Life Expectancy, Baht And Inflation Rate For Retirement Planning

[altman]

there is an alternative.

live as long and as well as you'd like then choose the time, place, and manner of your own death.

by choosing to live the last years of your life in any particular place you will benefit the people of that place with your presence and cash.

by choosing to live as long as your cash/investments/income lasts and then choosing to end your own life in your own time and manner, you will not need to worry about what you will do if your fortune dries up.

not for everyone, but an option to consider

http://www.EuthanasiaClinic.com

[Jingthing]

I think euthanasia is a great choice to have, but I would hope the choice isn't made based on running out of money, rather wanting to end the pain of a terminal disease. So put me in the middle of this argument. Try with the help of retirement calculators to figure how much you need to maximize the chance of never running out of money while at the same time trying to allow some retirement years, assuming you want to retire.

[Jingthing]

OK, this blurb from Money magazine expresses my personal feelings about investments in retirement, and it is totally mainstream:

Already retired

This is the time when you really have to be careful about market slumps. That’s because the combination of investment losses and pulling money out of your retirement accounts for living expenses can so depress the value of your portfolio that it may not be able to recover sufficiently even when the market rebounds.

There are two ways to protect yourself against the risk of going through your money too soon. One is to scale back your stock holdings enough to allow for modest growth yet limit the damage from a slumping market. At age 65, a reasonable guide is to invest roughly half of your retirement accounts in stock funds and the remainder in bonds and cash. As you age, you should gradually scale back the amount devoted to equities, until it reaches 20% to 30% of your portfolio when you’re in your ‘80s.

The second way to prevent a sinking market from sinking your retirement plans is to carefully manage withdrawals from your savings. If you want your nest egg to support you for 30 years to longer, you should draw no more than 4% to 4.5% or so of your account value initially and then increase the dollar amount of that withdrawal annually for inflation. This will give you an 85% to 90% chance that your money will last 30 or more years.

This is an estimate, though, not a guarantee. The odds will be lower if you’re hit with several years of subpar returns or a market downturn early in retirement. If the markets deliver solid gains, however, you could actually end up with a portfolio larger after 30 years than the one you started out with. That may sound like a big plus. But it could also mean that your desire for security prevented you from enjoying retirement as much as you might have.

So you need to be flexible. If the markets head south early in retirement, you might want to pare back your withdrawals a bit. Conversely, if you see your portfolio’s value begin to balloon, you might be more generous to yourself. You can keep tabs on how long your portfolio might last by going to the T. Rowe Price Retirement Income Calculator.

Bottom line: The threat of a recession and a bear market wreaking havoc with your retirement plans can definitely be unnerving. But shifting assets around in a vain attempt to outguess the markets will likely create more problems that it will solve. A better approach is to create a sensible long-term plan along the lines I’ve outlined here and, aside from minor adjustments, stick to it. In the years after the crisis passes, you’ll be glad you did.

Edited February 15, 2008 by Jingthing

[sendbaht]

F"or me, personally, I'm not using any life expectancy. I'm basing my projections on never dipping into any equity and being able to live for as long as I need to on interest alone; in fact, I want to (and plan to) be able to keep increasing the pot through drawing down less than I actually accrue."

If you can do this Bendix you will be set for life.

[Jingthing]

F"or me, personally, I'm not using any life expectancy. I'm basing my projections on never dipping into any equity and being able to live for as long as I need to on interest alone; in fact, I want to (and plan to) be able to keep increasing the pot through drawing down less than I actually accrue."

If you can do this Bendix you will be set for life.

That is so old fashioned, but up to you.

[BEENTHEREDONETHAT]

Personally I don't have any signiicant funds in the stock market so don't pay much attention to it's ups and downs. During my retirement I have made my money from Bonds, term deposits and real estate. The real estate provided the best return long term. It was not initally purchased as a investment but rather as a place I would like to live. It has been a rather stress free method for me. Yes I do have a pension plan in the way of US social security, it was adjusted up 2.6% this year for inflation.

