Does anybody want to be rich when they get old?

[walkinwood]

That is absolutely true. Take it from me who have been to many third world countries. It's all about expectations. If you don't expect much, you don't have much to worry about.

It is also cultural. Some cultures show their emotions more openly than others. Having said that, I think that once there is shelter, safety & food, money has a diminishing return on happiness.

 

[FIREd]

I went to visit my family for the holidays and this trip reminded me how rich we are already (a fact that sometimes gets lost after hanging out too much on ER.org). I make more money sitting on my tush all day than most people make while working 40+ hours a week at a job they loathe. That's already an incredible luxury that I intend to protect at all cost. Would it be fun to be even richer? Sure. But not if it means risking what we already have. We have no heirs and I do not feel compelled to potentially jeopardize my own financial wellbeing in order to make an outsize gift to some charitable organization down the road. And while we can afford many luxuries on our current income, we hardly spend any money on such things. So I doubt we'll develop a sudden taste for luxury later on. No, getting richer would only serve to make us feel even more financially secure, by lowering our WR.

 

[scrabbler1]

I went to visit my family for the holidays and this trip reminded me how rich we are already (a fact that sometimes gets lost after hanging out too much on ER.org). I make more money sitting on my tush all day than most people make while working 40+ hours a week at a job they loathe. That's already an incredible luxury that I intend to protect at all cost. Would it be fun to be even richer? Sure. But not if it means risking what we already have. We have no heirs and I do not feel compelled to potentially jeopardize my own financial wellbeing in order to make an outsize gift to some charitable organization down the road. And while we can afford many luxuries on our current income, we hardly spend any money on such things. So I doubt we'll develop a sudden taste for luxury later on. No, getting richer would only serve to make us feel even more financially secure, by lowering our WR.

+1. I happened to compare my average annual investment income from the 5 years I have been ERed versus the wage income from the 5 years I worked part-time (20 hours a week, not 12 hours) and saw that they were the same, around $44k. This means I have enough money to support my current ER lifestyle the way I did when I was working but without having the ordeal of working especially the awful commute (brought home, once again, by the recent snowstorm in the NY-NJ area I do not have to deal with any more)!

One big requirement of ER was that I could maintain my day-to-day lifestyle which does not include any really extravagant things but I know that if I want to splurge on something once in a while I can do so without fear of busting my budget.

 

[Shawn]

I want to be both safe and rich.

I consider myself relatively safe in that I have the three pillars of (pending) retirement assets: pension, investments, and social security. Because I am very frugal, any one of these assets will be able to independently cover my needed retirement expenses and much more. If I retired today at age 54, my pension would provide about 5 times my expenses (ignoring income taxes), my investments would provide about 6 times my expenses (at a 4% SWR), and social security would provide about 2 times my expenses beginning at age 70. These ratios should continue to rise since I plan to remain in the accumulation phase after retirement. So my safety margin is large, baring some sort of economic armageddon.

While my investments are not 100% in equities, they are 70/30 with no immediate plans to change. The most likely scenario is that I will live off my pension for the rest of my life and let the investments "ride." In addition, I will continue to add new money to my investments using unspent pension and eventually unused social security funds. So I should be rich using the definition provided by the OP.

While money may not buy happiness, having a sense of financial security is and will continue to be a big step in that direction. Having the option to splurge on big activities (e.g., summit Mt. Everest, sub-orbital flight) will bring satisfaction regardless of whether these activities are actually realized. I will have no regrets about leaving the money to charity when I die.

 

[travelover]

I went to visit my family for the holidays and this trip reminded me how rich we are already (a fact that sometimes gets lost after hanging out too much on ER.org). ............

I also visited family over the holidays and was similarly reminded. I also couldn't help but notice that they spent every extra dime they had and will never enjoy the freedom that I earned by being frugal.

 

[clifp]

I can predict that the responses will be typically " don't need any more money, very happy spending what I do". or "money doesn't buy happiness and i am already very happy". These views are valid and certainly reflect the LBYM mind set prevalent on this site.
Me on the other hand already meet your wealth criteria several times over nevertheless am 100% in equities if you ignore our pensions. Basically we are still playing the "game" that some people would say we have already won.. So I can say that I agree with you! I think.

Yes we do, in fact I was thinking of you when I wrote the post. IIRC soon after you joined the forum somebody asked you this question. You already won game why are you keeping playing? Nords would say why are you running up the score?

Correct me if I am wrong, while I know you accumulated much of your wealth from the sale of business you owned. I suspect that you've also made substantial amount of money in the market?

