When to do you start purposely spending down capital?

[NW-Bound]

Just be sure to get a place that can at least keep you from getting bed sores.

By frequently visiting our parents, actually on a daily basis, we have been able to prevent that.

By the time many of us reach life-end, we will be "offered" euthanasia. Probably not a bad deal...

I personally hope for that, to spare me the burden of having to travel to Holland when my time comes.

If and when one becomes bedridden, the logistics and cost will be considerably more than a first-class one-way ticket.

 

[LARS]

It doesn't sound to me like the problem is how to get rid of the money, but when it is safe to start splurging. Like, maybe they are traveling where they want but would like to start going first class, but not if it's going to make them run out. But there's no reason to deprive themselves of luxuries if they have no one to leave the money to. That's the "problem", as I see it. I could be wrong.

You understand the issue correctly. Luxuries are obviously a relative issue, but travel is a good example.

Historically, we would rarely pay for a first class airline ticket (not because we couldn't afford it, but because of a generally frugal nature on this kind of item). But there will be/is a time where the expense of first class, or even private aviation when we want to travel with our dog, is irrelevant.

 

[haha]

You understand the issue correctly. Luxuries are obviously a relative issue, but travel is a good example.

Historically, we would rarely pay for a first class airline ticket (not because we couldn't afford it, but because of a generally frugal nature on this kind of item). But there will be/is a time where the expense of first class, or even private aviation when we want to travel with our dog, is irrelevant.

You must be an extreme outlier on this board, or you are assuming very good returns going forward. Because I think that $10mln usually does not put one into the business jet category, even if you would be leasing.

Ha

 

[LARS]

You must be an extreme outlier on this board, or you are assuming very good returns going forward. Because I think that $10mln usually does not put one into the business jet category, even if you would be leasing.

Ha

Netjets et al can make the use of private aviation "reasonable" assuming you aren't going somewhere every month! But once or twice a year could certainly fall into the category of using excess capital.

As to being outliers I don't know, but the original question is not based upon future expected returns but current capital. Quite frankly I'm expecting poor returns over the next decade relative to historical norms.

Edit: To put it into perspective, you can currently get 25 hrs. at $116,000 on Marquis Jets (which subleases NetJets).

 

[Independent]

It doesn't sound to me like the problem is how to get rid of the money, but when it is safe to start splurging. Like, maybe they are traveling where they want but would like to start going first class, but not if it's going to make them run out. But there's no reason to deprive themselves of luxuries if they have no one to leave the money to. That's the "problem", as I see it. I could be wrong.

.

That's the way I see the "problem" too, and I think it's worth talking about.

Lots of us consider the principal our "end of life emergency fund". If we don't need it for end of life care, we'll be happy to leave it to the kids. Problem solved.

Others say they've got more than they can imagine using like that, but they are uncomfortable seeing the principal go down because it's a one-way street. Once it's gone, it's gone.

It's really more of a psychological issue than a financial issue. RunningBum's approach does a calculation to give yourself permission to spend. I think that makes some sense. (I'm working part time for my former employer this month. I'm planning to spend the money on stuff I could afford from my regular savings, but since it feels like "found money" I find it easier to splurge.)

 

[DoingHomework]

We plan to spend our "wad" on treats of experience while we are still young enough to enjoy them. So travel, travel, travel & more travel is on the agenda. We have also toyed with the idea of a vacation condo in a warm sunny place with great Scuba diving like Hawaii, Bonaire, California, etc.

Also DINKs. Also our plan. Bought the condo in Kona a couple of years ago. Now we get to scuba dive there any time we want and rent the place out teh rest of the time.

BTW, this is a great time to buy in those places you mentioned.

 

[Rustic23]

There have been a lot of comments on the expense of 'end of life' care. My father spent less than 6 months in a home, covered by Medicare and supplemental insurance. Mother died in her sleep at home. Mother in law was in and out of hospital, and nursing home over a two year period. All covered by Medicare and supplemental. Father in law in and out over a year and a half, all paid for.

I am not saying that there could not be significant expenses, but I would like to see more statistics as to how often these are not covered. I believe Alzheimer would be a case in point. You hear a lot about this disease, but what is the percentage of occurrence in the population?

Edit: I did a quick Google search and came up with figure of 5% and 10% of the population over 65 have alzheimers.

