The Myth of Outliving your Retirement Savings - EBRI

[SumDay]

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.

 

[joylesshusband]

...comforts me, a little.

It should not.

 

[ERD50]

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

 

[Andre1969]

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.

 

[SumDay]

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.

 

[NW-Bound]

I agree with this following excerpt from the article:

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:

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.

 

[Rustic23]

My parents out lived their savings. That does not mean they were out on the street. They did not out live their kids!

 

[bclover]

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.

 

[candrew]

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.

 

[Andre1969]

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.

 

[Teacher Terry]

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.

 

[Clone]

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.

 

[walkinwood]

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.

 

[Tallman4123]

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.

 

[MichaelB]

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.

 

[joeea]

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.

 

[fosterscik]

Interesting. Here's the original article:
https://www.ebri.org/pdf/briefspdf/EBRI_IB_447_AssetPreservation.3Apr18.pdf
summarized in the previous post

 

[Olbidness]

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.

 

[davebarnes]

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.

 

[aja8888]

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.

 

[NYEXPAT]

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.

I've heard of "catch and release" but that is a bit extreme.

 

[JoeWras]

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.

Sorry about your cousin, but you are right, go doing what you love.

In the other thread, "Tips from a Cardiologist", there is a referenced article. The author contends that deer hunting is extremely risky, as risky has high intensity interval training.

https://www.freep.com/story/news/20...lth-beaumont-cardiovascular-clinic/550861002/
2.) Deer hunting can put you at higher risk for heart attack.

It's a combination of factors — cold weather, the thrill of the hunt and sedentary lifestyle — that puts many deer hunters at risk for heart attacks in the field.

"We’ve done some studies here at Beaumont showing very high heart rates, blood pressures," Franklin said. "We have one case report showing a guy's heart rate standing next to a tree went from 70 up to 170 (beats per minute) simply by seeing a deer in front of him.

 

[NYEXPAT]

Or she could remarry and her and the new guy could spend it all.

That's our plan! I thought it was the least I could do for "stealing her youth" as my MIL say's.

 

[Rianne]

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.

My situation similar to yours, my mom lived to 93, traveled overseas and enjoyed her life. She lived her house until she really needed us. Dad passed early. She lived on SS, small rental income and surprisingly left all 5 of us @ 50K each! We were shocked. She was very frugal and smart with travel. She did live with us for 3 months then had to go to nursing home where she passed within 2 weeks. She always hated nursing homes and I think she passed on shear will.

 

[marko]

My friend of a friend story:
We were skiing in Euope and staying at a small guest house. One of the guests was an older guy who came into the dining room that evening and announced that he just had the best day skiing of his life and if he died tommorow he'd be fine with it. The next morning there was a lot of commotion in the lobby....he had died overnight