I understand the reasoning behind the question. But I also understand why coaches run up the score, unless it against a clearly overmatched team. It is more fun to win big than just win. Also if you are up 28-0 in the third quarter, you are very likely going to win the game. I don't know the statistics but I suspect that more passing teams lose the game by switching to a running game at that point than lose cause their star QB throws lots of interception.

The equivalent in investing is becoming too conservative. Looking at FIRECalc roughly as many aggressive portfolio fail in the 30s due to the stock market crash as conservative investments fail in the 70s and early 80s due to the ravages of decade worth of high inflation.

To me once you get to 100% on Firecalc, a more aggressive portfolio is like spend $5 a week playing the lotto. If you lose the $5 a week isn't going to matter. Most of the fun of playing the lotto is dreaming of winning. If the great depression hits tomorrow Danmar or myself isn't going to be starving.

A large part of that is because we did invest aggressively.

 

[robnplunder]

I want to be both safe and rich.

I consider myself relatively safe in that I have the three pillars of (pending) retirement assets: pension, investments, and social security. Because I am very frugal, any one of these assets will be able to independently cover my needed retirement expenses and much more. If I retired today at age 54, my pension would provide about 5 times my expenses (ignoring income taxes), my investments would provide about 6 times my expenses (at a 4% SWR), and social security would provide about 2 times my expenses beginning at age 70. These ratios should continue to rise since I plan to remain in the accumulation phase after retirement. So my safety margin is large, baring some sort of economic armageddon.

While my investments are not 100% in equities, they are 70/30 with no immediate plans to change. The most likely scenario is that I will live off my pension for the rest of my life and let the investments "ride." In addition, I will continue to add new money to my investments using unspent pension and eventually unused social security funds. So I should be rich using the definition provided by the OP.

While money may not buy happiness, having a sense of financial security is and will continue to be a big step in that direction. Having the option to splurge on big activities (e.g., summit Mt. Everest, sub-orbital flight) will bring satisfaction regardless of whether these activities are actually realized. I will have no regrets about leaving the money to charity when I die.

I don't know if should envy (for having more than enough) or pity you (for "leaving the money to charity when I die"). But, hey, if you are contend with it, nothing wrong with it.

 

[travelover]

I don't know if should envy (for having more than enough) or pity you (for "leaving the money to charity when I die"). But, hey, if you are contend with it, nothing wrong with it.

One doesn't know how much money they need until they are dead. I'd love to be able to be able to afford in-home nursing care vs being stuck in some nursing home, should I need it. If I leave money on the table, so be it.

 

[robnplunder]

One doesn't know how much money they need until they are dead. I'd love to be able to be able to afford in-home nursing care vs being stuck in some nursing home, should I need it. If I leave money on the table, so be it.

Nothing wrong with that. I will do the same. But in Shawn's case, he looks like he can cover that (in-home nursing care and other unexpected things) and then some (much, much more). But, hey, I understand that for some people, accumulating wealth is the goal in life.

 

[travelover]

Nothing wrong with that. I will do the same. But in Shawn's case, he looks like he can cover that (in-home nursing care and other unexpected things) and then some (much, much more). But, hey, I understand that for some people, accumulating wealth is the goal in life.

Yea, if SS provides 2x his expenses, he is living pretty inexpensively.

 

[robnplunder]

One of my uncles who is universally disliked will boast (when he's drunk) about having $600k cash hoarded in his house. That same man will complain about his DD's wedding guests b/c some of them didn't bring enough cash gift to cover his food/person expense. And the guests are his own brothers and close relatives. He's a real life Mr. Scrooge and an example to many of his relatives on what NOT to do.

 

[Fermion]

I want to live to be old. Rich would be a nice side benefit.

Steve Jobs died at 56

 

[REWahoo]

One of my uncles who is universally disliked will boast (when he's drunk) about having $600k cash hoarded in his house. That same man will complain about his DD's wedding guests b/c some of them didn't bring enough cash gift to cover his food/person expense. And the guests are his own brothers and close relatives. He's a real life Mr. Scrooge and an example to many of his relatives on what NOT to do.

Yep. Drinking to excess isn't cool.

 

[NW-Bound]

I do not think I will change my AA. Perhaps I will make use of ETFs more in the future than individual stocks, but why do I change something that has worked for me up to this point, even after a couple of bad recessions?

... One doesn't need $5M to spend $100k...

I do not have $5M right now. But my expenses can go up to $100K easily if I do not watch out. I have spent more than that when my kids were in school, but back then I still had part-time income.

And I want more like $10M. I like to see that extra digit. Hope I will live long enough to see that. That extra digit would just please this scroogy guy by showing up on his Quicken screen.

...
Correct me if I am wrong, while I know you accumulated much of your wealth from the sale of business you owned. I suspect that you've also made substantial amount of money in the market?...

Sorry but you are wrong.

