Does anybody want to be rich when they get old?

[clifp]

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.

That does seem to be pretty common sentiment.

FWIW, Mom use to say that sometimes. I finally achieved a pretty good breakthrough when I explained, mom the bulk of your money is with Vanguard. Frankly I doubt you are going to need it so I am managing with an eye to your inheritance. But there is 200K (more after this year) in Schwab and I'll pretty upset with you if you haven't spent most of before die. Cause that you'll have either died too early or not spent enough of it. She has been great at mostly giving this away, but when she announced I am flying first class for this trip I applauded.

 

[robnplunder]

At what point in your life (and wealth) do you say you have accumulated enough and it is time to start unloading (donation to your favorite causes, splurging, gifting, ...)? Being conservative to fool proof your retirement is good. But, frankly, reading this and other relevant threads, I sense that some of you are ultra conservative if not downright paranoid about running out of money. ( For example, in other posts, I see people recommending 2% WR. Really? Isn't that worse than average annuity you can get now? )

 

[haha]

At what point in your life (and wealth) do you say you have accumulated enough and it is time to start unloading (donation to your favorite causes, splurging, gifting, ...)? Being conservative to fool proof your retirement is good. But, frankly, reading this and other relevant threads, I sense that some of you are ultra conservative if not downright paranoid about running out of money. ( For example, in other posts, I see people recommending 2% WR. Really? Isn't that worse than average annuity you can get now? )

No one will object to however you wish to manage your portfolio, or at least I won't.

So many things are so confidently said, but in the fullness of time we will find that many are wrong one way or another. That is why it pays to be humble and careful.

Ha

 

[daylatedollarshort]

Being conservative to fool proof your retirement is good. But, frankly, reading this and other relevant threads, I sense that some of you are ultra conservative if not downright paranoid about running out of money. ( For example, in other posts, I see people recommending 2% WR. Really? Isn't that worse than average annuity you can get now? )

Two income couples who have maxed out and delayed SS benefits could theoretically make $80K on SS alone -

Workers with Maximum-Taxable Earnings

If the kids are grown and the house is paid for, is spending extra money on depreciating consumer goods going to make them any happier? Happiness studies say probably not, especially if they move to a low COL area where the average income is much lower and the $80K easily makes them the Joneses already.

 

[robnplunder]

Two income couples who have maxed out and delayed SS benefits could theoretically make $80K on SS alone -

That'd be good enough expense budget for most, given that people end up spending less as they age.

 

[robnplunder]

No one will object to however you wish to manage your portfolio, or at least I won't.

So many things are so confidently said, but in the fullness of time we will find that many are wrong one way or another. That is why it pays to be humble and careful.

Ha

Ha ha .

 

[WestLake]

I'm over $3 million now and have been very frugal. I might inherit another million but maybe not. I'd just as soon die before my mother. I'm 55 and if I worked another 8-10 years and saved my ass off, I might acquire another million. Yes I'd like to hit that number, but is it worth it to work longer?

I've never really even spent $50,000 a year yet I have been able to do some nice things and even contribute a fair amount to my alma mater. I do have a 1995 vehicle, so I guess I will need to buy a car at some point! Porsche? I always wanted one...

 

[wingfooted]

One thing to remember is that if FireCalc says you are going to have 100% success you are probably going to meet your definition of rich ($5M).

For example, I think FC shows that I'm at 100% with the worst scenario just over $0. But that also means my best scenario is something like $30M and my average is projected at $8M.

.

Yes this right on fishing, the MOST PROBABLE RESULT of using Firecalc to determine withdrawal rates is that your only worries will be estate tax and charitable trusts.

 

[REWahoo]

But, frankly, reading this and other relevant threads, I sense that some of you are ultra conservative if not downright paranoid about running out of money. ( For example, in other posts, I see people recommending 2% WR. Really? Isn't that worse than average annuity you can get now? )

I'm always concerned someone will come along and try to robnplunder my nest egg.

 

[Danmar]

Interesting discussion. I was thinking many people like a "conservative"AA and some of these carry debt into retirement. Perhaps having debt pushes one towards a FI component to balance out the risk? I have no debt and wouldn't feel comfortable with such in retirement. debt certainly would increase your risk of going broke. I also believe my equities are less risky than the market data used in Firecalc. I seem to recall that CDN equities had the highest success rate of any country, and my choice of CDN equities is very "blue chip"

 

[Dawg52]

I'm over $3 million now and have been very frugal. I might inherit another million but maybe not. I'd just as soon die before my mother. I'm 55 and if I worked another 8-10 years and saved my ass off, I might acquire another million. Yes I'd like to hit that number, but is it worth it to work longer?

