Are you guilty of spending too little ?

[Meadbh]

Any article that cheerfully recommends a WR of 6% has limited credibility with me. Furthermore, what's the big deal with spending too little? Too little for what? If the answer is "to die broke", that would not be an enjoyable process AFAIAC.

[Major Tom]

Quote:

Originally Posted by REWahoo I really don't think you'll be able to change your spending habits substantially. But it is fun to think about, isn't it?

Thinking about what I could purchase with my money is, in many ways, more enjoyable than actually spending it because that unspent money represents so much potential. Once it is spent, the potential is gone. This is one big reason I like having a healthy financial cushion.

And W2R - sorry to hear that your offer didn't work out, but I'm sure you'll find something else before long.

[Major Tom]

Quote:

Originally Posted by Masquernom If you aren't spending enough, buy a used Volvo. That will help you increase your spending....

+1

Been there, done that

[ziggy29]

It's silly to call this a "problem" unless you are miserly to the point where it is affecting your own health and happiness, and to the point where it is affecting your relationships, even when you can clearly afford to be a little "looser" with your money. Other than that, the suggestions are a solution in search of a problem. Just because someone *can* afford to spend down more than 1-2% doesn't mean they *should* unless not doing so feels like self-deprivation or toxic to your life and relationships.

[Andre1969]

Quote:

Originally Posted by athena53 It's not just inflation. It's the increased cost of technology and advances in medicine. The stripped-down VW Beetle your grandparents could buy in the 1960s doesn't exist anymore. A new car now HAS to have multiple catalytic converters, air bags, on-board computers and (probably) A/C, power windows, power steering, power brakes.

I think cars are actually one area where, once you adjust for inflation, and all the content and safety features, they're actually cheaper nowadays.

To use one example, my grandparents bought a 1957 Ford Fairlane 500 4-door hardtop, brand-new, for about $3500 (I can't remember though if that was the MSRP or what he paid for it). Base price on the car was around $2414, but in those days just about everything we take for granted today was optional. So by the time you add in the biggest V-8 (base engine was a 6-cyl, and there were something like 3-4 V-8 options), automatic transmission, power steering, brakes, radio, backup lights, maybe a light in the glove box and trunk, mirror on the visor, two tone paint, white wall tires, etc, it wasn't hard to jack up the price.

Adjusting for inflation, that $3500 would be roughly $29,600 today. For comparison, I just priced out a 2015 Ford Taurus SE, and got an MSRP of around $27,700, including freight. The only option I added, to make it more on par with the '57, was the "smoker's pack" for $85. . This car would have, standard, automatic, power steering, power brakes, a decent stereo, air conditioning (a/c was about a $500 option in 1957, which is why it was usually only Cadillacs, Lincolns, and Imperials that were ordered with it), power windows and locks (Granddad's '57 didn't have those). I think the Taurus has a power seat, but even if it doesn't, it has dual reclining seats, where the '57 just had a solid bench. Tilt wheel, cruise control. Alloy wheels. I think the Taurus even has Navigation. Then there's the safety stuff like ABS, traction control, air bags, and so on. The Taurus, even with the base engine, is faster than the '57 Ford, stops faster, handles better, gets better fuel economy, etc.

The Achilles heel of modern cars though, is that when they do break down, the repair costs can be enormous. And there are things that can break on them that didn't even exist in the old days. For instance, about two years ago, I had to have about $1,000 worth of emissions work done on my 2000 Buick Park Avenue...all of it stuff that wouldn't have existed on a 1957 anything. Transmission repair costs went up in a major way back when we shifted from 3-speed automatics to 4-speeds in the 1980's. The last time I had a 3-speed automatic rebuilt, it was in a 1979 Newport, and was about $650, although that was back in 1997. My uncle needed the 4-speed in his '97 Silverado rebuilt awhile back (Forget the year now) and it was $1860. I shudder to think how expensive these modern 8-9 speeds are going to be to replace!

[shotgunner]

Quote:

Originally Posted by Meadbh Any article that cheerfully recommends a WR of 6% has limited credibility with me.

Well I guess I can't trust FIRECALC then.

When I plug in my portfolio amount, a 2% spending inflation each year, Social Security, a small pension non inflation adjusted, and use the Investigate tab to see what it says I can spend. It tells me I can spend (with 100% chance of success) for a 30 year period starting at age 57, using a 6.69% withdrawal rate in year 1. Obviously that WR will be lower at age 62 when the SS and pension kick in.

