Opposite of Spendthrift--Not Knowing SWR

[Elbata]

Beyond this forum and The Bogleheads, when I mention SWR or Safe Withdrawal Rate, folks I know who are retired don't have a clue what I'm talking about.

Now there are many here who draw only 2% and even less, but they're fully aware of SWR and if they want, can take full advantage of their savings.

But I have one friend that I would guess, has a net worth of $3MM, not counting pensions and SS. He's very smart with saving and investing, but when it comes to SWR, he's not aware of it and doesn't use any of his nest egg. All his spending money is with his pensions and SS.

I think that he feels his nest egg is there for security, and it's best for it to remain untouched. But by him knowing SWR, he could easily take out 3% of that egg and it would still last him most likely infinitum and still grow.

 

[gayl]

But what if the pension + SSA covers everything? Then why should he have to take out anything from his Investments?

 

[pb4uski]

But what if the pension + SSA covers everything? Then why should he have to take out anything from his Investments?

Why not? Do we save for retirement or to become hoarders?

Live a little.

 

[Nemo2]

Why not? Do we save for retirement or to become hoarders?

Live a little.

Perhaps there's nothing extra that 'they' (we) feel they need or want to spend money on, and that that freedom of choice, in and of itself, is sufficient?

 

[haha]

Beyond this forum and The Bogleheads, when I mention SWR or Safe Withdrawal Rate, folks I know who are retired don't have a clue what I'm talking about.



Now there are many here who draw only 2% and even less, but they're fully aware of SWR and if they want, can take full advantage of their savings.



But I have one friend that I would guess, has a net worth of $3MM, not counting pensions and SS. He's very smart with saving and investing, but when it comes to SWR, he's not aware of it and doesn't use any of his nest egg. All his spending money is with his pensions and SS.



I think that he feels his nest egg is there for security, and it's best for it to remain untouched. But by him knowing SWR, he could easily take out 3% of that egg and it would still last him most likely infinitum and still grow.

You should definitely school him to see his grievous error. Alternatively, you could ask yourself why this troubles you.

Ha

 

[gayl]

OMG I'm a hoarder!! I think I live more than a little. Travel outside US at least 2× a year for over a month each time, domestically whenever, only stay in Hyatt's & Hilton's, don't watch what I spend (guilty / minimalist) but still only spend 60% of pension.

 

[Bigdawg]

OMG I'm a hoarder!! I think I live more than a little. Travel outside US at least 2× a year for over a month each time, domestically whenever, only stay in Hyatt's & Hilton's, don't watch what I spend (guilty / minimalist) but still only spend 60% of pension.

Holy Moly! How big is your pension?

I don't think OP wants the person in question to spend the money as much as to just understand what SWR means.

 

[Aerides]

Does he have kids? Perhaps he likes the idea of leaving an inheritance.

Either way, you don't really know, perhaps he has a crazy habit he keeps hidden, or old debts he doesn't share with you, or many other reasons.

My parents are not unlike your friend (smaller NW, but living on pensions, SS, very happily, quite comfortable, international travel and other trips each year, remodeled much of their home, etc.) They are keeping the nest egg for a future move, long term care, anything like that.

Be a friend and let this one go.

 

[gayl]

Holy Moly! How big is your pension?

$2319 + $799 net a month after income taxes / health ins so $3118, save $1375 .... I dont need to accumulate any more 'stuff' & I live in California so food is cheap. I'm still trying to learn to spend. Will get slammed with taxes when full SSA + RMD

 

[Nemo2]

A day or so ago we were over at DW's daughter's......an electrical sensor/component on their stove packed it in.....replacement cost for the part $500 Cdn.

I doubt that our basic, bought on sale a couple years ago, stove cost $500, and yet it does everything we require it to do and is far less likely to break down.

Spend more? Why?

 

[bingybear]

Have your read the SWR threads claiming SWR of 6% or 2%. Many (not all) confuse SWR with WR. I understand the meaning of the term, but do I know the exact amount? not really. I'd expect it is tied to your AA. And even if you know your SWR and follow it, chances are that you will under spend! SWR has the premise of not running out of $, so with a better than horrible market and you end up with more to spend.

gayl, when I was w*rking I once stayed in a Westen in Boston's convention center area. This was among the more upscale placed I stayed (in my mind higher than Hilton). That was one of the most uncomfortable hotel stays I've had. I just don't feel comfortable in that environment.