I've never really even spent $50,000 a year yet I have been able to do some nice things and even contribute a fair amount to my alma mater. I do have a 1995 vehicle, so I guess I will need to buy a car at some point! Porsche? I always wanted one...

As often said here.....'you have won the game'. Buy the Porsche and go clean out your office cubicle. Enjoy.

 

[Gatordoc50]

Two income couples who have maxed out and delayed SS benefits could theoretically make $80K on SS alone - Workers with Maximum-Taxable Earnings If the kids are grown and the house is paid for, is spending extra money on depreciating consumer goods going to make them any happier? Happiness studies say probably not, especially if they move to a low COL area where the average income is much lower and the $80K easily makes them the Joneses already.

I've never met anyone who made maximum taxable earnings for forty years, let alone a couple. I think most couples who earned that much would FIRE. What this chart doesn't show is that their SS income would be change little if they maxed out at 25 years. The last 15 years of 30,000/ year contributions( 450 K) are a gift to mankind.

 

[MooreBonds]

One technical note on the analysis - going to 50 years will give a false positive bias, as you end up dropping off some of the worst periods starting in the 1960's.

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

I'm also in the "high equity, low WR" camp, with a goal to fund my ER nearly entirely from interest/dividends from my portfolio with no drawdown, since I'm hoping to pull the plug @ 45 and want a nice strong portfolio to fund a long time. By relying mostly on dividends with my (currently) 85% equity portfolio, I know the dividends won't fluctuate as much as equity prices, so I have more tolerance for the ups and downs, with some savings bonds to redeem if things really get bad to help supplement the cash flow for a few years.

And if I get 'considerably wealthy'? If I don't end up getting married and having kids, giving it away can be quite gratifying - maybe some educational scholarships, or other charitable endeavors.

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.

I will say that if rates were to approach much higher levels, I'd consider increasing my fixed income allocation a bit (maybe 20%-30%), but it all depends on rates at that time, and expectations for the future. I'm not married to my AA, but I do definitely prefer living the life of the Norwegian widow.

 

[Letj]

I've never really even spent $50,000 a year yet I have been able to do some nice things and even contribute a fair amount to my alma mater. I do have a 1995 vehicle, so I guess I will need to buy a car at some point! Porsche? I always wanted one...

Don't mean to highjack the thread but I need to ask this question. Ok, I can possibly see under $50K if you have no children and mortgage paid off but I am often completely baffled by people who say they spend so little with a mortgage and children. Here's a snap shot of my very stripped down monthly basic budget and I have not included savings for college, entertainment, travel, house and car maintenance or anything of the sort and I am already over $50K.:

$2,000 (mortgage, taxes, insurance) and no I would not live in the sticks or the ghetto to save money nor I am ready to pay off the mortgage
$300 (employee portion of health insurance for 4)
$350 ($2MM in life insurance for spouse and me and long-term care)
$300 (average heating and cooling, water/sewer)
$300 (car insurance and gas for one car, no maintenance included)
$1,000 (Food and household and no I would not feed my family cheap unhealthy processed food)
$160 (cell phones for 3)
$132 (cable and house phone)

I am quite frugal and this seems like basic spending to maintain a semblance of middle class comfort. I don't see how I can get down as cheap as some people without living on the side of town I would rather not live. Can someone enlighten me?

 

[audreyh1]

Asset allocation and withdrawal rate are usually set according to one's risk tolerance.

It's not surprising to me that people are suggesting more equities and higher withdrawal when the market is surging as it is now.

However, I remember the fall of 2008, when so many of our members posted that they were selling. Some were even completely pulling out of the market, selling ALL of their equities low and essentially condemning themselves to many more years of work before ER. All this, because they had not originally set their AA to a level that they could stick with during bad times as well as good.

Sure, one could become wealthier in the long run by going all in, and that is not too tough during the accumulation phase (even I was 100% equities for a few years, despite my conservative stance now). But you know, it takes a lot more courage to stick with an AA this risky than most retired people have. Mistakes in these decisions can have horrific results.

Good point, W2R!

 

[Bestwifeever]

That'd be good enough expense budget for most, given that people end up spending less as they age.

And if a surviving spouse can live on only his/her own SS.

 

[Danmar]

Asset allocation and withdrawal rate are usually set according to one's risk tolerance.

It's not surprising to me that people are suggesting more equities and higher withdrawal when the market is surging as it is now.

However, I remember the fall of 2008, when so many of our members posted that they were selling. Some were even completely pulling out of the market, selling ALL of their equities low and essentially condemning themselves to many more years of work before ER. All this, because they had not originally set their AA to a level that they could stick with during bad times as well as good.