In the last 24 years my retirement capital has grown 300% using this method and continues to grow today. My money is spread through 4 countries so exchange rate fluxuations do not typically have a big impact. The only thing I ever spend principal on is real estate, other than that I will never touch principal.

Running out of money when I die would be grossly unfair to my wife who I expect will be around at least 20 years after I'm dead and gone and 30 years or more would not surprise me. She is 10 years younger than me (looks 20 years younger) and women tend to live longer than men.

But I definitely agree that a retirement plan should be designed for your needs and requirements and you should pick and choose the bits and pieces of other peoples plans to suit your own desires. Whatever method you use I wish you some luck to go with it and a long and happy retirement.

[cobra]

...the idea of running out of cash in my 70s or 80s apalls me and I'm not particularly keen on playing the odds that way.

Yes indeed,

The problem with life expectancy is that it's constantly increasing, the medical industry is getting very good at keeping people alive for better or worse,

Visiting a " retired" friend is a convalescent home, dingy, over crowded, no AC just a dirty slow turning ceiling fan,

behind the small talk I'm thinking, ... note to self, we are not ending up like this.

Bad enough to be old and infirm, but to run out of $$ in old age is untenable.

The wild card in all of this is rising health care, unforeseen catastrophic events, where medical deductibles can eat huge holes in budgets and nest eggs.

I'm with Bendix, better over-funded than under.

[Jingthing]

I'm with Bendix, better over-funded than under

That is so elitist. That means 99 percent of people can never retire. In reality, most middle class westerners can retire at a reasonable level. Of course, that is desirable to be so called over-funded, but simply not possible for the majority of people. Also note for a huge percentage of people of all classes, the last years of life are the most unpleasant. Money does not save you from suffering and death.

Edited February 15, 2008 by Jingthing

[mickba]

All different but all interesting reading.

At 60 this year I'm about to exercise my pension options. It's the obvious dilhema of choosing between the tax free lump sum vs pension income. I have other assets but no other significant income so income tax (UK) wouldn't be too bad. I've about decided to go for maximum income in the hope of reaching 73ish (break even) and then going into 'profit'. I know I wouldn't manage the lump sum well and I don't want to go back to blighty non viable sobbing and dribbling. Yet I must admit it's still bothering me that all the experts say "the tax free lump sum is always best". Maybe not for all?

As to dipping into capital, risky as anything is here, the option of using capital to generate a Thai income is one way of hedging against exchange rates and is just a little tempting at present(maybe a good reason for resisting the lump sum).

One of the biggest worries apart, from the obvious, is that something happens (incl ill health etc) to prevent me living here.

[GuestHouse]

All different but all interesting reading.

At 60 this year I'm about to exercise my pension options. It's the obvious dilhema of choosing between the tax free lump sum vs pension income. I have other assets but no other significant income so income tax (UK) wouldn't be too bad. I've about decided to go for maximum income in the hope of reaching 73ish (break even) and then going into 'profit'. I know I wouldn't manage the lump sum well and I don't want to go back to blighty non viable sobbing and dribbling. Yet I must admit it's still bothering me that all the experts say "the tax free lump sum is always best". Maybe not for all?

As to dipping into capital, risky as anything is here, the option of using capital to generate a Thai income is one way of hedging against exchange rates and is just a little tempting at present(maybe a good reason for resisting the lump sum).

One of the biggest worries apart, from the obvious, is that something happens (incl ill health etc) to prevent me living here.

I think you are making a wise decision - The higher income you get by not taking the tax free lump sum will give you a higher income, which makes for longterm security and longterm options.

Have a great retirement - I'm sure you have earned it.

In a similar vain, I like this too...

Running out of money when I die would be grossly unfair to my wife who I expect will be around at least 20 years after I'm dead and gone and 30 years or more would not surprise me. She is 10 years younger than me (looks 20 years younger) and women tend to live longer than men.

I've often asked here on TV how many guys are planning for the longterm financial security of their younger wives - Its good to hear some are doing just that.