I'm not spending my WR so much less than SWR. Part of that is are plans keep getting delayed with MIL duty. Hopefully the NZ trip with work this winter. Accommodations are hostels and back country huts. I've found that I meet many interesting people in these places.

OP... talk with your friend, and then let it go. If you get your point across, he will have the info he needs to make his choice.

 

[marko]

Spend more? Why?

Because life is too short not to have [-]a good[/-] the best time.
Because life is too hard not to [-]find[/-] buy ways to make it easier.
Because I've seen firsthand the hazards of leaving a ton of money to heirs.

But it is indeed, your money to spend--or not--as you wish.

 

[gayl]

Bingybear, I do stay in other places sometimes in Europe (Rembrandt in London, a little place off the square in Avignon) but if unsure -- it's Hyatts / Hiltons. A good friend thinks it's ridiculous for me to only have 5 prs of shoes + 3 prs of sandals but I only have 2 feet!

Bottom line: we all do what makes us feel comfortable --

 

[Car-Guy]

IMO, in such a case based on the limited info provided, if he's living like he "really wants" then that's fine, otherwise, it's just sad. In my earlier years, I know it was a very common concept to plan to live off your investment earnings, ss and pension and keep your base (whatever that turned out to be) intact once you retired.

As I write this, I realized that my base NW is significantly higher today than it was when I retired so you could say I've kept my base intact. But that was not my plan and I'll try harder.

 

[dallas27]

Beyond this forum and The Bogleheads, when I mention SWR or Safe Withdrawal Rate, folks I know who are retired don't have a clue what I'm talking about.



Now there are many here who draw only 2% and even less, but they're fully aware of SWR and if they want, can take full advantage of their savings.



But I have one friend that I would guess, has a net worth of $3MM, not counting pensions and SS. He's very smart with saving and investing, but when it comes to SWR, he's not aware of it and doesn't use any of his nest egg. All his spending money is with his pensions and SS.



I think that he feels his nest egg is there for security, and it's best for it to remain untouched. But by him knowing SWR, he could easily take out 3% of that egg and it would still last him most likely infinitum and still grow.

But if you believe more money doesn’t increase happiness, whats the point of trying to maximize spending?

 

[pb4uski]

Because life is too short not to have [-]a good[/-] the best time.
Because life is too hard not to [-]find[/-] buy ways to make it easier.
Because I've seen firsthand the hazards of leaving a ton of money to heirs.

But it is indeed, your money to spend--or not--as you wish.

IMO, in such a case based on the limited info provided, if he's living like he "really wants" then that's fine, otherwise, it's just sad. In my earlier years, I know it was a very common concept to plan to live off your investment earnings, ss and pension and keep your base (whatever that turned out to be) intact once you retired.

As I write this, I realized that my base NW is significantly higher today than it was when I retired so you could say I've kept my base intact. But that was not my plan and I'll try harder.

+1 I guess I find people who absolutely, positively refuse to touch "principal" or insist on saving more when they are retired a bit shortsighted.... particularly if they are depriving themselves of things... if they are doing all they want and still not dipping into principal then that is fine.

We started with nothing... when DW and I got married we had negative net worth and could not come up with a $2,000 down payment to buy a condo. While it is highly likely that our kids will inherit a nice chunk of change, if we find things that we enjoy and makes our remaining years easier and more fun and they inherit less or nothing then I am fine with it.

I saved that money for "our retirement" so if we end up spending some or all of it on "our retirement" then I see nothing wrong with that.

That said, we live the life that we want right now and when we don't spend money it isn't so much because we can't afford to spend, but more because we don't see the value received being commensurate with the amount spent.

And like many others, our portfolio is still growinr rmg despite our best efforts to enjoy our remaining years.

 

[W2R]

Beyond this forum and The Bogleheads, when I mention SWR or Safe Withdrawal Rate, folks I know who are retired don't have a clue what I'm talking about.

Now there are many here who draw only 2% and even less, but they're fully aware of SWR and if they want, can take full advantage of their savings.

But I have one friend that I would guess, has a net worth of $3MM, not counting pensions and SS. He's very smart with saving and investing, but when it comes to SWR, he's not aware of it and doesn't use any of his nest egg. All his spending money is with his pensions and SS.

I think that he feels his nest egg is there for security, and it's best for it to remain untouched. But by him knowing SWR, he could easily take out 3% of that egg and it would still last him most likely infinitum and still grow.

I don't know this but I would guess that he worked hard in order to accumulate $3MM. Sounds to me like he has earned the right to spend it or not, as HE wishes. Not as YOU wish.

