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Old 01-13-2011, 07:15 PM   #21
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My ex FIL, who is 96 and whose homebase is Maryland, in the past five years has been to Normandy, Crete, on a Rhine Tour, to Paris, to San Francisco about 12 times, to DC approvimately weekly, to Dallas maybe 10 times, to New York City several times a year. Just look around an airport at all the white heads! Count auburn haired women too...
My FIL, in his early 90s, has been in a nursing home, and has been steadily losing whatever mobility he has left. My wife told me he recently had difficulties feeding himself with a spoon, because his elbows and wrists were getting stiff and he could no longer bend them to bring the spoon to his mouth. My MIL in her late 80s no longer wants to travel far from home due to her arthritic joints.

But my inlaws are still doing better than my own father who did not make it to 80. And visiting the hospitals, convalescent homes and nursing homes, I have seen many in their 60s and 70s.

So, that certainly influences the dim view of my "golden years". I do not expect myself to be globe trotting in my 90s, in fact doubt that I would even make it that far.
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Old 01-13-2011, 07:23 PM   #22
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Good points. I should have simply said, "if I live to be 80 and out live my money, I will be fine with living off social security because I would have traveled and lived the earlier retirement lifestyle the prior 20 years!".

Essentially I am willing to gamble on not living to 80 or living very frugually past that point, so that I can retire at 50 instead of 58 or 60.
I'd be willing to bet that you would regret that decision. I can't imagine living the last years of my life with major financial limitations because I was impatient when I was younger. Pete Townsend and Roger Daltrey may have sung "Hope I die before I get old", but I don't see them putting the hose in the exhaust pipe. When I was 20, 50 sounded ancient. Now that I'm 55, 80 doesn't sound that old. IMO, if I don't need as much money when I'm 80, no problem. But no way I'm going to run out of money before I die, if I can do anything about it. Good luck to you, though. Hope it doesn't work out badly.
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Old 01-13-2011, 07:33 PM   #23
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Good points. I should have simply said, "if I live to be 80 and out live my money, I will be fine with living off social security because I would have traveled and lived the earlier retirement lifestyle the prior 20 years!".

Essentially I am willing to gamble on not living to 80 or living very frugually past that point, so that I can retire at 50 instead of 58 or 60.

I think this is a completely respectable position to take, as long as one understands the bet, which definitely seems to be the case here. I just wanted to point out that it was a bet, not a fact of life that there is nothing worth paying for beyond rent and medicine after 80.

My own Dad assumed that he wouldn't last far beyond 60- he had a number of serious chronic illnesses, but in fact in lived in good health until he was 86, and then spent the last 2 years in assisted living which is not what anyone would like, but he wasn't really ill, was not in pain, could take care of himself, go out on group trips to the symphony, etc. He was definitely glad that the had the money to live in a nice place, around people much like himself, and actually to know that he was finishing the 4th quarter with some class.

Ha
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Old 01-13-2011, 09:56 PM   #24
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Nobody here (except me perhaps) seems concerned with spending too little of their nestegg. the idea is to fully utilize the nestegg without going broke. ....
That's the retirement planning dilemma, isn't it - life is too short.......... but it could be too long.

It seems foolish to not enjoy life NOW when so many people die young - you can pick up the paper any given day and find some examples. On the other hand, if you are one of the lucky ones and do live long you want to be sure that you don't run out of money (live long and prosper?).

As for me, I'm planning to delay drawing SS until I'm 70 as a hedge of living too long - will live off the nestegg from when I fully retire until then.

My plan also anticipates a slowdown in spending at the later ages (20% at 75 and and additional 10% at 85). I hope I'm wrong and my health is such that I'm spending MORE at those ages, but looking at others I know in those age groups it does seem that they slow down some.

Have already told the kids that the plan is to die broke (not really, but I want to shape their expectations).
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Old 01-13-2011, 10:22 PM   #25
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Nobody here (except me perhaps) seems concerned with spending too little of their nestegg. the idea is to fully utilize the nestegg without going broke.
While I am neutral on whether or not I leave anything to my childen (after the point which they achieve independent adulthood), two issues which concern me about plans to spend the last penny on my last day are:

1. I do not know how long I will live - actuarial tables give me something of an average expectation but I could live a lot longer than the averages (or not);

2. I do not want to spend my declining years worrying about whether I will have enough money to live whatever lifestyle I am capable of right to the end, pay for a hip replacement (or even for the basic living expenses).