[shotgunner]

I also just realized that FIRECALC says I can spend 150% more than I currently budget for this year and still have 100% chance of success. Add to this I am still working P/T and did not factor that income into the FIRECALC scenario. It is now clear to me I am guilty as charged by this article. More food for serious thought.

[Andre1969]

Quote:

Originally Posted by shotgunner Well I guess I can't trust FIRECALC then. When I plug in my portfolio amount, a 2% spending inflation each year, Social Security, a small pension non inflation adjusted, and use the Investigate tab to see what it says I can spend. It tells me I can spend (with 100% chance of success) for a 30 year period starting at age 57, using a 6.69% withdrawal rate in year 1. Obviously that WR will be lower at age 62 when the SS and pension kick in.

FireCalc gives me a 95.5% chance of success of pulling out 6.09% of my starting portfolio in year one. However, the math isn't quite that simple. That's 6.09% of my CURRENT portfolio, but I don't plan to start withdrawing until 6 years from now. With luck, my portfolio will be larger by then. Then, there's SS that will kick in in 2032, and my small, non-COLA'ed pension in 2035.

So, I don't know what the actual withdrawal rate of the portfolio will be once I actually start drawing on it.

When people talk about withdrawal rates and making a nest egg last though, they're just using simple math, and not counting other incomes such as pension, SS, etc. For instance, if I had $1M and pulled out $60,900 per year from it, FireCalc only gives that scenario a 47.4% chance of success.

[pb4uski]

Quote:

Originally Posted by Andre1969 And yeah, that 4-6% number caught my eye, too. ...

But one thing to remember is I suspect this article and the 4-6% is targeted to readers who retire at 65 or near their FRA or even later and not to ERs who retire in their 50s or earlier.

[pb4uski]

Quote:

Originally Posted by W2R I almost did on Tuesday! But even though I'm eager to do so, there just isn't any sense in paying 7% more for the house than the maximum the comps could possibly justify. 4% more and we'll talk... Stupid sellers think it's the effing Taj Mahal. Maybe they'll come back at me with hat in hand and ask me to resubmit my offer, at some point, and then you'll see. Meanwhile I'll just patiently wait for something else suitable to come on the market. I'm not going to settle for just ANY house, y'know.

If your really like the house, you could call them and make them the same offer every 30 days for a couple months (then lower it) until they start getting realistic. If it is empty, you can accompany it with a reminder that they are out of pocket for costs of keeping it so each month they reject your offer means less money in their pocket.

[W2R]

Quote:

Originally Posted by pb4uski If your really like the house, you could call them and make them the same offer every 30 days for a couple months (then lower it) until they start getting realistic. If it is empty, you can accompany it with a reminder that they are out of pocket for costs of keeping it so each month they reject your offer means less money in their pocket.

That has already been considered, of course. We'll see if I feel like doing that in 30 days or not. I'm not married to the house.

[haha]

Quote:

Originally Posted by Major Tom Thinking about what I could purchase with my money is, in many ways, more enjoyable than actually spending it because that unspent money represents so much potential. Once it is spent, the potential is gone. This is one big reason I like having a healthy financial cushion. And W2R - sorry to hear that your offer didn't work out, but I'm sure you'll find something else before long.

So right. Unspent money is like a full water tank way up on a mountain
Spend it and that power is forever lost.

Ha

[CaliforniaMan]

Quote:

Originally Posted by shotgunner Personnally I think I have been worried too much about the odds of running out of money against the odds of running out of life itself. Someon on this board gave my that epiphany moment when they pointed out they had a 100% chance of success on FIRECALC to age 95 and an 18% chance of living that long. One must find balance between the two and that is the tricky part of retirement to me.

+1
As I retired this year and less focused on financials of saving, this running out of time idea has begun to come more and more to the forefront. I don't think the idea is that you should spend it because you have it. But rather if there is some thing or some travel or some giving that would make your life better and more enjoyable, it might be better to go ahead and enjoy it now, rather than keep waiting for a time that will never come. I have to admit that we have a budget and are planning to spend less than 4%, but while we are not spendthrifts, we do happily blow some money on things we use, travel, entertainment and pursuing adventures as they arise.

