More difficult then you would think... spending down

[LARS]

Like the article says: "When my will is read, it will begin with the statement: 
"Being of sound mind and body … I spent it all.""

The challenge of spending is a tricky one for those that are not looking to leave large inheritances.

Can't say I have any bright ideas, but I do spend some time looking out some 20 years or so and thinking about the minimum $s I want to show up with at the age (approx. 80 yrs old) on the theory that I ought to amortize current excess $s and add to increased spending.

Read more: Planning To Die Rich Misses The Point - Business Insider
Planning To Die Rich Misses The Point - Business Insider

 

[gcgang]

Just put all your $ into annuities, both immediate and some that pay later so you have increasing income, and live it up.


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[Meadbh]

Hmmmm....maybe I should borrow to pay for my mega yacht. My estate can pay it off.

 

[robnplunder]

( I want to spend down but can't do that even if I try when I am still doing OMY. )

Isn't "spending down" more of an issue for folks without children? What are their plans to spend down if any?

 

[Meadbh]

I would rather have money left over when I kick the bucket than risk becoming destitute. I am not going to make any attempt to "spend it down" until at least 5 years after ER, that is, until the retirement risk period is over I am sticking to ~3% WR. If things look good 5 years in, I will loosen the purse strings a little.

 

[38Chevy454]

The classic trade-off, trying to predict your demise or health issues that come up with age vs spend now and enjoy while you can.

I agree, it is not an easy thing to determine. I don't like to think about my mortality.

 

[RunningBum]

Dying with nothing left means I barely survived pretty much the worst case scenario. It's certainly not a goal. Even if I didn't have heirs, I'd be as happy knowing my money would go to good use wherever I decided to leave it as I would seeing it while I'm alive. If I'm very safe I may get more generous in my later years.

I just don't get some on here who are trying to figure out how to spend more. Seems to me that you spend whatever you need and want up to your SWR. Maybe one of you can explain why you feel like you must find things to spend your money on when you have a low withdrawal rate.

 

[aja8888]

I'd love to be able to build my own pyramid but don't believe I can order enough concrete and cut stones since the local builders and Exxon are gobbling it all up.

Given I won't have any pyramid to house me and the collection of toys and gold and jewels I am hoarding, I guess I'll have to start spending more as time goes on. Wait..I believe DW has just volunteered to handle that for me. What a relief!

Seriously, being in the RMD phase adds another dimension to spending. Not only are you making funds available, Uncle Sam is requiring it! (talk about SWR choice!) Moving IRA funds into a Roth at this point is a choice, but like before RMD (and still working), it looked like a taxing event. Now with SS and RMDs, it's still a substantial tax hit to convert funds to Roth.

One thing we are doing is passing assets to children now, rather than at some point in the future. We helped DD buy a small house a few years ago and that worked out well. We give cash to the kids annually. We helped with one grandchild's college costs.

 

[bingybear]

( I want to spend down but can't do that even if I try when I am still doing OMY. )

Target ER -> OMY.

I see your problem. Target ER -> OMY..you never get there... it is always OMY!
(hint) -- you never get there.

I have one too... planned WR 1.5%, 2% when splurging...the kinds will be happy as I can't spend down!

 

[robnplunder]

We helped DD buy a small house a few years ago and that worked out well. We give cash to the kids annually. We helped with one grandchild's college costs.

Stop! You are setting a bad example for us all.

Perhaps, it's not too late for you to adopt me. I don't eat much but can take your money at will.

 

[RunningBum]

Seriously, being in the RMD phase adds another dimension to spending. Not only are you making funds available, Uncle Sam is requiring it! (talk about SWR choice!) Moving IRA funds into a Roth at this point is a choice, but like before RMD (and still working), it looked like a taxing event. Now with SS and RMDs, it's still a substantial tax hit to convert funds to Roth.

See, that's another aspect I don't get. Uncle Sam requires you to take RMDs. You don't have to find things to spend it on. You can just invest the money in a taxable individual account. I mean, if you use the logic that you have to spend RMDs, wouldn't the same logic say that you have to spend your whole paycheck that you get from your job? Not exactly, I know, but just because money is taxed doesn't mean you can't set it aside.

 

[Lsbcal]

The VPW Retirement Calculator is a good way to put flesh on this topic. See this thread and then go to Bogleheads for the actual calculator:
http://www.early-retirement.org/for...drawal-calculator-ive-seen-to-date-68770.html

 

[aja8888]

See, that's another aspect I don't get. Uncle Sam requires you to take RMDs. You don't have to find things to spend it on. You can just invest the money in a taxable individual account. I mean, if you use the logic that you have to spend RMDs, wouldn't the same logic say that you have to spend your whole paycheck that you get from your job? Not exactly, I know, but just because money is taxed doesn't mean you can't set it aside.

And setting the RMDs aside in a taxable account is mostly what we are doing. I just hate to pay the taxes on it. But it is accumulating since we spend less than what we have available from SS and RMDs (no pension).

 

[LARS]

From my perspective I am not trying to die with one dollar in the bank: or anywhere near it. However, I also do not want to end up with 100% of what I have now. That would mean way, way too many $s left unspent. Hence, my thought is to set milestones for net worth to drop to as I age. And have 80 be the end point to arrive at with x dollars (which would still be a very substantial amount....).

