Retirees -- are you SPENDING enough money?

[Jingthing]

Throughout life, most people are sensibly concerned if they are SAVING enough money.

Such habits are hard to break.

Food for thought.

 

Quote

 

Rich Retirees Are Hoarding Cash Out of Fear

While younger generations get poorer, older Americans can’t seem to spend it all.

...

“We found that even in a worst-case scenario, they could have spent more,” said Texas Tech University Professor Christopher Browning, one of the study’s authors. “There have to be other explanations,” he said–reasons that aren’t rational.

 

 

 

https://www.bloomberg.com/news/articles/2017-05-16/rich-retirees-are-hoarding-cash-out-of-fear

Edited May 18, 2017 by Jingthing

[wump]

I don't know how the American system works but in Europe you get your pension payments monthly and not as a lump sum when you retire. Would be silly not to spend it all if you got health insurance. In the end, you can't take anything with you and leaving a condo/house/car/other material stuff for the kids/partner would be enough IMO. But this is just my opinion. If I was old and had spare money, I'd give it to the kids/partner right away. There's no interest anymore, so saving up will only give you an extra risk.

Edited May 19, 2017 by wump

[Langsuan Man]

17 hours ago, Jingthing said:

Texas Tech University Professor Christopher Browning, one of the study’s authors. There have to be other explanations,” he said–reasons that aren’t rational.

 

And it isn't going to get any better under the current dysfunctional Administration and Congress

 

Of course we are not spending because the government keeps threatening to change medicare and social security, not to mention the provisions under "trump care" that are sending mixed signal to the insurance industry

 

Many retirees used to consider their home ownership as a hedge against catastrophic illness or long term medical care but with the fall in housing prices, many fear that they won't be able to sell when they need the money 

 

For the party of big business these muppets don't seem to understand the old adage that markets don't like uncertainty

[Suradit69]

Quote

... are you SPENDING enough money?

"Enough" to accomplish what? 

Biggest unknown is how much longer will you live. Most mornings I feel like I have one foot in the grave already, but still wonder if I might carry on for another decade or more. Anyway I spend enough to be comfortable and the older I get the less interested I am in buying more things that have no immediate practical purpose.

 

1 hour ago, wump said:

I don't know how the American system works but in Europe you get your pension payments monthly and not as a lump sum when you retire

I doubt that many "rich" Americans depend on a pension as their primary source of income in retirement and even those of us who are far from rich and who may have both a pension and Social Security still have an additional source of income over which we maintain personal control.

 

But yes, US Social Security is paid out monthly and most pensions are too, though the latter may include some one-time lump sum portion.

 

 

 

 

 

Edited May 19, 2017 by Suradit69

[Mangkhut]

Enough??? For who and for what?

[English Engineer]

I agree difficult to break the saving habit. I sold my house in the UK and gave divided the money up between myself and my youngsters. We generally live a simple life in Thailand. We have bought a small house and our outgoings are modest. Our only extravagance is business class travel. I agree the reality is the desire to purchase things diminishes as you become older. The question is always is our long you will live and how much money will you need for health care.

[Foozool]

Nothing for Thai style life.

[smotherb]

3 hours ago, wump said:

I don't know how the American system works but in Europe you get your pension payments monthly and not as a lump sum when you retire. Would be silly not to spend it all if you got health insurance. In the end, you can't take anything with you and leaving a condo/house/car/other material stuff for the kids/partner would be enough IMO. But this is just my opinion. If I was old and had spare money, I'd give it to the kids/partner right away. There's no interest anymore, so saving up will only give you an extra risk.

While some retirement plans allow you to take lump sum payments, I think you may have  misinterpreted what was said. Retirees are simply spending less than their retirement funds allow; whether by monthly checks or periodic withdrawals--even when they have to take money out of some retirement plans as they age--they are not spending it. Some of that, I am sure, has to deal with being older and not being as active or being in ill-health and having sufficient insurance to pay the costs; so there is no extra cost.

 

 

[peleid]

Drink it while it is fizzing (life).There are many rich people in the graveyard

[elgordo38]

5 hours ago, wump said:

If I was old and had spare money, I'd give it to the kids/partner right away.

Rethink that one we never know what the future has in store. Would you like to adopt me for a cut??

[elgordo38]

Saving is an old habit to break. Learned it at the knee of my grandmother. Her bank was under the living room rug. She could never understand why she was "entitled" to a pension. Finally at age 75 I convinced her she is "entitled" What a sweetheart self supporting even after her husband and 3 children passed by the time she was 50. She never felt the world "owed" her a living even though she was on her own. 