Sure, one could become wealthier in the long run by going all in, and that is not too tough during the accumulation phase (even I was 100% equities for a few years, despite my conservative stance now). But you know, it takes a lot more courage to stick with an AA this risky than most retired people have. Mistakes in these decisions can have horrific results.

Actually, I think the initial issue was AA not withdrawal rate. An aggressive AA is often accompanied by a conservative WR. In fact this combo is the one most likely to result in significant wealth later on. Having said that, I think your point about this issue being raised in a strong market is valid.

 

[daylatedollarshort]

I've never met anyone who made maximum taxable earnings for forty years, let alone a couple. I think most couples who earned that much would FIRE. What this chart doesn't show is that their SS income would be change little if they maxed out at 25 years. The last 15 years of 30,000/ year contributions( 450 K) are a gift to mankind.

Think high cost of living area, two engineers, two engineering managers or something similar. The average salary in Silicon Valley is over $100K per year.

Average Silicon Valley Tech Salary Passes $100,000 - WSJ.com

The average salary at Google is $141K. Microsoft is $127K.

They wouldn't necessarily FIRE. They might own or rent a $1M+ house, drive a $100K car each, be used to lavish vacations, and spending everything they make or even more. SS might not provide enough to keep up the the life they are used to.

 

[daylatedollarshort]

debt certainly would increase your risk of going broke.

Not if you have the money to pay off the loans and are making more in interest + subsidies than the loans are costing you, after taxes.

 

[SVHoper]

Hi,

I am somewhat with you on the AA - still planning zero bonds all my life (interest rates > 10%? would make me reconsider individual bonds), buying more equities through 2008, 2009.

I would imagine that risk tolerance would be a huge factor. If someone has never been 100% equities (with income $), I would imagine it would be even more difficult to reach 100% when retired

I can also subscribe to a slightly modified definition of rich. Assuming say a base of FI (may be more or less than $1m): A working definition might be 5?x net worth or 5?x investment portfolio. And I agree that I want to keep playing the "game" - growing net worth aiming at "rich", but for me this more akin to an intellectual exercise rather than a want driven imperative.

With ingrained value of LBYM, I can't let my wants ramp to "rich" before I reach it

Judging by the last decade --> wants definitely grow with means :-(

 

[daylatedollarshort]

And if a surviving spouse can live on only his/her own SS.

Then the surviving spouse would have years of reinvested income and maybe pensions to live on. The original post was not pointing out how to live on SS alone, but why retirees with high SS benefits might not need a WR higher than 2% and not be living like Scrooges.

 

[Danmar]

Not if you have the money to pay off the loans and are making more in interest + subsidies than the loans are costing you, after taxes.

Key word is RISK. Obviously having debt may work to your advantage if everything goes according to plan. i don't think it is generally possible to borrow and then invest in a risk free asset and lock in a positive spread. Maybe there is some subsidy I am not aware of?

 

[obgyn65]

The answer the question asked in the title of the thread, I don't want to be rich as I get old but I do not to worry about money either.

I feel rich by being healthy already, having more money is secondary.

 

[NW-Bound]

...
I understand rule #1 is don't run out of money before you die. Still I am surprised that there doesn't seem to be a lot of interest in moving from being affluent to the rich stage. I realize that those terms are vague and you can define them how you want.

But for my purpose I'm going to say that somebody who has $5 million after age 75, and typically spends 100K or so is rich
...

Yes, I want to be rich. Preferably when still young. Something like 40, if not 30. But now approaching 60, I'd still want to be rich when old. Better late than never, I guess.

I have been thinking rich is having $10M. But that's because I look at FIRECalc runs with starry eyes. Just recently, looking at the present economic condition and the status of stock and bond markets, I think I should cut back my expectation. So, $5M it is.

I hope I will live long enough and be a good enough investor to see that.

But, but, but what if when I get there, the $5M is worth only $2M or less?

 

[daylatedollarshort]

I have been thinking rich is having $10M. But that's because I look at FIRECalc runs with starry eyes. Just recently, looking at the present economic condition and the status of stock and bond markets, I think I should cut back my expectation. So, $5M it is.

I hope I will live long enough and be a good enough investor to see that.

But, but, but what if when I get there, the $5M is worth only $2M or less?

Do you want $5M nominal or inflation adjusted?

I ran Firecalc the other day and I kinda see what you guys are thinking now with crazy, high possible results with a high stock allocation under Firecalc. I personally don't expect anywhere near those returns from my spreadsheet, the conservative portfolio on the Fidelity RIP or any of the SWR future prediction from the financial sages that I follow.