And by the way, spent includes substantial donations in my book...

 

[GreenER]

I would be very happy to be able to insure our security and then leave an inheritance and fund a charitable trust!

 

[MRG]

I would be very happy to be able to insure our security and then leave an inheritance and fund a charitable trust!

+1
We have set our trust to disburse funds to 2 well known charities, and a local no-kill animal shelter.

I recently learned (unfortunately)of a new charity to help cancer patients. I'll investigate it, I have a personal relationship with the founder. Maybe I'll volunteer to assist him.

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[daylatedollarshort]

I would be very happy to be able to insure our security and then leave an inheritance and fund a charitable trust!

+1. I am okay with leaving money to the kids, food bank and a local elephant sanctuary. As our kids get older and seem settled in careers, maybe we will leave more to the elephants. I am okay with using our NW more as a financial security blanket for when we are older than having the last check bounce.

 

[meierlde]

As gcgang points out you can buy annunities and have nothing left at death (better buy a funeral in advance though or your survivors will be stuck paying for it). But that then is essentially making a bet with the insurance company (exactly the opposite bet of life insurance) that you will live longer than the company things, just like life insurance is essentially a bet you will die sooner.

 

[wingfooted]

'Spending it all' is likely going to be a big problem for many on this board as we will adjust WR to the safe zone as indicated by Firecalc, et al for a 95% success rate.

However if returns exceed the 5% bear market scenarios - retirement accounts are going to have an embarrassing wealth of surplus riches - which it will be difficult to spend.




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[DayDreaming]

Love this line from that article:

Your gravestone will have two dates separated by a hyphen. You have no control over the dates, but you do have control over the hyphen … that’s your life. Make the most of that hyphen.

 

[imoldernu]

Like the article says: "When my will is read, it will begin with the statement: 
"Being of sound mind and body … I spent it all.""

The challenge of spending is a tricky one for those that are not looking to leave large inheritances.

Can't say I have any bright ideas, but I do spend some time looking out some 20 years or so and thinking about the minimum $s I want to show up with at the age (approx. 80 yrs old) on the theory that I ought to amortize current excess $s and add to increased spending.

Read more: Planning To Die Rich Misses The Point - Business Insider
Planning To Die Rich Misses The Point - Business Insider

The linked article reflects our own feelings.

I am not into giving advice, but what you said is exactly what we did. Retired at 53, now nearing 80. Not into active investing, but, financially speaking DW and I are at almost the exact position as the day we retired, and feel secure with what the future may bring. Keeping in mind that the 1989 dollar is now $1.90, and the investment return basis over the early years was better than it is today, the fact is that our capital is/was far below that of most ER members. We are only now, beginning to go into the spend down period... much later than we planned.

The simple part of this was understanding that LBYM does not mean sacrificing anything at all, as long as one understands that matching the outgo with the income is what we do before the fact.

Our path to a fulfiling and happy retirement is here:
http://www.early-retirement.org/forums/f27/sharing-23-years-of-frugal-retirement-62251.html

 

[athena53]

I would rather have money left over when I kick the bucket than risk becoming destitute. I am not going to make any attempt to "spend it down" until at least 5 years after ER, that is, until the retirement risk period is over I am sticking to ~3% WR. If things look good 5 years in, I will loosen the purse strings a little.

I agree. Having a husband 15 years older has been a good education for me. I can see the difference money makes in a comfortable old age (he's 76 now). The first hearing aids he got 10 years ago cost $5,000 for the pair and insurance paid $1,500. He lost one a few years ago and the other stopped working, and the ones we just bought at Costco were "only" $2,600 and work much better. (Thanks to those of you here who recommended Costco!) Between the 2 of us we have 5 dental implants. I'm also finding that our travel is more expensive. He just can't do long-hauls (e.g. transatlantic) in Coach anymore. He never fit in Coach seats anyway and now it just kills his back. The aspects of travel that reduce wear and tear- maybe private car to/from the airport, a hotel close in, etc. also cost $$$.

I'm planning on 3% withdrawal till I start collecting SS in 8 years and even that scares me, but I look at my spreadsheets and under some pretty reasonable assumptions the $$ I'll have left at 90 are equivalent to what I have now in today's $$.

I'd rather have that cushion. When my granddaughter starts college (she's less than a year old) I may be able to help her and (please God) future siblings with expenses. At that point, I'll have a good idea of how much I can chp in for that. I've already started a 529.

 

[RonBoyd]

Love this line from that article:

A quote by Kevin Welch made famous by the Garth Books song, "Pushing Up Daisies."

 

[Lsbcal]

...
I'm planning on 3% withdrawal till I start collecting SS in 8 years and even that scares me, but I look at my spreadsheets and under some pretty reasonable assumptions the $$ I'll have left at 90 are equivalent to what I have now in today's $$.
...

Sounds like the VPW calculator would fit your case. See above for link if you haven't already checked it out.

 

[hesperus]

Seriously, being in the RMD phase adds another dimension to spending. Not only are you making funds available, Uncle Sam is requiring it! (talk about SWR choice!)

I take my RMD's from an inherited IRA as 'in kind' distribution, in the form of securities. Sure, I pay taxes on the distribution, but these holdings go right back into my brokerage account.