[Jingthing]

3 hours ago, Mangkhut said:

Enough??? For who and for what?

Perhaps read the linked article in the OP and it would be obvious.

It's about people with a good degree of wealth. 

Unless their goal is to leave a large legacy, generally it means spending enough to enjoy your money while you are ALIVE and not "waste" it by dying without spending it motivated by perhaps irrational worry that you don't have enough.

I've met older people, and heard them here, that are quite wealthy but are determined to never spend down a nest egg at all. Not to nothing, that would be a disaster of course, but at all!

The article talks about many people even growing a large nest egg after retirement. For some people, worth a look at these attitudes. 

Edited May 19, 2017 by Jingthing

[simoh1490]

4 hours ago, Langsuan Man said:

And it isn't going to get any better under the current dysfunctional Administration and Congress

 

Of course we are not spending because the government keeps threatening to change medicare and social security, not to mention the provisions under "trump care" that are sending mixed signal to the insurance industry

 

Many retirees used to consider their home ownership as a hedge against catastrophic illness or long term medical care but with the fall in housing prices, many fear that they won't be able to sell when they need the money 

 

For the party of big business these muppets don't seem to understand the old adage that markets don't like uncertainty

"Many retirees used to consider their home ownership as a hedge against catastrophic illness or long term medical care but with the fall in housing prices, many fear that they won't be able to sell when they need the money". 

 

It's also that way in the UK, except now the government has decided the cost of housing (over 100K Pounds) will help pay for care in old age, they wont take the house from you but when you die they will get repaid - not an unfair system I reckon although it's likely to cause the heirs estate beneficiaries some angst and teeth gnashing.

[elgordo38]

13 minutes ago, simoh1490 said:

"Many retirees used to consider their home ownership as a hedge against catastrophic illness or long term medical care but with the fall in housing prices, many fear that they won't be able to sell when they need the money". 

 

It's also that way in the UK, except now the government has decided the cost of housing (over 100K Pounds) will help pay for care in old age, they wont take the house from you but when you die they will get repaid - not an unfair system I reckon although it's likely to cause the heirs estate beneficiaries some angst and teeth gnashing.

The government will ensure that you leave this world the same way you came in with nothing. Excuse me I am wrong some were born with a silver spoon in their mouth but their only hope is to get silver handles on their caskets. 

Edited May 19, 2017 by elgordo38

[elgordo38]

17 minutes ago, Jingthing said:

Perhaps read the linked article in the OP and it would be obvious.

It's about people with a good degree of wealth. 

Unless their goal is to leave a large legacy, generally it means spending enough to enjoy your money while you are ALIVE and not "waste" it by dying without spending it motivated by perhaps irrational worry that you don't have enough.

I've met older people, and heard them here, that are quite wealthy but are determined to never spend down a nest egg at all. Not to nothing, that would be a disaster of course, but at all!

The article talks about many people even growing a large nest egg after retirement. For some people, worth a look at these attitudes. 

Jingthing your post is sure stirring up the geriatric set. Be careful there could be some duels here. Canes at 5 paces. Saving like a good education or a good circuit board was imprinted on us. 

[elgordo38]

4 hours ago, Suradit69 said:

"Enough" to accomplish what? 

Biggest unknown is how much longer will you live. Most mornings I feel like I have one foot in the grave already, but still wonder if I might carry on for another decade or more. Anyway I spend enough to be comfortable and the older I get the less interested I am in buying more things that have no immediate practical purpose.

And the winning comment of the day is (drum roll please)

[elgordo38]

22 hours ago, Jingthing said:

While younger generations get poorer, older Americans can’t seem to spend it all.

...

Yes the younger generation is holding on waiting for their parents etc. to kick off so that they can inherit what the parents worked hard for. Its their only hope of survival living off the fruits of others. 

[elgordo38]

26 minutes ago, Jingthing said:

Perhaps read the linked article in the OP and it would be obvious.

It's about people with a good degree of wealth. 

Unless their goal is to leave a large legacy, generally it means spending enough to enjoy your money while you are ALIVE and not "waste" it by dying without spending it motivated by perhaps irrational worry that you don't have enough.

I've met older people, and heard them here, that are quite wealthy but are determined to never spend down a nest egg at all. Not to nothing, that would be a disaster of course, but at all!

The article talks about many people even growing a large nest egg after retirement. For some people, worth a look at these attitudes. 