Quote:

Originally Posted by aaronc879 I don't think 4-6% is unreasonable for people retiring at full retirement age. I think a lot of people on this site will have more money when they die than when they retired. To some that may mean success. To me it means you worked longer than you needed to.

I agree with this, but personally have a hard time with anything over 4%, too many unknowns, and just don't want to have to ever become a Walmart greeter.

Quote:

Originally Posted by pb4uski But one thing to remember is I suspect this article and the 4-6% is targeted to readers who retire at 65 or near their FRA or even later and not to ERs who retire in their 50s or earlier.

I totally agree. There is a big difference in retiring very early, especially with kids still around, than retiring later.

[rodi]

Quote:

Originally Posted by RobLJ (We have slack to fund travel and other non-essentials, and I'm only semi-retiring next year, so that's easy to post. After DW retires, maybe I'll start eating SPAM.)

LOL - I just bought a case of spam at Costco yesterday... Grilled up, with eggs. Yummy. Nothing beats salted canned meat.

I joked with the checkout clerk that the spam was to offset the organic chickens and the organic hamburger I also bought.

[aja8888]

Quote:

Originally Posted by rodi LOL - I just bought a case of spam at Costco yesterday... Grilled up, with eggs. Yummy. Nothing beats salted canned meat. I joked with the checkout clerk that the spam was to offset the organic chickens and the organic hamburger I also bought.

You could fry the organic chicken in the Spam grease too! That's multi-tasking!

[imoldernu]

Giving the article consideration.

Ummm.. How much for a personal trainer?

...and what is it?

[daylatedollarshort]

Going forward I am trying to use money more for investing, appreciating assets, and buying already depreciated consumer goods. I think one of our better past spends was a pre-owned whitewater canoe we used for many years and then were able to sell for what we paid for it.

I am not sure I agree with even the happiness studies on spending money on experiences. We do a lot of things I think are fun for free or very low cost. We had a lot of exciting weekend river trips with meetup type groups with the canoe and they didn't cost any money except for gas for the car.

Maybe it helps to be easily amused.

[travelover]

If I knew how much my last few years were going to cost me with certainty, I'd feel a lot better about spending more now.

[NW-Bound]

Quote:

Originally Posted by CaliforniaMan As I retired this year and less focused on financials of saving, this running out of time idea has begun to come more and more to the forefront. I don't think the idea is that you should spend it because you have it. But rather if there is some thing or some travel or some giving that would make your life better and more enjoyable, it might be better to go ahead and enjoy it now, rather than keep waiting for a time that will never come. I have to admit that we have a budget and are planning to spend less than 4%, but while we are not spendthrifts, we do happily blow some money on things we use, travel, entertainment and pursuing adventures as they arise. I ... personally have a hard time with anything over 4%, too many unknowns, and just don't want to have to ever become a Walmart greeter.

I originally planned to spend 3.5%, but after sitting down to figure out our SS, am quite comfortable going up to 4%. After spending 1% on the maintenance and update of our homes this year, I am still at less than 4%.

I would not throw money away, meaning spending it without thinking about what to get in return, but on the other hand have stopped worrying about running out of money. If things get really bad, out of control, and we have to get rid of the homes and live full-time in a small motorhome, so what? Fewer expenses, and less things to take care of, and more travel... I would still find a way to enjoy life. As long as one has life, with some reasonable health, money is secondary.

Me worry?

[Mulligan]

Quote:

Originally Posted by NW-Bound I originally planned to spend 3.5%, but after sitting down to figure out our SS, am quite comfortable going up to 4%. After spending 1% on the maintenance and update of our homes this year, I am still at less than 4%. I would not throw money away, meaning spending it without thinking about what to get in return, but on the other hand have stopped worrying about running out of money. If things get really bad, out of control, and we have to get rid of the homes and live full-time in a small motorhome, so what? Fewer expenses, and less things to take care off, and more travel... I would still find a way to enjoy life. As long as one has life, with some reasonable health, money is secondary. Me worry?

I am going to have to start staying out of Lowes and Home Depot. It is amazing what kind of maintenance and updating I am creating for myself whenever I walk in there. I have blown way past the 1% yearly thing. Before I started going in those places a few months ago, I thought my house was still in great shape.


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