US News Article: Socking Too Much Away

[jdw_fire]

If Bernicke's conclusion is correct, would this not then suggest that Americans are on the whole saving too much money for their retirements?  Don't think you'd find many thinking this true.

No, I don't think it is suggesting that Americains on the whole are saving too much.  I think it suggests that generally financial planners are over stating the amount of savings required for retirement.  

With that general statement given I frankly don't see my spending going down as I grow older either, but I think that stems from my attitude toward spending.  I think that someone that has an attitude of LBYM is likely to be getting good value for his/her money spent and probably is not paying for services that s/he can do him/her self and not spending on stuff that is unnecessary.  As one gets older some of these things aren't doable any more and the service will have to be purchased and some stuff may become necessary.  However, I can see how travel, entertainment, and even food expenses could go down.  

I also think "Americans on the whole" don't always get good value for money spent, spend money on services they could do themselves and buy unnecessary stuff.  From there it is easy for me to believe that their spending goes down as buying stuff becomes less important to them.

 

[MasterBlaster]

You retire and want to spend money fixing up the basement or backyard or bonus room or whatever. After you spend it you probably aren't going to do that again.

You buy that Lincoln/Lexus/Mercedes that you always wanted but since you rarely drive anymore the car lasts forever and you don't need to replace it.

You have dreamed of that 3-month European trip or world cruise. Do you really want to do the trip-of-a-lifetime over and over again. Travel plans must diminish with age. My father in his last years never got more than a few miles from home.

In other words every person probably has a few one-time expenses that are made early in a retirement that do not re-occur or do not re-occur often.

The spending reductions (in my opinion) are a natural result of being retired and are a natural result of aging.

 

[Sam]

That's what I think.  The older group spends less because they have lower income.

Audrey

Bernike went to great length to prove that this is not the case.

 

[SteveR]

You retire and want to spend money fixing up the basement or backyard or bonus room or whatever. After you spend it you probably aren't going to do that again.

You buy that Lincoln/Lexus/Mercedes that you always wanted but since you rarely drive anymore the car lasts forever and you don't need to replace it.

You have dreamed of that 3-month European trip or world cruise. Do you really want to do the trip-of-a-lifetime over and over again. Travel plans must diminish with age. My father in his last years never got more than a few miles from home.

In other words every person probably has a few one-time expenses that are made early in a retirement that do not re-occur or do not re-occur often.

The spending reductions (in my opinion) are a natural result of being retired and are a natural result of aging.

My personal experience with my mother and father's retirement, my MIL and FIL, and several close friends is that once you have taken your dream trip, bought your dream car, bought your dream home....you tend to not repeat it. Sure some folks travel many months of the year but the ones I know didn't. They took the BIG one and then settled into their daily routine which was cheap because there was not much to buy, no real expensive travel to take and the house was paid for. If you do less, need less, travel less, eat less, and stay around the house most of the time you don't have much need to spend a lot. The older one gets the less active you can be. My mother is blind and cannot walk without assistance. How much $$ do you suppose she spends? Not much.

 

[Andre1969]

I know in the case of my grandparents, on my Mom's side, the last time they bought a car was 1985. That summer, Granddad bought a brand-new Silverado, which over the years got passed down to me and I still have it. Granddad ended up passing away in 1990. Grandmom gave up driving in 1999, and gave me her '85 LeSabre, which they had bought in late 1984. So don't be TOO afraid of American cars...they CAN last! We finally got rid of that LeSabre in late 2002, and really only because we didn't need it anymore.

On my Dad's side, they had bought a new '94 Taurus in late 1993. Grandmom died in the summer of '94. Granddad finally gave up driving about a year ago, and gave the Taurus to one of the grandkids.

So from what I've seen, at least, people tend to buy cars less often as they get older. Now that I think about it, my Grandma's cousin has a 1989 Coupe DeVille that she's had since like 1992. And before that she had a '79 Volare wagon, which she bought soon before she retired in 1980.