When you started this thread I hope you realized what you were letting yourself in for. Without a doubt a lot of followup. 

[Jingthing]

The topic does interest me, or I wouldn't have posted, but I don't think I'm nearly wealthy enough for the problem described in the article to be relevant to me. For me, I think that frugality isn't really a choice. 

 

But the funny thing is that I reckon many retirees with 10 times more wealth than me or even 100 feel the same way I do. Not rich enough to be free spending.

Maybe you really are.

 

Edited May 19, 2017 by Jingthing

[elgordo38]

1 minute ago, Jingthing said:

The topic does interest me personally, or I wouldn't have posted, but I don't think I'm nearly wealthy enough for the problem described in the article to be relevant to me. 

But the funny thing is that I reckon many retirees with 10 times more wealth than me or even 100 feel the same way I do. Not rich enough to be free spending.

Maybe you really are.

 

Some walk through life unfettered. Then there are some that take one step forward and two back. Then there are some like the poor young lady age 18 killed in New York yesterday who was senselessly mowed down. RIP. Like a butterfly her wings were just opening barely out of the cocoon. Makes one think life is more like a casino everyday. 

[CatCage]

I dont spend any money, my wife is in charge of the 'spending money department'

[bazza73]

My aim is to spend what I get as annual income, and preserve my capital base. Two reasons: I don't know how long I will live, so it would not be particularly smart to spend all of it. Second reason: I'd like to leave something to my next of kin.

I suspect many people who have far more than they can spend accumulate for the second reason.

There are several generations now that have not been taught the virtues of thrift, as I was. IMHO their retirement is going to be a lot less comfortable than mine is.

 

[Jingthing]

16 minutes ago, bazza73 said:

My aim is to spend what I get as annual income, and preserve my capital base. Two reasons: I don't know how long I will live, so it would not be particularly smart to spend all of it. Second reason: I'd like to leave something to my next of kin.

I suspect many people who have far more than they can spend accumulate for the second reason.

There are several generations now that have not been taught the virtues of thrift, as I was. IMHO their retirement is going to be a lot less comfortable than mine is.

 

If leaving a large legacy is your priority, then the message of this thread doesn't really apply to you.

For those in your situation that aren't focused on legacy, whether your plan was rational or not would be based on level of wealth, age, and life span expectations.

Didn't start this thread to really invite people to get into specific details about their resources, but here's an example.

Let's imagine a Canadian, age 65, with a nest egg of 10 million dollars, pension income of 35K dollars per year, projected life of 20 more years, and not focused on legacy.

Such a person does not need to maintain that full nest egg of 10 million at that level or to grow it. 

They would be very foolish and irrational to only spend the pension.

Edited May 19, 2017 by Jingthing

[taxout]

A relative needed a lot of care in a U.S. nursing home recently: over US$12,000 per month. Not covered by Medicare.

 

Estimate what that number will be when you're in your mid-80s, say. Keep in mind that since care is labor-intensive, the applicable inflation rate will be higher than the general inflation rate.

 

Then estimate, in a reasonably worst-case scenario, how many years of that care you might need. Four or five years is reasonably worst case, but of course it could be longer. Keep in mind the tendency to find new ways to keep people alive longer.

 

While you can't do the numbers very precisely, you can do them roughly enough to know that we're talking about an exceptionally large number.

 

All this is without taking into account political factors which will probably see Social Security and Medicare benefits cut back. And the fact that anything medical always seems to increase in price faster than anything else.

 

So of course Americans worry about money as they get older, even when they have what might strike others as a reasonable nest egg. How could they not worry? This is especially true for expats, who may find themselves returning to the U.S. without family or friends for support.

 

(And as to that "foolish and irrational" Canadian, I'd say he's foolish and irrational to spend simply for the sake of spending.)

[bazza73]

13 minutes ago, Jingthing said:

If leaving a large legacy is your priority, then the message of this thread doesn't really apply to you.

For those in your situation that aren't focused on legacy, whether your plan was rational or not would be based on level of wealth, age, and life span expectations.

Didn't start this thread to really invite people to get into specific details about their resources, but here's an example.

Let's imagine a Canadian, age 65, with a nest egg of 10 million dollars, pension income of 35K dollars per year, projected life of 20 more years, and not focused on legacy.

Such a person does not need to maintain that full nest egg of 10 million at that level or to grow it. 

They would be very foolish and irrational to only spend the pension.