My superior memory tells me that Danmar was a CFO at a bank, and got rich from mucho stock options.

 

[growing_older]

One doesn't know how much money they need until they are dead. I'd love to be able to be able to afford in-home nursing care vs being stuck in some nursing home, should I need it. If I leave money on the table, so be it.

I am also a strong believer in this approach. As I've been accumulating, there have been a few times when my expenses seemed to take a quick jump. Whether it was a simple change in lifestyle, or inflation in something my spending pattern was especially sensitive to, it does make me cautious. Should such an inflation shock happen while I am retired, I'd want to be able to absorb it in stride. Likewise, having options for in-home care, other household help, increased need for transportation help or other services I might need as I age, are all attractively possible if I have a portfolio with enough more than my current basic living expenses requires.

I like the idea of easing up once I have won the game, but since so much of the game will be played after I retire, I do want a very comfortable lead before I stop playing.

 

[Danmar]

@clifp. No, I made my money mostly through employee stock options and other equity related incentive compensation, as well as leveraged investing in my employer's stock. Employer was one of the big CDN banks. Keep in mind that running up a football score doesn't do you much good, eg a win is a win. On the other hand you get to spend the "extra points" when you run up your retirement wealth.
It just seems to me to be a very good risk reward equation. If I don't really need the money, why wouldn't I let it ride. My daughter or other charities will thank me.

 

[clifp]

I'm not sure I can relate to the question (if I understood it properly) - I'm aiming for a conservative WR and a maintain a high equity position. I think OP was figuring these would generally be mutually exclusive?

-ERD50

No I don't think they are mutual exclusive at all. As you know for most conservative withdrawal rates there is virtually no difference in success rates for a wide range of AA anywhere from 40-80% and even 20/80 or 90/10 only increase failures by a couple percent.

My question is there seems to be a strong preference (not from you) for the lowest possible equity. allocation once you get to the 95%+ level. I suppose the benefit is being able to sleep better at night during a bear market. The down side is the low equity position also mean you have a very slim chance of significantly increasing your standard of living and/or finding yourself rich at an old age.

In many cases this is preference for people who also have large pension or other secure source of income. I guess it just comes down to a risk tolerance and just wonder what risk they are really guarding against?.

I also want to point out that I suspect that even for people without pensions, social security provides a pretty important back up.

For instance lets take a look at the poor Y2K retiree. Raddr has not updated the thread for 2103 yet.

But as of 2012 his 75/25 (t-bills) portfolio was worth $493K his inflation adjusted withdrawal was 54K.. Looks grim right however 2013 helped him out and by my calculations he had 545k at the end of 2013. (It is also worth noting that 25% in t-bills is a particularly poor option)

If the Y2K retire was 50 that makes him 63/4 now and eligible to collect full SS in 2016. If SS was a very conservative $20K that give him a 39% chance of success (not great but...) If someone managed to accumulate $1,000,000 by age 50 a more realistic SS figure is $2500/month, 30K a year. This gives the Y2K retire a respectable 70% survival rate.

When I talk about my withdrawal rate, it is very rare that I include SS. Yet it could be more than 1/3 of my income if things go badly.

 

[Shawn]

Nothing wrong with that. I will do the same. But in Shawn's case, he looks like he can cover that (in-home nursing care and other unexpected things) and then some (much, much more). But, hey, I understand that for some people, accumulating wealth is the goal in life.

In my case, accumulating wealth is not the ultimate goal. The ultimate goal is to feel financially secure, both in terms of needs and wants. I do not wish to be inhibited by financial constraints.

Example. I just loaned a woman $5K to help with the veterinary bills for one of her pets. She is the "pet sitter" who had been looking in on my cat over the last 1 1/2 years, but recently it was one of her cats who became ill. She does not have that much money and her husband recently lost his job. I have no expectations about when or if this loan will be repaid. If the loan becomes an expense, so be it. I can take these steps without any real financial consequences to me. No second thoughts. No emotional tradeoffs or worries. It is financial freedom.

I cannot predict the future. I do not know what other events will occur in my life. Yes, I may need to pay for in-home nursing care for myself. I may need to pay for in-home nursing care for my mother or my step-mother. I do not know how the economy or my investments will perform. Frugality and the accumulation of wealth provide the security and flexibility of financial freedom.

 

[Running_Man]

I am relatively conservative having seen firsthand the absolute distress and misery that follows a complete wipeout of a portfolio. This has led me to be satisfyed completely being able to live a more assured, lower risk portfolio likely providing a comfortable life style with a portfolio that should be able to handle either economic upsides or downsides. This is far important to me, while at the same time undoubtably limiting my chances to become rich.

