Be Patriotic. Spend down your assets you hoarders...

[LARS]

Nothing truly new in this article, but it reinforces many of the conversations had on this board: am I spending enough?

https://www.bloomberg.com/news/articles/2017-05-16/rich-retirees-are-hoarding-cash-out-of-fear

 

[candrew]

Are We Spending Enough?

DW & I have never thought of ourselves as "affluent" - a term mentioned several times throughout the article. We have, however, always considered ourselves "patriotic" - buying U.S. made when we can, supporting local small businesses, etc.

We figured that we retired with "enough" having built in a number of financial safeguards into our retirement plan along with being long term LBYM types.

When we met with the Fidelity rep that helped us with DW's workplace rollovers, etc., he mentioned that we should consider spending more dough during our retirement.

Are we spending enough?? It's a process and we're working at it....

 

[jazz4cash]

Good piece. It reflects many of my own feelings and concerns expressed on this forum. Notably retirees spend 8 pct less than the safe rate (e.g. 3.7 vs 4.0). What's missing I think is the idea that retirees are happy spending less rather than terrified of spending more. Maybe because folks here do more planning than avg.

 

[LARS]

One thing the author is basically silent on is the fact that many "affluent" retirees are worried about the future because of how the powers that be have managed economies/monetary policy of late.

Tremendous uncertainty, which translates to husbanding of assets for "what if" scenarios, are squarely a result of the blowing bubble approach to monetary policy. The resultant concern for boom-bust on the equity side coupled with "war on saving" interest rates and it is no wonder caution prevails among affluent retirees.

 

[athena53]

I wouldn't say I'm terrified but my biggest goal is not to outlive my savings, even under the scary scenario of needing LTC, so I keep the withdrawal arte under 3.5%. Also happy with what I spend- if I had more I'd travel more, but what I just got back from Central America, leave on Sunday for a few days in Toronto, will be in Iceland in August and have a trip to India booked for early 2018. I'm hoping to get to Scotland next summer. Really, isn't that enough?


I remember realizing just before the last financial crisis that my stocks were gaining value because of all the bozos doing cash-out refinancing every time their homes appreciated in value and spending it on Stuff. While I liked the effect on my net worth, it didn't make me want to behave similarly.

 

[jollystomper]

From the article:

Insurance products could also protect retirees against huge, late-in-life expenses from medical care - a dominant fear.

I find it interesting that the emphasis is on "more insurance" versus "reduce the cost of medical insurance/expenses". I may be "hoarding" because I do not see either coming down, and that is the probably the major unknown expense for most in retirement.

With other stories saying a retired couple may need to set aside around $250K for health care, perhaps a factor for the "affluence" is due to planing for this kind of expense.

 

[explanade]

So "active" retirees live longer and happier lives, according to studies.

But do studies show that being more active means spending more or is this an inference that the article is making?

I guess a recent trend is that people value experiences more than accumulating things. So people are traveling in more comfortable ways -- business class flights, nicer hotels as opposed to roughing it in hostels. Credit card companies are marketing experiences, using your points.

But does it always follow that memorable experiences come from spending more?

Does being more active in retirement mean spending more money?

So far in ER my spending is more like 2% rather than 4%, even though I've raised my travel and overall spending by a lot.

 

[Nightcap]

Are we reading Bloomberg too much? Yes, yes we are. We're being whipsawed by stories from the financial media on how most Americans are woefully unprepared for retirement, we who did save are about to enter an extended period of extremely low returns, the 4% rule is busted, we're living longer and will die cold and penniless, and now we're not doing our patriotic duty by consuming as much as we possibly can.

Feh!

 

[imoldernu]

Article made me wonder where we stood in the pecking order.
Hmmm... thinking that the estate value can be a little morbid, so I looked at the average net worth, and was astounded to find that we were actually considered to be at lower end of "upper middle" class... by the hair on my chinny chin chin.

Numbers for "live" people:

The Average Net Worth By Age For The Upper Middle Class | Financial Samurai

Always thought that we'd be somewhere around the "middle, middle". Anyway, as far as patriotic spending goes, we're trying to be "Normal" ...more than enough to make us happy, but not enough to worry that we're spending your tax dollars.

At age 80, it's a lot easier to look ahead without spending too much time worrying about our financial future.

 

[Bigdawg]

Browning’s suggestion is that financial planners urge their thriftiest clients to make big purchases–like a second home or a fancy car–before they retire, out of their pot of savings. The idea, he said, is “training people to spend.”


-Agenda? Yup. Spend, spend spend! Because I make money when you spend.


Ridiculous.

 

[Nightcap]

Article made me wonder where we stood in the pecking order.
Hmmm... thinking that the estate value can be a little morbid, so I looked at the average net worth, and was astounded to find that we were actually considered to be at lower end of "upper middle" class... by the hair on my chinny chin chin.

Numbers for "live" people:

The Average Net Worth By Age For The Upper Middle Class | Financial Samurai

Always thought that we'd be somewhere around the "middle, middle". Anyway, as far as patriotic spending goes, we're trying to be "Normal" ...more than enough to make us happy, but not enough to worry that we're spending your tax dollars.

At age 80, it's a lot easier to look ahead without spending too much time worrying about our financial future.

Is it just me, or is anyone else troubled by FinancialSamurai's insistence on the mean rather than the median? Sure, the average American my age is upper-middle-class. But the median is far less rosy. It's like "Bill Gates walked into a bar and suddenly everyone had an average net worth of a billion dollars."

 

[Bir48die]

From the article:

I find it interesting that the emphasis is on "more insurance" versus "reduce the cost of medical insurance/expenses". I may be "hoarding" because I do not see either coming down, and that is the probably the major unknown expense for most in retirement.