 

[meierlde]

.

I am not saying that there could not be significant expenses, but I would like to see more statistics as to how often these are not covered. I believe Alzheimer would be a case in point. You hear a lot about this disease, but what is the percentage of occurrence in the population?

Medicare will pay for nursing home care only if the patient is recovering, and the stay is less than 90 days. Once either is found not be happening then its off to private pay or Medicaid if you have no assets.
.

 

[Rustic23]

MIL spent time in the hospital, was moved to a rehabilitation wing for some time, to a nursing home, back to the hospital, back to the nursing home (the 90 day reset), I think back to the nursing home again and finally to the hospital where she died. There was also some at home time in there. All total about two years. FIL was hospital, home, hospital, nursing home, home, hospital, home. Interesting the last home care which lasted several months was under hospice. In talking with the hospice people they said it would be paid for until he died no matter how long that took. In his case about three months. When he was at home during all of this, he had health care providers in several times a week. Some to bathe him, some to do medical test, some for physical therapy. There was a time during MIL's illness that the nursing home benefit was going to run out, but that is when they put her back into the hospital.

I just did some googling, and this, while a little dated, seems to have some good information.

Nursing Home Statistics

 

[chinaco]

This is the mystery all of us would like to solve!!!


Because of the uncertainty of longevity and other variables with markets (if the assets are invested) it is complicated. It is a maze of personal considerations.

Many have stated some technical approaches. One of the big challenges is working through the personal issues and fears.

IMO - When one approaches the end, no amount of cash reserves will matter or lessen the final outcome... death! DW and I hope to spend it while we can enjoy it.


Our goal is to develop a fairly rock solid base income to cover lifelong non-discretionary spending and some base discretionary spending. Put back an emergency reserve and spend the rest (on things we want... not to just spend it).

How we would best approach this goal is where I struggle.

I have considered using a couple of SPIAs (for DW and I) to fill the gap for a base income... but vacillate on whether it is the best approach.



Anyone read any books on the subject?

 

[Alan]

Our goal is to develop a fairly rock solid base income to cover lifelong non-discretionary spending and some base discretionary spending. Put back an emergency reserve and spend the rest (on things we want... not to just spend it).

How we would best approach this goal is where I struggle.

I have considered using a couple of SPIAs (for DW and I) to fill the gap for a base income... but vacillate on whether it is the best approach.

This is pretty much our approach. We are fortunate to have annuities in the form of employer pensions that cover all the basics at present and I think that as we get older I'd want that security even if it meant buying SPIA(s).

We have children and although we've told them not to expect anything in inheritance I would expect that we will leave a sizeable chunk of cash to them but who knows what will happen. (If we live into our 80's the kids will be in their late 50's).

A few weeks ago we met a 58 yr old woman from Australia who had come over end of May for a 4 month vacation with her 87 year old mother. Her mother still had her 2 siblings and other relatives living in England and wanted a good long visit with them all before they were too old to travel. She paid for herself and daughter to travel business class and that is the sort of 'luxury' I can see us buying as our health gets worse, or much earlier if the prinicipal grows robustly.

 

[Carnage]

I've been reading a lot of books on retirement planning lately and I was a little amazed by the emphasis on leaving an inheritance. Sure if there's extra, you can have it, but I would never make different lifestyle choices based on leaving an inheritance for family. Of course, the big variable is WHEN you are going to die, so an emergency reserve or annuity makes some sort of sense.

 

[Khan]

I've been reading a lot of books on retirement planning lately and I was a little amazed by the emphasis on leaving an inheritance. Sure if there's extra, you can have it, but I would never make different lifestyle choices based on leaving an inheritance for family. Of course, the big variable is WHEN you are going to die, so an emergency reserve or annuity makes some sort of sense.

No relatives are getting anything

Anything left over is going to friends and non-profits.

 

[chinaco]

Another area that people should consider when planning for their life income: How should one ensure that they have an income if the primary household financial expert becomes unable to make good decisions?

At the very least, the household financial "genius" should write-down a some instructions for their spouse. Rather than leave decisions up to someone that may get taken to the cleaners.

Without such a plan... the less experienced spouse may be wracked with indecision and opt for overly conservative consumption. Or worse, make very bad decisions or get taken to the cleaners by some shyster.