Based on the above, I have assumed a very long life and no fall off in spending as I age. Add in my paranoia about inflation, and the result is that I will most likely leave a substantial inheritance unless (i) I live well beyond the expectations of the actuaries (ii) I increase spending and (iii) inflation ends up being less than the long run average I have assumed (or (iv) I really stuff up my investments).

I accept that it is likely that I will spend "too little" as a result but, for me at least, better that than the alternative. I also don't mind leaving my daughters a meaningful amount of money.

Edited to add: It's likely that my views are affected by the absence of either a pension or social security as fall back - the consequences of running out of money are much greater without them
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Old 01-13-2011, 11:18 PM   #26
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My father is 90 and he still travels. I think if my mother were still alive he'd go to Europe - as it is he goes to Florida to visit friends several times a year. He also plays tennis and drives (although that is scary!).

I'd like to spend more in the next few years, when I'm more likely to have the energy to travel and so on. I find I get more tired, more easily, each year. But with a family that tends to die late... I have to conserve for the contingency that I live to be 100. Okay if I'm still lucid...
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Old 01-14-2011, 07:31 AM   #27
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+3.

I plan on making the genXer's pay to bury me.
I'm sure that more than one on this board are willing to make an ash out of you ...
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Old 01-14-2011, 08:17 AM   #28
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I'll agree with all the posts above that say this is too conservative in that it assumes you will live to 105 and get no real return on your investments.

There's a simple variation that uses an expected return. If you are 47, instead of withdrawing 1/(105-47) = 1.72%, use 1/PV where PV = the present value of 58 equal annual payments, discounted at x%.

If you choose x% = 3%, then PV = 28.15 and you can spend 3.55%. The next year "PV" changes to the present value of 57 equal payments, so you can spend 3.58%. The next uses 56 payments to generate 3.60%, etc. If you earn exactly 3%, your dollar withdrawals will be perfectly level. If you earn inflation + 3%, your withdrawals will go up exactly with inflation.

This puts you on a path that will use up all your assets if you are fortunate enough to live to 105, but it still leaves money on the table if you die sooner.
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Old 01-14-2011, 08:49 AM   #29
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I'll agree with all the posts above that say this is too conservative in that it assumes you will live to 105 and get no real return on your investments.

There's a simple variation that uses an expected return. If you are 47, instead of withdrawing 1/(105-47) = 1.72%, use 1/PV where PV = the present value of 58 equal annual payments, discounted at x%.

If you choose x% = 3%, then PV = 28.15 and you can spend 3.55%. The next year "PV" changes to the present value of 57 equal payments, so you can spend 3.58%. The next uses 56 payments to generate 3.60%, etc. If you earn exactly 3%, your dollar withdrawals will be perfectly level. If you earn inflation + 3%, your withdrawals will go up exactly with inflation.

This puts you on a path that will use up all your assets if you are fortunate enough to live to 105, but it still leaves money on the table if you die sooner.
I am not certain, but doesn't this assume a smooth return, rather than the bumpy ride that markets actually provide? It seems to me that given path dependence, someone who is dependent on portfolio for cashflow could get whacked even if the overall return and years needed were in synch.

Off the top of my head, it seems that the only truly secure way to fund a portfolio liquidating retirement would be by using the accursed CPI adjusted annuities.

Ha
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Old 01-14-2011, 09:22 AM   #30
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Well, the poster did say you'd have a cushion for unexpected expenditures, but he didn't mention just how big it might be.

I think it is much too conservative - unless you have a huge nest egg or retire very late in life.
Agreed -- much too conservative.
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Old 01-14-2011, 10:29 AM   #31
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I am not certain, but doesn't this assume a smooth return, rather than the bumpy ride that markets actually provide? It seems to me that given path dependence, someone who is dependent on portfolio for cashflow could get whacked even if the overall return and years needed were in synch.

Off the top of my head, it seems that the only truly secure way to fund a portfolio liquidating retirement would be by using the accursed CPI adjusted annuities.

Ha
Yes. This is a percent-of-current portfolio method and you get the bumpy ride of actual year-to-year market fluctuations. The OP method was as well, so I was just doing a less conservative variation on it.

And I'll agree that the only way to use up your whole portfolio without running out of money before you die is to buy some sort of annuity.
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Old 01-14-2011, 11:19 AM   #32
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+3.