 

[Texas Proud]

Well, not a great study..  but I have seen it in my relatives and friends relatives...  they do spend LESS...

My mom is 86.  She used to travel a LOT.. one year she was gone 26 weeks all over the world.  Today, she said she does not want to go overseas at all.. and mostly takes only day trips with a group now...  so, even if first class, she does not want to go..

She does not drive as much as she used to... if we go somewhere not around her, someone else in the family goes and picks her up..

So, we can all say how we WILL be spending more money the older we get, the reality is most of us will not...

caveat... your mileage may differ than the label

 

[d]

Bernike went to great length to prove that this is not the case

Bernike has concluded, but has not proven, that total expenditures will (voluntarily) decrease as we age. Further, should it be true that they have done so in the past, that does not mean that they will do so in the future.

There has been much discussion of how CPI underestimates "personal inflation", particularly for the older among us; Social Security will not likely be as generous going forward as it has been in the past; some private pensions will not materialize; Medicare is on life-support; taxes are likely to increase; capital returns may be less generous going foward; etc. etc. etc.

I have some personal experience as well ... yes, some expenses decrease; but others increase.  In planning for other folks, I might be willing to assume reduced needs; in planning for myself I am not so willing. If there is an error to be made in my planning, I'd rather it be that I am overly conservative than be overly and erroneously confident.

I should be so lucky as to have too much money when I'm 85 ...

 

[MasterBlaster]

d:

I say these things somewhat hypocritically, but being lucky, in my book, doesn't mean that you are the richest man in the graveyard. What a lost opportunity.

I think we all need to balance our needs for a secure retirement with the need to get on with it.

If you work and save until you are totally and absolutely secure you just may miss the best parts of your life.

 

[d]

MB:

unfortunately or fortunately, depending on how one looks at it, it is not likely that I'll be the richest man in the graveyard ... just hoping I won't be in the soup-line. 

no question but that balance is needed, the difficulty is to assure that balance is reached.

 

[haha]

When my Dad was 85, after a long life of hard work, saving, and some good luck in the 80s and 90s bond market, (he brought himself to buy some zeros when Big Paul took over at the Fed) he felt that by his standards and those of his friends he was rich. He received more pleasure out of this than he would have out of a bigger screen on his TV.

When he went to a rather posh "Assisted Living", he found that there were many guys richer than he was. This annoyed him, as much of what the old guys talked about was how rich they were. That was funny; the old women talked about their grandkids and how many cool things they had in their houses, and the old men talked about their grandkids (and great grandkids), and many $$ they had in their portfolios.

Ha

 

[d]

the old men talked about ... many $$ they had in their portfolios

boys being boys.

 

[SteveR]

boys being boys.

He who dies with the most toys and $$...................................is still dead.

FIRE is only a race with yourself. You only have to beat the clock that is in your head. When you have enough $$$ you have won. Don't compare yourself to anybody else...that is not FIRE thinking.

 

[REWahoo]

When I get to the home I'm gonna be talkin about Big Fish, Wine, Women and Song! - And will still be proud to be a Liberal at age 90! 8)

Better watch yourself, C-T. One of those old wingnuts in the home with you might slip some superglue into your Poligrip....or your Preparation H.

 

[d]

BTW, how much is "too much"? I remember my children used to ask me if I had "any extra money" ... still can't fathom what "extra" money is.

 

[haha]

BTW, how much is "too much"?  I remember my children used to ask me if I had "any extra money" ... still can't fathom what "extra" money is.

For me, too much is way more than I have or could imagine getting.

Ha

 

[cute fuzzy bunny]

Speaking of generations, is it because we're analyzing current retirees who are largely depression era babies? Will this look differently when the free spending boomers retire?

 

[SteveR]

Speaking of generations, is it because we're analyzing current retirees who are largely depression era babies?  Will this look differently when the free spending boomers retire?

