Only Large Numbers is Hard (Making Decisions)

[clobber]

Credit to REWahoo for my title.

Small numbers is easy:

I have acquaintances with very little money/savings (living on SS only) who say, "You don't have to worry about money if you don't have any." True - they get their $XXXX/mo and generally buy groceries that are on sale, never worrying about investments, taxes, education credits, 401(k), etc.

Mega big numbers is easy:

Then there is the Jeff Bezos and $100M+ wealthy types. Obviously many decisions to make regarding their personal finance, but I wonder how much it truly matters. If AMZN goes down 2%, he "loses" 3 billion but can still buy the yachts. I doubt that hardly any decisions are driven by daily net worth (other than to on up the other billionaires). Also not worried about the ACA cliff, IRA contribution limits, or AMT etc.

Large numbers is hard:

You're getting a decent pension and maybe even have $500k-$10M spread across taxable and non taxable accounts. You're dealing with the Roth conversions, new W4 (W4P) forms, retirement planning, maximizing social security, HSA or not HSA, etc. You have to do your taxes twice (AMT). Should you start an FSA? Depending on your true risk tolerance you spend a lot of time thinking about not losing your money. You don't know if you should trust the 4% rule, new evidence shows it should be 3% while other experts say 5%. What is the best asset allocation, 60/40 or some type of Lifecyle fund? Index funds are awesome, but what if you had just put $10k in Amazon in 1996? You have downside worries but also Fear of Missing Out (FOMO). Maybe you are even obsessed with FireCalc and all the different variations. But are Monte Carlo simulations trust worthy? Supposedly past performance is no indication of the future. Do you have a 90%, 95%, or 99% success rate? What about sequence of return rates - can you retire right before an election? Right before a government shutdown? Then the market goes down 2% and you have a paper loss of $100k. You were planning to buy a new luxury car the next day, but even though you can still afford it you really don't want to see your accounts go down by $200k (market loss plus cost of the car). Then the market rebounds by 4% and you think how much money you just made by not purchasing the car. If the market continues to go up like that it will pay for the car in days. Should you pay off your mortgage, or invest the extra money? Suzie Orman says X, but Ray Dalio says Y, and the Oracle of Omaha says they are all wrong and just invest in Coke and banks. Value baby! Ohh crap, you just sold some investments and learned about the NIT tax the hard way.

I've got no real question. Just to say that: Large numbers is hard.

 

[NW-Bound]

You can just stay safe and do 3% WR. If it proves to be too conservative and you underspend, your stash will grow, and you can go on drawing 3% off the higher new value. Each year, your spending will increase slowly but more surely.

About the car, if the $100K car is worth that much to you, just go ahead and buy it, even if it costs 2% of your stash. If you are scared to pull the trigger, then perhaps the car is not that important to you compared to the anxiety caused by the purchase, and you should buy a $50K car instead.

Even easier is to live like your acquaintances who have so little. Then you have no worry about running out of money at all. Just joking.

I suddenly remind myself of the story a few years ago of a guy here in town. He was homeless and hung out at a shelter. When he died, his will left behind $4 million to a kind nurse that took care of him, and to various charities.

Some posters here have expressed a desire to use the most of their money before they die, and not leave much behind. That's hard to do, and you will end up tormenting yourself while trying to find the right WR, which is impossible because of the vagaries of the market, plus the bigger unknown of not knowing how much time you have left on earth.

It's better to continue to be LBYM, and not worry about the maximum possible material things that your stash can get you.

By the way, I searched and found the story of the rich homeless man here: https://en.wikipedia.org/wiki/Richard_Leroy_Walters.

 

[SecondCor521]

I have a few things like this that chew on my brain still. Most of the rest I've done my research and my thinking and made a decision or plan. At that point executing and monitoring the plan is pretty easy.

The things that still chew on my brain:

1. Roth conversions - how much and when? I think my conclusion is to a FAFSA limit until that no longer applies, then probably 400% FPL to Medicare age, then top of the 22%, and that's probably a pretty good plan for me.

2. By all accounts I should be spending more (LWBMM), but how much more can I spend and get away with? And will I actually value spending it, or will I get more value by keeping it for my safety and my kids' inheritance?

3. Will I have too much or not enough in my kids college funds? Until my youngest decides where they're finishing their degree, I just won't know. But I do have a plan in either case, so in a sense I've got this one figured out too.

Actually lately I've felt a little let down because I enjoyed the challenge of figuring out my answers to all those kinds of questions that OP posed, and for my own case I think I've got really good answers. I think I need to go find myself some more challenges; probably of a different kind than financial ones. Pilot's license or maybe something athletic.

 

[chassis]

Life can be simple. It's a choice. Net worth is not part of the decisionmaking factor on the choice to live simply.

 

[ILikeStarTrek]

If large numbers is so hard, there is a simple solution. Donate all your money to charity and live on SS alone. Then, according to what you have said, you will have it easy!

 

[GravitySucks]

It's a curse.
Almost as bad as living with these fantastic good looks I am cursed with.

 

[clobber]

If large numbers is so hard, there is a simple solution. Donate all your money to charity and live on SS alone. Then, according to what you have said, you will have it easy!

My post was not a complaint.

 

[Palmtree]

It's true. We've been retired for five years. I just turned 60 and I still spend an hour or so every day on this (and other) retirement forums, just to try to stay current and make sure (or at least try to) I'm optimizing all our investments and options. It's a fair amount of time.

 

[ILikeStarTrek]

My post was not a complaint.

Then, consider my reply to be an attempt at humor!

 

[pb4uski]

It's a curse.
Almost as bad as living with these fantastic good looks I am cursed with.

Reminds me of the title of Joe Namath's book...

 

[ckelly78z]

It's true. We've been retired for five years. I just turned 60 and I still spend an hour or so every day on this (and other) retirement forums, just to try to stay current and make sure (or at least try to) I'm optimizing all our investments and options. It's a fair amount of time.

None of us would be on this forum if it wasn't something we were interested in looking at. I will most likely continue to read/post on here after I retire rather comfortably in about 5 years. I like not feeling helpless, and clueless, so I stay current.

I think perhaps that some who post on this forum dealt with numbers every day in the job they had while working, and can't give up that habit. My parents retired splendidly with far less $$, and knowledge than I will, and they are blissfully ignorant of "the numbers" to this day.

 

[NW-Bound]

Life can be simple. It's a choice. Net worth is not part of the decisionmaking factor on the choice to live simply.

But there are many levels of simplicity.

I choose a level that's simple enough so that the chance of me running out of money is extremely remote. And I am fortunate that a lot of people still working hard for a living do not live as well as I do now. It is the same level as when I was still working even though I now have a lot more money, except that I can now travel by RV domestically or by a Europe car trek for 2 months at a stretch just because I have the time.

And then, just for a mental exercise, I thought about how I would live with so little money as I saw some people do. I talked about living in a motorhome parked on NM state land for an annual fee as low as a few hundred bucks. Some thought I was serious.

No, even with just SS, I can afford to live better than with an RV on NM state land. It's just a thought exercise to convince myself that I could still live well with a lot less.