I plan on making the genXer's pay to bury me.
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Old 01-14-2011, 11:37 AM   #33
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I'd be willing to bet that you would regret that decision. I can't imagine living the last years of my life with major financial limitations because I was impatient when I was younger. Pete Townsend and Roger Daltrey may have sung "Hope I die before I get old", but I don't see them putting the hose in the exhaust pipe. When I was 20, 50 sounded ancient. Now that I'm 55, 80 doesn't sound that old. IMO, if I don't need as much money when I'm 80, no problem. But no way I'm going to run out of money before I die, if I can do anything about it. Good luck to you, though. Hope it doesn't work out badly.
Harley,
I understand your point and if I liked what I was currently doing I would be willing to work longer to put a safer nest egg in place. However, the fact is I really have grown to strongly dislike working in my middle management job in my megacorp company. I really dread every Sunday night because it means coming back in here for 5 more days.

In addition, I really doubt that I will quit at 50 and never work again. I have a feeling after a couple years of traveling, golfing and partying I will be ready to do something I enjoy a few hours a week. This will help out the mathematical model and extend the probability I don't run out live the cash.
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Old 01-14-2011, 11:50 AM   #34
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That's the retirement planning dilemma, isn't it - life is too short.......... but it could be too long.

It seems foolish to not enjoy life NOW when so many people die young - you can pick up the paper any given day and find some examples. On the other hand, if you are one of the lucky ones and do live long you want to be sure that you don't run out of money (live long and prosper?).

As for me, I'm planning to delay drawing SS until I'm 70 as a hedge of living too long - will live off the nestegg from when I fully retire until then.

My plan also anticipates a slowdown in spending at the later ages (20% at 75 and and additional 10% at 85). I hope I'm wrong and my health is such that I'm spending MORE at those ages, but looking at others I know in those age groups it does seem that they slow down some.

Have already told the kids that the plan is to die broke (not really, but I want to shape their expectations).
We think very much alike. My plan incorporates the SS deferal as a hedge and a gradual slowdown in spending as well. I am actually forecasting the first 5 years of my retirement to be an increase in spending over now when working. I simply will have more time to do what I wish I could.
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Old 01-14-2011, 05:23 PM   #35
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Harley,
I understand your point and if I liked what I was currently doing I would be willing to work longer to put a safer nest egg in place. However, the fact is I really have grown to strongly dislike working in my middle management job in my megacorp company. I really dread every Sunday night because it means coming back in here for 5 more days.

In addition, I really doubt that I will quit at 50 and never work again. I have a feeling after a couple years of traveling, golfing and partying I will be ready to do something I enjoy a few hours a week. This will help out the mathematical model and extend the probability I don't run out live the cash.
I did retire at 50, and thought the same thing. But after 5 years I recognize that traveling, golfing, and partying never get old. I do actually have a gig that brings in a few thou a year, but it is so simple I can't help myself. I actually have a better suggestion. I'm married to a wonderful woman who has a much lower boredom tolerance than I do. She's started a business and is going back to school for higher level education in a field she can work in as long as she's still alive. I plan to be totally supportive, since as long as she's happy I'm happy. And after gigolo, kept man was my second career choice.
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Old 01-14-2011, 06:10 PM   #36
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I'm sure that more than one on this board are willing to make an ash out of you ...
...and if they wanted to bury me afterwards, I'm sure there are plenty of ash holes to go around.
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Old 01-15-2011, 02:23 AM   #37
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I used to be very frugal, always saving for the day that I could be conservatively very comfortable at a 3% withdrawal rate.

Then at 51 I went from supremely healthy to almost dead a couple of days later, with an infection leading to septic shock. When you realize how fragile life is and how quickly it can all change, your perspective is altered.

I'm still somewhat frugal, but I've loosened up. I quit letting my job be so important. And last summer my wife and I spent 3 weeks in Europe and cruising the Med.

You can't plan so conservatively for a future, because you might not be here, or your spouse might not be here, or you might not be healthy enough to enjoy it.

For me it is all about balance. For example, I lost my j*b at age 54 about 6 mos ago. We are currently spending at 3.8% of our savings. I wanted that to be 3.0%. So I'm looking for w*rk, but not overly aggressively. I'm going to cherry pick only things I would enjoy doing. If I don't find them, I won't work - I'll lower my standard of living if necessary. It may sound harsh, but if my wife wants to keep the big house and have nice cars, she can work (she's raised kids without working outside the home for the last 15 years). I've had enough. I'm going to work on staying healthy and unstressed and am going to enjoy life in a balanced way - not too frugal and not too spendy. But my time is worth more to me than just about anything.
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