Certainly someone in the position of your hypothetical Canadian could afford some luxuries, such as an AMG C63 Mercedes, or half a dozen mia nois. Or travelling first class around the world. However, as you get older your horizons do shrink. While I still enjoy golf, I can't play at the competitive level I used to. 8 hours in a plane ( business class ) is all I want to handle nowadays. Ditto one Thai GF.

What would you be spending surplus cash on?

The $10 million you refer to

[Jingthing]

On people hoarding for legacy reasons, perhaps more of them should consider starting to give their money away while they are still alive! Wouldn't it be more satisfying for example to help a worthy struggling relative start a business at a younger age?  Possibly you could even have some influence (guilt trips?) in the recipient not blowing it, certainly more chance of that while alive. Charity giving as well for those inclined. Spending more while alive doesn't necessarily only need to be selfish pleasure spending. 

Edited May 19, 2017 by Jingthing

[Jingthing]

39 minutes ago, taxout said:

A relative needed a lot of care in a U.S. nursing home recently: over US$12,000 per month. Not covered by Medicare.

 

Estimate what that number will be when you're in your mid-80s, say. Keep in mind that since care is labor-intensive, the applicable inflation rate will be higher than the general inflation rate.

 

Then estimate, in a reasonably worst-case scenario, how many years of that care you might need. Four or five years is reasonably worst case, but of course it could be longer. Keep in mind the tendency to find new ways to keep people alive longer.

 

While you can't do the numbers very precisely, you can do them roughly enough to know that we're talking about an exceptionally large number.

 

All this is without taking into account political factors which will probably see Social Security and Medicare benefits cut back. And the fact that anything medical always seems to increase in price faster than anything else.

 

So of course Americans worry about money as they get older, even when they have what might strike others as a reasonable nest egg. How could they not worry? This is especially true for expats, who may find themselves returning to the U.S. without family or friends for support.

 

(And as to that "foolish and irrational" Canadian, I'd say he's foolish and irrational to spend simply for the sake of spending.)

You are a strong voice for the paranoid.

It's a matter of balance with so many personal factors to be considered.

But surely you must agree there are many cases where older people are depriving themselves unnecessarily. 

My personal situation rules out carefree spending at least from my perspective. But it's interesting to me that there are likely many less well off people (bona fide broke ass?) that might think I'm being too careful.  I'm sure they'd be wrong! So these wealth level things can be very subjective and relative. 

Edited May 19, 2017 by Jingthing

[bazza73]

12 minutes ago, taxout said:

A relative needed a lot of care in a U.S. nursing home recently: over US$12,000 per month. Not covered by Medicare.

.

 

So of course Americans worry about money as they get older, even when they have what might strike others as a reasonable nest egg. How could they not worry? This is especially true for expats, who may find themselves returning to the U.S. without family or friends for support.

 

Drifting a bit off topic, there is an aged care facility in Chiang Mai which charges 45,000 baht a month for round-the clock care. Food, accommodation, nursing, resident doctors.

The other alternative is to hire a qualified nurse for full time care for about 10,000 baht a month.

Every September, the Thai government retrenches all nurses in government hospitals who have hit age 45. They don't get much as a pension, and are quite happy to take up positions as full-time carers. I've seen several adverts for them.

[55Jay]

I'm not in the "unprecedented piles of assets" category but, apparently, doing well in comparison to Net Worth at Death bar chart in linked article.

 

Can relate to the OMG! feeling when I stopped working and we moved here.  Not only loss of revenue, but going from 100mph to Zero, it was like being dropped off a cliff.  Hell, I even tried golf for a while because you're supposed to.    

 

The unknown future does contribute to my high level of fiscal discipline, although I've always been that way, even when I was at my peak earning years. 

 

We spend enough here in Thailand though.  Could spend more but don't.  Thailand is not very stimulating for us, and always guard against shopping when bored, retail therapy, etc.    We do get it on when we travel, specifically to the US.  Splash out on expensive air tickets because we won't be folded up like beach chairs in Economy.  Screw that.  Nice rental cars, and lots of shopping for a couple months.... then back to boring "normal" here in Sabai Land for a while.

[Jingthing]

Another way to look at this for those that aren't focused on legacy is to just have an introspective look at your situation and consider are you being too careful, just about right careful, or possibly you should be less careful.

I did this and it took me about 10 seconds. I should probably spend even less, but probably won't as most of my spending is non-discretionary.

But some people may consider this and realize they really can afford to spend more. 

Edited May 19, 2017 by Jingthing