recall Bernicke's assertion that the older one gets, the less one spends? well, the flaw may have been found! "The reality: Most older Americans don't have much financial room for maneuver -- and if they're spending less, it probably isn't out of choice." see http://online.wsj.com/public/article/SB115505641496829993-_J_SQS1SRa3R7zGLKTQHBM0Mftc_20060815.html?mktw seems the reduced spending was in large part because of reduced assets! (where did i hear that before?! )
Ty Bernicke
- Thread starter d
- Start date
Hmmm... the majority of their wealth tied up in home equity, biased quintiles, and financial advisors only taking on wealthy clients? Who would've expected these biases?
Speaking of that, I'm glad to have my bias confirmed by Bud Hebeler. I bet he sees a surge on his website after this article gets around.
Maybe Clements' next article could tackle the subject of all those 75-year-olds who are still working because they "lack purpose and fulfillment" when what they really lack is "spending money".
Speaking of that, I'm glad to have my bias confirmed by Bud Hebeler. I bet he sees a surge on his website after this article gets around.
Maybe Clements' next article could tackle the subject of all those 75-year-olds who are still working because they "lack purpose and fulfillment" when what they really lack is "spending money".
At least one of the recent studies on late life expenses did not include nursing home residents - exactly the group to have some of the highest expenses.
I like Hebeler's viewpoints - he's old enough to see what happens in real life, as opposed to what a much younger researcher thinks should happen.
I like Hebeler's viewpoints - he's old enough to see what happens in real life, as opposed to what a much younger researcher thinks should happen.
I will say after looking over my in-laws finaces, spending definitely drops as one ages. Unfortunately, my in-laws are in nursing/assisted living facilities but I can also say that they are statistical anomalties at their age.
2B said:
It would be interesting to see the shape of different spending curves by age/income. My guess would be that people with barebones modest lifestyles will experience a relatively insignificant decline in spending while big spenders will see their expenses drop significantly. That's why I don't expect my spending to drop much during the retirement years. Well, except that I plan to buy my last car at 70.
Yes, but this does not negate the truth that most people slow down spending as they age because they are older and prefer not to travel, etc.
I have watched my senior family members all do this....they were blue collar people with small amts (maybe 300K each family) and all of them ended up with more money than they started with.
It actually made me sad that some of them had so much and experienced so little. My mom is now exactly the same. She has in excess of 1.5mil, is 70, but so sick she cannot travel or do much. the money just keeps growing.
I have watched my senior family members all do this....they were blue collar people with small amts (maybe 300K each family) and all of them ended up with more money than they started with.
It actually made me sad that some of them had so much and experienced so little. My mom is now exactly the same. She has in excess of 1.5mil, is 70, but so sick she cannot travel or do much. the money just keeps growing.
Scrooge said:
I've broken my retirement budget into sections. I assume my basic cost of living is fixed adjusted for inflation. My heath care will be constant since as I age I'll qualify for medicare (no private health care policy) but I assume I'll have more copays. Travel will come out of my pathetic pensions -- as time goes on I'll do less of it but inflation will eat away the value of my pension.
Callie said:
Callie,
I see you've just started posting and this post is similar to one of my early posts. Saving too much delays when you can retire and not accounting for declining spending has you depriving yourself of pleasures in the early part of retirement. Bernicke has tried to address it but it goes against "conventional wisdom" and the vested interests of the financial services industry.
Hopefully, you've discovered FIRECalc by now. It will show you that the greatest risk to a financially secure retirement is to retire just before a major bear market. Then the 4% SWR barely covers your life's spending (or not). If you retire just before a bull market, you end up (die) with a massive fortune.
Guyton has published an article (check the forum archives) where withdrawls can start at up to 6.2% but withdrawls are then adjusted based on portfolio performance. The success rate of this approach is very high. One of the people here showed that spending in inflation adjusted dollars could fall as much as 50% during a 40 year plan if the market goes into a serious bear. Of course, good market returns drive the spending to even higher levels.