Money will not protect anyone from old age, illness and death, but, and this is important to note - For most foreign men in Thailand, it is going to be a younger wife who takes care of them as they go through old age. Who then is going to take care of the wife?

Hats off to BEENTHEREDONETHAT for taking care of his wife's long term future, I only wish more did so.

[astromash]

there is an alternative.

live as long and as well as you'd like then choose the time, place, and manner of your own death......

by choosing to live as long as your cash/investments/income lasts and then choosing to end your own life in your own time and manner, you will not need to worry about what you will do if your fortune dries up.

not for everyone, but an option to consider

Well, hurray, hurray. I was reading this thread, came across this post and it more or less took the words out of my mouth.

I'd add at least one caveat. The path of self-assured destruction of course should factor in the responsibilities a person may have accrued in this life. Dependants etc etc.

But having said that, most people (including most of the people posting here) don't seem to see life and death this way. They seem more concerned about making sure they can cover the cost of the very last change of colostomy bag, the service charge for wiping the very last bit of dribble off their crumbling, quivering chins.

People are strange.

[BigSnake]

Luck you some of us it tied to that dollars on retirement.

[torrenova]

I think that euthanaisa is viable if the person wants to over spend then die when there is no cash left. Its your life, up to you what you do with it in my book.

[LivinLOS]

For me, personally, I'm not using any life expectancy. I'm basing my projections on never dipping into any equity and being able to live for as long as I need to on interest alone; in fact, I want to (and plan to) be able to keep increasing the pot through drawing down less than I actually accrue.

I know all the arguments about there being no pockets in coffins, but frankly the idea of running out of cash in my 70s or 80s apalls me and I'm not particularly keen on playing the odds that way.

Its rare that I agree with you Bendix but this time your spot on..

I am young, I came here in my late 20's and only in my early 30's now.. But I would never have come unless I could have a nestegg that provides enough return that I can put at least 1/2 my annual returns back into the pot to keep it growing.

As it happens my investments have panned out and I have been able to radically grow the nestegg, hence I can now imagine a greater outgoing and better standard of living going forward as I age, which is I think a normal aspiration (that you have more wealth as your get older)..

Here in the developing world a 10% rate of inflation is easily possible.. Then theres currency risks.. Etc etc etc.

[LivinLOS]

But Bendex, many people with your attitude (which is a fair one if you are rich) could never ever get that $mill to retire with. And do you want to di with a mill$ in the bank?

Erm as opposed to the opposite of not having a mil in the bank.. yeah sure would go for having a mil when I die over not having one ?!?!

Am I miss understanding the question ??

[LivinLOS]

I have a question about this. Before moving to Thailand, I never heard anyone who knows anything about retirement financial planning suggest that the goal in retirement (after retirement) is to always increase your nest egg, and never, ever spend any of your initial capital, except if your primary goal is to pass on your money after death to someone else. Is this some kind of thing people in the UK are taught (or to my view, brainwashed)? It also comes off as a total western denial of death, something you would think people interested in Thailand where death is less hidden than the west would be cured of.

However back in the west there are certain safety nets, often free medicines, often pensions, often people still have much closer ties into family etc.

Expats who head out into the great unknown have to have a much greater sense of self reliance, the ability to perhaps even leave Thailand should coups, wars, political instability or even visa regs change. That total self reliance requires a hiugher buffer of ready cash to throw at problems than it would for those living the 'normal' life back where things dont change as much.

[Jingthing]

Fair point, LOS.

However, pensions are payable overseas for most of us. What I find funny is people who think staying home solves all your problems. Most retirees at home are underfunded as well and the safety nets people at home have are often not as secure as you might think, especially for US people, where things are more Darwinian than in Europe.

Edited March 1, 2008 by Jingthing

[LivinLOS]

Ohh I readily agree that many in the west are not secure either.. Tho I do think they will be assisted far more there than an underfunded old farang will be assisted here.

As to pension planning.. I long ago decided that I would neither pay into or ever draw down from any government system. I will CYA purely alone.