With other stories saying a retired couple may need to set aside around $250K for health care, perhaps a factor for the "affluence" is due to planing for this kind of expense.

+1

If you read enough articles about how we're living longer and need more money to "help us through the latter years", most of us don't want to be a burden to our kids financially. So, we budget to be able to self insure. With the insane rising costs of long term care insurance it forces us to have a pot for "worst case scenario". Thus, if our kids are lucky enough they get a pot of gold at the end of the rainbow.

 

[ShokWaveRider]

I am spending my assets....... on German cars, Flying Foreign Airlines, Buying Chinese Products. LOL sorry I could not resist. Just Kidding.

 

[dixonge]

From the article:

What can get rich elderly Americans spending more? One way is to reassure them they’re not going to run out of cash. Tools such as annuities and bond-ladders can turn a retirement account into a regular stream of income, mimicking a paycheck.

Yeah, kinda like a dividend stock. It's purely psychological, but I can definitely see the benefit. I'd be interested in the spending patterns of dividend income investors vs. everyone else.

 

[Fedup]

I'm doing my best to spend. But I'm not under illusion that there are too much money. Hell no. But I won't stress over it.

 

[LARS]

I am spending my assets....... on German cars, Flying Foreign Airlines, Buying Chinese Products. LOL sorry I could not resist. Just Kidding.

And here I thought for sure you were going to say, "I'm spending my assets....... on wine, women and song... and the rest I'm wasting."

 

[FIREd]

Uncertainty related to healthcare is what keeps me from spending more. Until it changes, my WR will remain very conservative.

 

[H2ODude]

Are DW and I spending what we could/can safely? No. Is it because we're cowering under the impression that the sky might fall? No. (We have large safety factor built in). It's simply that we don't see anything else worthwhile to spend money on. We're just now recovering from two domestic trips over last three weeks, getting ready for another one in June and one in July, and then Africa in August and Spain in September. I'd scrub one of the last two from travel fatigue but arrangements have been made for one and the other is family visit. Feel sort of embarrassed that the dog sitter sees all this from a much lower economic perspective. Lucky to have beer tastes with funds to cover costlier libations I guess.

It just gets me that the "failure to spend" is characterized as overly conservative fear of failure. Some of us are just fine living happy lives without needlessly buying stuff we don't need or going places just to go.

 

[Aerides]

Retirees spending less?

Maybe because we're old enough to remember a few recessions....experienced enough to know that every new shiney doesn't make you happier...and smart enough to know the folks who claim we should spend more aren't gonna help if we're 87 and need long term care.

 

[ExFlyBoy5]

Journal of Financial Planning found that the wealthiest fifth of U.S. retirees were spending 53 percent less than they could have. Meanwhile, the poorest 40 percent generally spend more than they safely should; the median retiree spent about 8 percent less than the safe amount.

Well, I am not *that* smart, but if I had to come up with a hypothesis for this "phenomena" then this quote tells me all I need to know. Those that were GOOD about saving their money continue to do so in their waning years and those that suck with money continue to do so until they die. Are the more "affluent" folks less happy because they spent less? I would vote NO and I would further guess that if they spent more, they would have been more stressed and thus less happy.

So, I think this is yet another article that tries to bunch folks (or data) into tiny (actually, rather large) boxes that is probably not useful to people.

After a lifetime of saving, it requires some psychological gymnastics to start spending your nest egg. Browning’s suggestion is that financial planners urge their thriftiest clients to make big purchases–like a second home or a fancy car–before they retire, out of their pot of savings. The idea, he said, is “training people to spend.”

Seriously?

 

[Alan]

Beginning this year we are increasing our spending by proxy in that we will start giving our 2 kids (in their mid to late 30's) the max we can each year without it needing to be reported. ($14k per person, so $28k each).

There are no grandchildren and none expected so we decided we'd rather begin giving the kids their inheritance slowly over time rather than a big lump sum in possibly another 30 years time when we die.

 

[jazz4cash]

Is it just me, or is anyone else troubled by FinancialSamurai's insistence on the mean rather than the median? Sure, the average American my age is upper-middle-class. But the median is far less rosy. It's like "Bill Gates walked into a bar and suddenly everyone had an average net worth of a billion dollars."

+1
The age 55-64 age avg vs median is 843k vs 248k. I also wonder if data is for household or individual.

 

[LARS]

So, I think this is yet another article that tries to bunch folks (or data) into tiny (actually, rather large) boxes that is probably not useful to people.

?

As the author points out, at one level this is a real societal issue, which is potentially meaningless as you point out at any one individual level.

Still, a fundamental question, continually debated by economists, is the balance between societal spending and societal savings rate. Generally, the rap against the US economy is that our savings rate is too low (unless you are Ben Bernanke blaming too high a savings rate for your reckless reason for implementing your theories on QE).

 

[RobbieB]

I just bought another pair of First Class airplane rides.

 

[samclem]

Related to another current thread: A lot of us worry about future LTC costs, and are squirelling away a big chunk of change to help cover them. If the government wants us to spend this money now, maybe they will come up with a public/private approach that makes LTCi of some type a product that we can depend on. Something that starts paying after a year or two, is guaranteed to cover costs and not escalate in price. Really guaranteed.

When people again had faith in the banks and that they would be able to get their money under any conditions (due to govt guarantees), they started saving and this helped everyone.

BTW--the money that is not being spent is still being put to productive use. Increased availability of capital helps businesses and makes workers more productive. This emphasis on pumping up demand often has an unhappy ending.