In many ways, Bernicke and Guyton end up in a similar place. Bernicke says you will cut your spending in half between age 55 and 70. Guyton says you might have to if the market does poorly. Either way you get to spend more up front and will minimize the size of your estate.
The opposite extreme you'll hear about here is the "Norwegian widow." She lives only on her dividends and never touches the principle. Her principle grows and she will leave a large estate.
Interesting subject...
A few months ago, DW/me met with a Fidelity retirement financial rep (offered through our 401K plans). Part of the "exercise" is to list current budget/expenses and try to forecast the same for our retirement period.
The "financial guy" took our retirement budget, and went through it line by line. Since he's gone through many of these budgets over the years, he reviwed it in a reference of "those that came before". What struck him as "strange" was our forecast of spending 20% on travel. Since my wife and I do travel currently (she dosen't want to wait till retirement, when our health may not be as good), the 20% was reflecting our current expenditures (over the last 10+ years).
The "Fidelity guy" asked if she would still be traveling to Europe when she was 90. Of course, she said that the possibility was reduced, for that age (although she still planned to take bus trips, in the U.S.!)
That being the case, we did show that our "expected" expenses would be reduced in the future. I guess this is a case where Ty's "forecast" would be true (no comment on the replacment in expenses for health care - that's hard to forecast).
Ask me in 40 years what the results are - I'll let you know if Ty's idea "floats"...
- Ron
A few months ago, DW/me met with a Fidelity retirement financial rep (offered through our 401K plans). Part of the "exercise" is to list current budget/expenses and try to forecast the same for our retirement period.
The "financial guy" took our retirement budget, and went through it line by line. Since he's gone through many of these budgets over the years, he reviwed it in a reference of "those that came before". What struck him as "strange" was our forecast of spending 20% on travel. Since my wife and I do travel currently (she dosen't want to wait till retirement, when our health may not be as good), the 20% was reflecting our current expenditures (over the last 10+ years).
The "Fidelity guy" asked if she would still be traveling to Europe when she was 90. Of course, she said that the possibility was reduced, for that age (although she still planned to take bus trips, in the U.S.!)
That being the case, we did show that our "expected" expenses would be reduced in the future. I guess this is a case where Ty's "forecast" would be true (no comment on the replacment in expenses for health care - that's hard to forecast).
Ask me in 40 years what the results are - I'll let you know if Ty's idea "floats"...
- Ron
Ron'Da said:Ask me in 40 years what the results are - I'll let you know if Ty's idea "floats"...
There's the rub. We buy our ticket and take our chances. My goal isn't to leave my children or grandchildren an inheritance but I'd like to have enough money to die with dignity without having my children write any checks for my care.
The Guyton and Bernicke appoaches have great appeal but there are the other issues tp consider. I plan on splitting my appoach by have a minimum lifestyle financed with a low SWR and a variable lifestyle linked more to Guyton. It's similar to Cut Throat's trailer by the trout stream but I prefer the saltwater species.
My retired parents (mid -70's) tell me they are banking money when they are home, spending more when away. My FIL (mid - 80's) gets by mostly on SS, but tells me he only dips into his savings only occasionally. So I see some drop in spending, voluntary in my parents case, forced in my FIL's case.
I suspect there is typically a decline in spending unless health problems force higher spending - drugs and care. My grandmother had Alzheimers - very high cost care, her assets were gone in 1 year, then state aid. Grandpa was in good health into his early 90's, until cancer reappeared after many years in remission, passing away after a month or two.
This may be more of a long terrm care and health insurance problem, than a retirment planning problem.
I suspect there is typically a decline in spending unless health problems force higher spending - drugs and care. My grandmother had Alzheimers - very high cost care, her assets were gone in 1 year, then state aid. Grandpa was in good health into his early 90's, until cancer reappeared after many years in remission, passing away after a month or two.
This may be more of a long terrm care and health insurance problem, than a retirment planning problem.
kcowan
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
My Dad lived to be 95 and his nestegg grew every year of his retirement. (Mom died of cancer the month he retired so he travelled less than otherwise.) My MIL is 90 and she only spends a tiny fraction (25-30%) of her investment income. They used to travel until 1991 when FIL died then had no desire after that.
rmark said:
My experiences partially mirror yours. My father died at 79 -- he retired broke at 65 with a post office pension. He had saved about $350,000.