[Naam]

But Bendex, many people with your attitude (which is a fair one if you are rich) could never ever get that $mill to retire with. And do you want to di with a mill$ in the bank?

Erm as opposed to the opposite of not having a mil in the bank.. yeah sure would go for having a mil when I die over not having one ?!?!

and i wouldn't mind jumping in my grave with 10 millions. my view is that people who think they can draw from their capital at a certain age lack the knowledge how fast this procedure will decrease capital and income progressively... not to talk about the nonsense of committing suicide when all the dough has been spent.

Edited March 1, 2008 by Naam

[Maigo6]

The way the USD is heading, I will live really well on my savings if I have a life expectancy of 17 Days.

[mellow1]

But Bendex, many people with your attitude (which is a fair one if you are rich) could never ever get that $mill to retire with. And do you want to di with a mill$ in the bank?

Erm as opposed to the opposite of not having a mil in the bank.. yeah sure would go for having a mil when I die over not having one ?!?!

and i wouldn't mind jumping in my grave with 10 millions. my view is that people who think they can draw from their capital at a certain age lack the knowledge how fast this procedure will decrease capital and income progressively... not to talk about the nonsense of committing suicide when all the dough has been spent.

I'm sure that planning to have a million or more upon retirement is not a novel idea. Shooting high in any goal is always worthwhile, even if you don't meet your goal, its always nice to get close to it, especially when the goal is millions. Most people make plans and set goals, but life has a way of making changes, which are many times unforeseen. A chunk of luck, will come in handy in this pursuit. Try and take some time to smell the roses during this pursuit, in case you get hit by a truck and are left paralyzed. This will at least give you some good memories to dwell on, other than the millions out of your reach. There are many people living good retirements, who don't have millions. If you own a nice home, have a good wife and family, no debts, enough of a pension to live on, to take care of everyday needs, decent health, your rich already. Nothing wrong with big plans though, good luck.

[autopilot]

What happens if you get it wrong? I mean, what happens if you pick 84 and plan your finances to run out around then but you actually make it to 90? Would you think of that as good or bad news?

The short answer is income annuity, you can annuitize part of you protfolio, I just plugged few numbers into the Vanguard site, for a 61 years old to get monthly, inflation adjusted payments of $1,000 for life, all it takes is $200,000 investment. You can play with the numbers according to your needs during retirement but the net effect is that you will never run of money when you are old, giving you the flexebility to spend bit more money when you are bit younger. Of course you will leave smaller pile of money when you are dead but you will have more fun living...

[egg6447]

interesting in deed. everyone has left out THE factor... as you get older you require less, and thats less of everything, those that have retired , due to age, will be able to endorce this i trust. those still in the planning read on . and oh buy a hammock lol.. enjoy

[gregb]

I for one am using the following system. I believe that the ability to get better than inflation through financial portfolios is an anachronism. I think the ability to do that reliably ended last year. Witness the amazing run ups in commodities recently. You need go no further than Lotus to observe this for yourself. This will be with us for the rest of our lives. It will never settle down to what it was before. To do so would require the reemergence of perpetual growth economies, which can't happen in an energy constrained world. A threshold has been crossed.

The best you can hope for today is to break even with inflation, and that is only done by investment in above said commodities. The easiest commodity to store is gold. Thus, my advice to the OP is the following:

Decide how much money you want to live today, and convert that to gold. For example, it you need 50,000 baht per month today, that means 3.5 baht of gold per month.

Next, decide how many years you want to live after retirement. For sake of argument, let's say that number is 40. Multiply 40 x 12 x 3.5 and you get 1680 baht. To purchase that today, you will need approximately 24.5 million baht, or about $800k USD. That is what you need in today's dollars. You can assume inflation will run about 20% per year from now on, so if you don't have that much and need to save, plan on that factor to convert to 2008 currency (probably more than 20% if you are calculating in USD).

You should invest all of your money in non discretionary commodities, gold is particularly easy and safe. Don't worry too much about ROI. If commodities drop, so will the inflation rate, so you are well hedged.