Is it some sort of sin or crime to spend less than the absolute maximum possible one can spend without running out of money? Is that what our consumerist culture has decreed? Yikes.

Sounds like he gets more value from the security he feels with a lot of unspent money that remains untouched, than he would from blowing it on more stuff or experiences that he may not even want. And good for him to have resisted any subtle or not-so-subtle pressures to spend, that he may have experienced thus far.

If you survive him, it will be interesting for you to discover what charity or what relatives end up with his money. That could tell you a lot about him and what he values.

 

[gayl]

But if you believe more money doesn’t increase happiness, whats the point of trying to maximize spending?

+1

 

[Nemo2]

Because life is too short not to have [-]a good[/-] the best time.

Depends upon one's definition of 'best'.....we have found that, for us, there hasn't been a pronounced correlation between expenditure and enjoyment.....oftentimes it's been exactly the opposite.

Because life is too hard not to [-]find[/-] buy ways to make it easier.

We have a TA coming up, and monitor another site in an attempt to find snippets of useful information. Most of the other posters are "Spend, spend, spend....impress, impress, impress"......sounds like purgatory from our perspective, and we will avoid them as much as they will avoid us.

 

[Danmar]

I have learned (here) that you will never convince somebody to spend more if they don’t want to. Also, more money(spending?) won’t make me happier is a common comment. I will not disagree other than to note that spending and the marginal utility of such is a very personal thing.

Having said that, I enjoy my lifestyle and would be less happy (at least in the short term) if it was reduced out of necessity. Would more spending make my happier? Not sure. Maybe in the short term.

What I can say is that having the increased sense of control, choice, and empowerment that money provides makes me happier. Also, you can only spend your money or give it away ( a form of spending in my view) now or later. Finally, most people get comfortable with their financial means and the spending it can support. To be otherwise would only cause unhappiness and regret.

This stuff is so personal. I say “spend (or not) and let spend (or not)”.

 

[Music Lover]

There's nothing wrong with not spending money, unless you are needlessly depriving yourself. Some people save all their lives and are never able to transition to enjoying the fruits of their labour.

 

[JDARNELL]

I think things have value due to scarcity. When I am flush then wild swings in spending don't do much for happiness IMO. I remember being on a cruise a couple of years ago enjoying great seafood each day as we were in port. After a while I got my fill and the enjoyment wore off. I did enjoy the balcony cabin and will continue to upgrade to them when we cruise. I am working on increasing my spending marginally. Baseball Playoff Tickets, healthier food, nicer hotel rooms, etc. Of course I can't seem to replace a 13 yr old car as I just don't see the value at this point. Go figure.

 

[Sojourner]

Because life is too short not to have [-]a good[/-] the best time.
Because life is too hard not to [-]find[/-] buy ways to make it easier.
Because I've seen firsthand the hazards of leaving a ton of money to heirs.

But it is indeed, your money to spend--or not--as you wish.

+1

I suspect that the widespread, irrational reluctance to spend down principal often leads to a) retirees living much more frugally than they need to, and b) heirs receiving much larger estates than they are savvy enough to know how to manage, spend, and/or invest.

 

[Sunset]

$2319 + $799 net a month after income taxes / health ins so $3118, save $1375 .... I dont need to accumulate any more 'stuff' & I live in California so food is cheap. I'm still trying to learn to spend. Will get slammed with taxes when full SSA + RMD

While I totally agree a person does not NEED to spend their savings, sometimes a person holds off on spending some when it won't really make any difference and thereby deny themselves something they might enjoy.

Example: Perhaps you would enjoy a river cruise, yes you might have to pay the "extra" single supplement, so a 2 week cruise might be $7,000 instead of $5,000/pp , as you won't be sharing a room.

So will spending the extra $2,000 mean you eat cat food later, or will it mean you simply pay a little less in taxes later (RMD time) and leave less to folks who may end up wasting more than the inherited $2,000 on something.

 

[Corporateburnout]

Spending has not been an issue for us in retirement. We don't deprive ourselves from anything we want and we feel that maintaining our current standard of living is extremely important to us. On average our WR has been over 5% in retirement and this year will exceed 6% as we took advantage of a couple of travel opportunities and purchased season tickets to one of our pro sports teams.

Some people are content with their lifestyle without excessive spending and that's good for them but for us the experiences and lifestyle require a high rate of spending and since we can afford it we will continue to enjoy these experiences for as long as we're physically and mentally able to.