down to the 2% level again. While the boys have about half college costs set aside in 529 plans, they are counted as parent's assets both by FAFSA and my accounting.

 

[W2R]

Dreaming of things you would want to do or places you would want to visit is normal.

I knew it, I just knew it!!! Finally, here is definitive proof that I am NOT normal. I can safely say that I have never dreamed of a place that I would want to visit, or of doing anything that I am not already doing in retirement.

I am already living my dreams, right now. I have my dream house and live next door to Frank, who is a wonderful man and we enjoy each other's company every day. For me this is my dream come true.

 

[mickeyd]

Like others here our income streams from outside sources (SS, pensions, VA etc.) pays for most of our expenses. In fact, we often have enough to increase our cash reserves a bit.

I just completed my first RMD recently and just exchanged TSM for taxable STB fund less taxes. I consider my STB as cash reserves also.

 

[braumeister]

definitive proof that I am NOT normal.

Why would you want to be?
Boring!

 

[W2R]

Why would you want to be?
Boring!

Good point! Boring for me, anyway. Who wants to sit around longing to go to some dumb place, when they could be enjoying life at their present location. And heaven knows, I have zero desire to go zip-lining or jumping out of airplanes or bronco riding. At my age, it's sometimes an adventure just to engage in normal daily activities.

 

[chris2008]

We all lived below our means, saved and invested to get where we are, but once we get there why not enjoy a little? If you are retired with a pension that covers all of your expenses and have another million in your portfolio why wouldnt you enjoy .

Who said we do not enjoy?
We do and it is covered by either pension or investments.
We have a travelling budget and go out eating, to a concert or whatever when we wish. We do not live in depriviation.
But simply spending what is left at the end of the month would not bring more joy nor fun into our life.

 

[utrecht]

Who said we do not enjoy?
We do and it is covered by either pension or investments.
We have a travelling budget and go out eating, to a concert or whatever when we wish. We do not live in depriviation.
But simply spending what is left at the end of the month would not bring more joy nor fun into our life.

Thats great. To each his own. If you are happy and are buying the things that give you happiness then you have a great life. Im talking about people who deep down would like to upgrade their lives a bit but dont because they cant shift from saver to spender even though all of their expenses are paid by their pension and they still have a large portfolio to draw from (per the OP).

Im talking about people who are driving a 12 year old vehicle that needs repairs every other month but wont buy a new car because thats the way they have always been.

Or people who have lived in the same house for 20 years and its too small for family gatherings and the carpet is matted down and worn badly, but they wont put in new carpet or nice hardwood floors or move to a bigger house with granite counter tops ect. You get the idea. If your carpet is worn out and new carpet wont give you more happiness then I dont know what will please you besides a large bank account.

 

[nun]

Who said we do not enjoy?
We do and it is covered by either pension or investments.
We have a travelling budget and go out eating, to a concert or whatever when we wish. We do not live in depriviation.
But simply spending what is left at the end of the month would not bring more joy nor fun into our life.

This is my approach too. I like nice things, but don't find myself wanting to spend money unnecessarily. When I go on vacation it's usually a bicycle tour because that's what I like. I will stay in a mix of fancy hotels, hostels and go camping. I could afford a round the world cruise, but I prefer bicycle touring a it's a lot less expensive.

I don't feel I scrimp on much, if I need a new car I buy one. I currently have a 9 year old Honda Civic with $135k miles. It gets serviced regularly and works great. I hope to get a few more years out of it yet, but I will definitely buy a new car when the time comes.

 

[Cobra9777]

Our pensions and rentals cover about 70% of spending. The taxable portfolio closes that gap via dividends and occasional selling. After SS, there's no gap... at least if everything goes according to plan. With so many unknowns (LTC, inflation, longevity... to name a few), we still try to strike a reasonable balance between planning for future contingencies and spending every penny that FIRECalc says we can. I concede that with only 2.5 years under my belt, I'm gravitating to the conservative side.

 

[PhrugalPhan]

For me a pension is 7 years off, but when it comes it will most likely cover all my expenses (though I admit I don't have extravagant tastes). If not, it will be close and when SS starts they combined will definitely cover my expenses. My current plan is to stay mostly in equities, and withdrawing just dividends as play money. When RMDs start, that money will most likely just get transferred to my brokerage account. Assuming Roth IRAs are still available, I plan on giving my only son enough each year to max out a Roth IRA as soon as he is eligible. If nothing else, he will have that as an inheritance.