 

[BTravlin]

Also DINKs. Also our plan. Bought the condo in Kona a couple of years ago. Now we get to scuba dive there any time we want and rent the place out teh rest of the time.

BTW, this is a great time to buy in those places you mentioned.

That's what we just did in May as well with a condo in Cozumel. We bought a little earlier than we originally planned but there are many excellent deals out there now for those with cash. We need to rent it at full price for 13-14 weeks to cover annual expenses. Six down & 8 to go. The diving is great though so I don't mind if we come up short once in awhile!

As to the OP, we have three kids and do wish to leave them something but nothing outrageous. Our plan is tough in that we want to spend down to about a level where we can leave them $100-200k each. I'm looking forward to the challenge!

 

[teejayevans]

No relatives are getting anything

Anything left over is going to friends and non-profits.

Khan, can I be your friend

re: annuties
There is no law that says you can only have 1, if you are worried about the solvency of your insurance companies, then get a couple to spread the risk.
TJ

 

[Stevewc]

The Question: When do you start purposely spending down capital?
Answer: When the doctor tells you, sorry you have 90 days to live.
That's a good time to spend like there's no tomorrow.
Steve

 

[NW-Bound]

I would be too heart broken to think of anything to spend money on.

 

[lowflyer]

Regarding the original question, this is something I think about fairly often. As a (not so great) example, my Dad died three years ago with the most money he ever had. He saved, invested and FIRE'd at 55, back when being "FIRE'd" wasn't fashionable. From that point to his death 22 years later, he continued to save and invest and live a frugal lifestyle. So he spent a lifetime living below his means and saving for

On the surface, my conclusion is to live the kind of life you want and enjoy. Don't hesitate to spend if you want to and if it makes you (or someone else) happy. If you can do that all without dipping into capital, then I guess the kids, friends or charities will get it in the end. I'm trying to adjust my thinking on this, though, to possibly spend more. Unfortunately, I'm way too much like my Dad. Of course, my kids like it that way!

 

[Stevewc]

In reference to people that retire die and leave money on the table for family, kids what ever.
I'm OK with that, in fact I hope I do.
The main thing to me is I lived my life, I got out from under the control of the man and I beat the system so to speak.
I will Cruise along and travel, camp, eat, drink and be merry as long as I can. That's good enough for me. I'm just enjoying being back to the point where I was at about high school age where I didn't have a lot of worries or cares in the world. Just kind of chilling, if you know what I mean. It doesn't take a lot to make me happy.
That's all I ever really wanted in life.
I guess I truly am a long hair hippie freak at heart.
Good to be back to the beginning,
Steve

 

[NW-Bound]

I guess I truly am a long hair hippie freak at heart.

Need picture as proof that you've still got hair.

 

[Stevewc]

Need picture as proof that you've still got hair.

I'll have to work on that.
I said at heart not root.
Does hair on the face count?
The color isn't what it was, the length is not what it was and if I don't show the top side I might be able to slide by.
I can dream can't I ?
Steve
PS. I've found its always good to drag a friend in to take the heat.
I don't think that picture of Alan with hair is up to date, what do you think?
Look up to post #61
Oh well, he was my friend !!
Come on Alan, I know you have a good heart and sense of humor in there somewhere.

 

[NW-Bound]

Sorry for the taunt. Head hair is overrated anyhow. One of my favorite actors was Yul Brynner, and he was so cool. Much cooler than Kojak.

PS. What picture of Alan do you refer to? He never claims to have much hair left and has posted recent pictures showing his baldness.

Oh, you meant his avatar! He said that was in his 20s. A long time ago.

 

[Stevewc]

Sorry for the taunt. Head hair is overrated anyhow. One of my favorite actors was Yul Brynner, and he was so cool. Much cooler than Kojak.

PS. What picture of Alan do you refer to? He never claims to have much hair left.

Oh, you meant his avatar! He said that was in his 20s. A long time ago.

No problem
Vanity is not one of my big hang ups.
I have a friend that has spent thousands of dollars trying to promote hair growth, guess what? Years later I think he wasted his money.
What a dummy,
Steve

 

[rayvt]

No relatives are getting anything

Anything left over is going to friends and non-profits.

Ha! We told our kids that their inheritance would be whatever the BMW was worth after they un-wrapped it from around the tree.