I believe part of it may be the depression era folks...it is in my parents case. Boomers are used to spending more but those of us that grew up with depression era parents who ingrained into us the value of money and the evils of debt will be more careful about over spending. Some of course went the other direction and spent like crazy so their kids learned to spend and not save.

In one believes the popular media...all baby boomers are broke, deep in debt and will work until they die. There are millions that are not in this camp and what they do will be interesting. I know my proposed spending is initially near my current levels but drops off by 50% by my 70s; more in my 80s if I live that long. Time will tell.

It will be interesting to say the least.

 

[Cut-Throat]

Speaking of generations, is it because we're analyzing current retirees who are largely depression era babies? Will this look differently when the free spending boomers retire?

The ones that are truly 'free spending' won't be able to retire. -

 

[jdw_fire]

Being from the Depression era may affect the overall level of spending but do you really think it explains the decrease of spending in later years?  In other words yes I think the "free spending" baby boomers will be spending more in constant dollars for any given age than the depression era retirees, but I also see some good reasons that spending decreases for older retirees that seem to apply as much to baby boomers.

 

[Coach]

We're an interesting, self-selected group. While most people apparently spend little time in retirement planning, we research the subject deeply enough to find this board, read it regularly and over time, and have learned enough that the number of really uninformed posts is extremely low. And we're cautious by nature -- we add 10 years to our life expectancy "just to be safe", analyze and then pad our expense projections "just to be safe", and model the worst years in stock market history "just to be safe."

Folks, between us we're gonna leave a lot of money on the table, come the end! But that sure beats ending up eating Alpo.

Coach

 

[Outtahere]

When I get to the home I'm gonna be talkin about Big Fish, Wine, Women and Song!

Arn't you doing that now?

 

[Cut-Throat]

Arn't you doing that now?

I'm not just talkin Now -

 

[Texas Proud]

We're an interesting, self-selected group.  While most people apparently spend little time in retirement planning, we research the subject deeply enough to find this board, read it regularly and over time, and have learned enough that the number of really uninformed posts is extremely low.  And we're cautious by nature -- we add 10 years to our life expectancy "just to be safe", analyze and then pad our expense projections "just to be safe", and model the worst years in stock market history "just to be safe."

Folks, between us we're gonna leave a lot of money on the table, come the end!  But that sure beats ending up eating Alpo.

Coach

I agree... I have NO problem with my portfolio growing the older I get... I made a decision when I was about 17 that I would retire when I hit 55... no reason to change a good plan... and I do not care if someone in the family gets something.... but to tell the truth, I am thinking of setting up an education trust for anybody in the family line so they all can go to college.. many thoughts on how to manage this... but have not put it on paper.

 

[SteveR]

We're an interesting, self-selected group.  ...
Folks, between us we're gonna leave a lot of money on the table, come the end!  But that sure beats ending up eating Alpo.

Coach

Yes most folks here are not a good cross section of the rest of the country or the world.  Very few people would jump without at least some amount of number crunching to see if they would splat or bounce once they hit.  

There is a good chance that we as a group will be leaving a ton on the table for family or charity.  Even if inflation runs wild like in the 1980s most of us would be able to easily adjust and do just fine.  The belt and suspenders approach to FIRE is not a bad thing....if it allows you to sleep at night and retire early.

 

[laurence]

I agree...  I have NO problem with my portfolio growing the older I get...  I made a decision when I was about 17 that I would retire when I hit 55...  no reason to change a good plan...   and I do not care if someone in the family gets something....  but to tell the truth, I am thinking of setting up an education trust for anybody in the family line so they all can go to college..  many thoughts on how to manage this... but have not put it on paper.

I was thinking about that, too! I was, in fact, thinking beyond family and imagining setting up a local scholarship fund (worthy graduates of the local high school, something like that). See, the only barrier to college for my family members is desire, really. But if a kid has all the academic qualification to go to a top 20 school, but couldn't get enough grants to cover the dorm room, I'd love to help be that critical piece that lets them reach their dream. Like you, I haven't fleshed out this plan, my portfolio is too small for me to get ahead of myself!