The reason for most of the portfolio failures I was unfortunate enough to witness was due to overreliance on single stocks, sudden financial losses not covered by insurance, or just plain too much spending.

For today's investor an overreliance on stocks in an attempt to get rich even with only a 2% portfolio withdrawl is missing the very real possibility of a deflationary spiral that would leave stocks suffering much more than other asset classes. Equities are the most likely way for many to become rich, but I think the percentages are far lower currently than many may feel or calculate base on past history.

Investors are overconfident because portfolio crashes have been limited in the most part to single countries, or to losing sides in war but never has the investing world ever been so connected world wide to each other.

The obvious strategy in play today by ruling governments is a stealth savings tax by offering negative real rates on the debt issued and a circle of guarentees between "troubled" and secure nations, but the resolution of this problem has not yet actually manifested itself, either through inflation or deflation; both potential resolutions that hang unseen over the populations of the world and controlled by ongoing heads of finance in a fashion much like the Sword of Democles. We as investors continue on as the citizens of Syracuse, unseeing of either the thread that holds the finances together over which we hold neither sight nor a responsiblity of it's upkeep to keep the sword invisible to the populace.

 

[traineeinvestor]

At our end, we very deliberately over engineered the retirement plan by working for longer and building up a bigger nest egg than either our own spreedsheets or FIRECalc said was necessary. Unless we increase our spending, there is at least a reasonable possibility of ending up being "rich" at some point. This is one risk that does not keep me awake at night.

 

[imoldernu]

Does anybody want to be rich when they get old?

We ARE old!.... quite content with what we have, thank you.

5 more years of retirement will equal total years of employment, or to put it another way... 51 years of freedom.

 

[seraphim]

Haven't read all the responses, but perhaps I'm being redundant - forgive me if I am.

OP - define 'rich'.

I'm retired in my fifties, have pensions to cover my living expenses, minimal debt (a couple of cars paid off this year), a new RV (paid for), and a 7 digit portfolio at a moderately risky 60/40 AA. I haven't even thought about SS yet, though it won't be much, it'll be a bit of extra gravy. At a two percent withdrawal, should I take it for reasons of extravagance, FC indicates he historic average would be a tripling of the balance during our life expectancy. Never below the current amount. I could mess around, increase volatility, increase risk and possibly make a bit more.

Why?

My son has his own career, his own successes, his own hardships - he needs to find his own path to be happy - but will still inherit a hefty amount. We won't let him starve or be homeless if he needs help, and he's independent enough not to ask unless necessary; even then he's embarrassed when he occasionally does, which is OK. He's out of college and surviving doing his dream - a professional, non-starving actor. If we gave him everything, he'd never be a happy and independent individual. There's nothing more we want, nothing more he needs.

Actually, I guess I feel pretty darn rich, but not in the manner you're describing.

 

[ERD50]

Originally Posted by ERD50 View Post
I'm not sure I can relate to the question (if I understood it properly) - I'm aiming for a conservative WR and a maintain a high equity position. I think OP was figuring these would generally be mutually exclusive?

-ERD50

No I don't think they are mutual exclusive at all. As you know for most conservative withdrawal rates there is virtually no difference in success rates for a wide range of AA anywhere from 40-80% and even 20/80 or 90/10 only increase failures by a couple percent.

My question is there seems to be a strong preference (not from you) for the lowest possible equity. allocation once you get to the 95%+ level. ....

OK, that helps, and I'd agree that there is probably a pretty strong correlation between those shooting for high success rates in FIRECalc and choosing a low Equity AA - but far from universal. Historically, if you take that to extremes (below ~ 35% equities), you start to hurt your success rates, and it is not what I would call a 'conservative' plan. A few posters did not want to hear that, but it is a historical fact.

For instance lets take a look at the poor Y2K retiree. Raddr has not updated the thread for 2103 yet.

If he does that in the next few years, please let us know!

-ERD50

 

[Animorph]

I am using a fairly conservative WR (at least after age 70.5) and going with 100% equities, as suggested by the OP. The SWR is not that different between 40% and 100% equities, though it does sag a bit towards 100%. On the other hand, the average or median portfolio values for 100% equities are much higher than for 40% equities. So I figure I give up just a little WR safety and hopefully gain the safety of a larger portfolio later.

I model this, outside FIRECalc, with an historical rate of return fixed each year but with a requirement of a large portfolio ending value that results in about a 3% WR. If that actually happened we could end up with well over $10M in our portfolio in today's dollars, depending on how long we lived. That would be nice, though we'd spend some of it if it got that high.

 

[scrabbler1]

I thought of something my 82-year-old, retired dad said to me last year when he needed some costly dental work to replace some crowns: "There goes some more of your inheritance!" LOL I told my brother what he said to me and he enjoyed the laugh, too.