Retiring with even a small approximation of the standard of living you have today will be very expensive in the future. It will be so expensive most people will never be able to do it. The above mechanism is my best guess on what it will take.

This is your life you are playing with. Don't underestimate how bad things will get in the future.

My best advice.

[NovaBlue05]

"......everyone has left out THE factor... as you get older you require less, and thats less of everything,...."

Except medical care

[dumspero]

Gregb- respectfuly, your tinfoil has slipped and it's obscuring your view. 20% inflation from now on? Gold under the mattress? Can't expect economies to grow?

How about this? The planet's billions of people are just getting started. Short of a global-scale catastrophe, which is certainly possible but not likely, the energy issue will be overcome by new technologies, whether in 15 or 25 or 30 years, all before the fossils run out. Energy may yet cause a few more bumps in the road or even a major one, but it is not an insurmountable obstacle to the progress of humankind. Humans are not only the world's biggest threat, we're also the most important resource.

On topic, I refuse to plan for retirement based on the most extreme doom and gloom scenarios. It would simply be too soul-draining to live with such a perspective.

[chicowoodduck]

What happens if you get it wrong? I mean, what happens if you pick 84 and plan your finances to run out around then but you actually make it to 90? Would you think of that as good or bad news?

Good point.

I think it's anyway difficult to plan your finances. Some people say as you get older you will spent a lot less because you've seen it all, done it all and it's not like when you're younger chasing women, sitting in the bar all day etc. etc.

I always figure if you cut out the beer and smokes, the money will never be the problem, it's the state of your health. One illness can wipe out the books and it's sleeping on the beach with some sand as a blanket!

[astromash]

... not to talk about the nonsense of committing suicide when all the dough has been spent.

As you get older and older and the dough is starting to go and/or your physical ailments are getting steadily worse and worse ...

It's certainly not nonsense. It's simply as altman said: "not for everyone".

[altman]

But Bendex, many people with your attitude (which is a fair one if you are rich) could never ever get that $mill to retire with. And do you want to di with a mill$ in the bank?

Erm as opposed to the opposite of not having a mil in the bank.. yeah sure would go for having a mil when I die over not having one ?!?!

and i wouldn't mind jumping in my grave with 10 millions. my view is that people who think they can draw from their capital at a certain age lack the knowledge how fast this procedure will decrease capital and income progressively... not to talk about the nonsense of committing suicide when all the dough has been spent.

nonsense is unfair.

you may not agree with this as a plan, but to declare it nonsense for those that do is to deny them their choice.

[gregb]

Gregb- respectfuly, your tinfoil has slipped and it's obscuring your view.

Actually, the whole tinfoil thing comes from a few very non mainstream crazies who believe that their minds are being controlled with non detectable government beams. I don't wear any tinfoil, so nothing to slip.

20% inflation from now on? Gold under the mattress? Can't expect economies to grow?

Gold works perfectly fine in a safe deposit box at the bank. You don't have to put it under the mattress unless you are really paranoid. And yes, growth economies are over, except where governments manipulate the books.

How about this? The planet's billions of people are just getting started. Short of a global-scale catastrophe, which is certainly possible but not likely, the energy issue will be overcome by new technologies, whether in 15 or 25 or 30 years, all before the fossils run out.

The problem, Kimosabi, is not fossil fuels running out, but peak production being reached. You have not understood the problem.

On topic, I refuse to plan for retirement based on the most extreme doom and gloom scenarios. It would simply be too soul-draining to live with such a perspective.

That's a wonderful religion, but I sure wouldn't wish that cornucopian vision on the OP. Perhaps you should just pray for money to fall from the sky? Maybe butterflies and rainbows will magically make baht appear in the bank account.

My advice to the OP...study the numbers. Decide for yourself. And, most importantly, pay very close attention to the run up in commodities recently. Everyone says how "abnormal" this is. There is a reason for that, and it isn't at all good. If you care about your future, prepare for the worst.

All I can do is give you advice. Your decision whether to listen or not.