Unfortunately, my in-laws are both 85 and have been living on a decent pension and SS since he turned 67. They spent their money as fast as it came in. They bought new cadillacs and expensive things for their house. They didn't travel or do anything I would classify as "enjoying" retirement. They just kept right on keeping up with the "Jones." When physcial and mental issues developed, my wife took over financial control. They had over $35,000 in credit card and auto debt with a collection of about $200,000 in poor investments. My MIL is in a nursing home and my FIL is in the assisted living section. We are getting ready to sell their home and hoping they don't outlive their money.
LTC is the big unknown variable. Unfortunately, LTC insurance doesn't look like the way to go. You need the money to pay for your care.
Don't get me wrong. I will be very careful. I am just getting tired of the 80% number.
We are high wage earners (250K between us) but we don't spend much. Plus we pay high child support and 50K per year for college for one child.
When that all ends, we will easily be able to live on 50K or so.
We are high wage earners (250K between us) but we don't spend much. Plus we pay high child support and 50K per year for college for one child.
When that all ends, we will easily be able to live on 50K or so.
Callie said:
It is totally meaningless. My last child graduates from college in December. Basic living expenses will be about 40-45% of gross income. I'd like to increase the travel spending when our situation improves with the in laws.
Mr._johngalt
Thinks s/he gets paid by the post
- Joined
- Dec 3, 2002
- Messages
- 4,801
Agree that the 80% is total BS. Just one story (from my stash of thousands) . My uncle (hard worker) just up and quit back in the 60s
(epiphany?). He sat around for a few years while my aunt worked
until she got tired of it and divorced him. They didn't have much at the time.
Anyway, my aunt worked into her late 60s at least while my uncle lived
in a trailer (mobil home?) in Fla. When he died, the family was amazed
at how much he left my only cousin. As far as I know all he
had was his SS and money from the marital residence (my aunt paid
him for his half). It looked like a fortune to my Dad, but I could see
it. Single guy, living out of a trailer in Fla. Doesn't take much.
JG
. My uncle (hard worker) just up and quit back in the 60s(epiphany?). He sat around for a few years while my aunt worked
until she got tired of it and divorced him. They didn't have much at the time.
Anyway, my aunt worked into her late 60s at least while my uncle lived
in a trailer (mobil home?) in Fla. When he died, the family was amazed
at how much he left my only cousin. As far as I know all he
had was his SS and money from the marital residence (my aunt paid
him for his half). It looked like a fortune to my Dad, but I could see
it. Single guy, living out of a trailer in Fla. Doesn't take much.
JG
After we stop investing, paying 25K child support and 50K in college each year, and taxes, we actually spend very little. Also the house will be paid off by the time we are ready to stop.
We don't eat out much, we travel a little, but just two vacations a year.
I really do not want to end up like all my senior relatives. I want to enjoy life.
We don't eat out much, we travel a little, but just two vacations a year.
I really do not want to end up like all my senior relatives. I want to enjoy life.
My Dream
Full time employment: Posting here.
Callie said:
I never really went through this thread, but the comment above caught my eye. We haven't taken a vacation in about 3 years, and only went camping once and a few short trips during that time, and I thought we travel very little by definition.
What are you're thoughts?
Sorry for highjacking this thread.
Spanky
Thinks s/he gets paid by the post
Wow!
Yes the child support and college are tough. We have to pay both at the same time (required by divorce).
We will have to pay for the second child who will also likely go to an expenisve private college in another 6 years. We are putting that money away now.
The girl's mom actually tried to get us to agree to put the younger one in the most exclusive private HS - 20K per year. My hub put his foot down thankfully.
We will have to pay for the second child who will also likely go to an expenisve private college in another 6 years. We are putting that money away now.
The girl's mom actually tried to get us to agree to put the younger one in the most exclusive private HS - 20K per year. My hub put his foot down thankfully.
