Gyroscopic Investing

I'm curious to know what people's thoughts are regarding the spend-down of assets as they age.

I've been attempting to model my finances in retirement and the projected final value of my assets might be higher than it needs to be. It's hard to change the "save save save" mindset and be okay with spending down assets, and of course it's impossible to predict what kind of good or bad fortune will come our way in the coming years.

If you have come to any conclusions on this issue, how did you get there? For example, have you set a $ target? Or have you settled in on a certain lifestyle and figured that's good enough? Are you just winging it?

Ideally, when I die of old age I’ll still have some investments left, and I can leave it to family and/or a favorite charity.

I would personally find it stressful to try to calculate exact savings and spending amounts so that I have “just enough” to die with exactly $0 in my accounts. Much simpler just to save comfortably more than I’ll need and then pass along what remains when I shuffle off this mortal coil.

Your post made me think of something I read in one of Harry Browne's books. To paraphrase it, he said people have a tendency to save in order to make sure they have enough for the future, sometimes at the expense of foregoing enjoyment in life only to accumulate more than they needed in the end. I have known people who have refrained from taking adventurous vacations and things like that so they can save for the future only to be too old or health compromised when they were ready to spend more freely.

HB's suggestion was to put a plan together and include in the plan a budget for spending on indulgent things you enjoy now, and if it's all in the budget, you can do so without worrying about the future and give yourself a license to indulge.

I have a lot of thoughts on this. It has become one of the cosmic questions for me. I feel like I need to write a book about it just so I can figure it out.

If I can clarify my internal ramblings a little, I'll try to post some points, feelings, observations. I usually do that by writing anyway.

The problem is, you can't predict the situation in which you end up. If I had known then what I know now, we would have done a lot more (things, spending) in the prime of our lives.

Or would we have, really? We could always tell we were going to have "enough", as the term is used in Bogleheads discussions. Why didn't we buy that cottage at the lake? Why didn't we vacation overseas? We bought what we wanted, though. If there was one thing that my wife and I didn't do, it was buy things that seemed overpriced. For me, the cottage at the lake was always overpriced. So was a vacation overseas for a family. Plus, we had a business to run.

So, one question is, how do you like to live, and what will it take to sustain that?

If you could accumulate a lot more, would you do a lot more later? Or will you still live a relatively simple and straightforward life? Will your excess money end up owning you, rather than the other way around? It sounds silly, right? But I feel like that right now. We are trying to learn how to stop worrying and love the bomb, er, I mean buying overpriced things that we might actually enjoy. Like international business class air travel. John McEnroe voice on: "Five thousand bucks, are you effing kidding me?" It's very hard to change one's stripes.

I won't even go into estate planning and worrying about how not to screw up future generations, how to find charities that aren't wasting the money on highly paid, limo riding insiders, and all that. Honestly, once we got above "enough", everything else has been more pain than pleasure. God, it hurts to say that. The pleasure has mostly been from self satisfaction of looking at the number of zeroes. And yeah, that's pretty shallow. And I still think Starbucks prices are ridiculous.

Bottom line, plan to have enough to cover misfortunes that might come your way. Don't cut it so close that you end up on Medicaid in the county nursing home. On the other hand, don't swear off marriage and kids because they cut into your money and fun. Marriage and kids are the most overpriced things of all, but life is about more than the sugar high of short term fun. You can tell my values involve trading short term fun for long term satisfaction and security. And how hard it is to get it just right. So don't let it consume you. If you are here on this forum, you're good with money. If in doubt, work another year. It won't kill you. And if it does, so what, nobody gets out of here alive.

I Shrugged wrote: ↑Sun Apr 18, 2021 8:58 am Like international business class air travel. John McEnroe voice on: "Five thousand bucks, are you effing kidding me?"

Totally worth it. I first did it on miles/free upgrades, but don't think I'll ever travel coach internationally again -- I'd rather not travel.

Of course, then I got to fly international first class once (BA)....don't think I can go back to Business now

I have a trust set up so any "leftover" money goes about 50% to loved ones and the rest to charities. Right now I'm struggling with wondering if I have "enough" now to retire early -- we decided to keep working for another 6 months at least given how much prices of things we need have gone up (need a truck, are building a house, etc).

With (hopefully) 50 years left on the clock, I don't know how you can feel comfortable you have 'enough' unless you're likely to have way more than you really need. The cost of failure is too high, and it's far easier to make money now, than later in life when realizing it's needed.

I suspect people might get worried about "oversaving" in cases where they don't like what they have to do to make the money. If you hate your job, it would make sense to not work at it a second longer than necessary, and therefore figuring out how much is 'necessary' is important.

I think a better strategy is to accumulate a minimum-viable pile as fast as possible, then (if you want) transition to making more money in a more enjoyable way.

But to answer flyingpylon, I don't intend to spend down my assets throughout my life, I'd prefer to be able to leave it in a trust for future generations.

Kriegsspiel wrote: ↑Mon Apr 19, 2021 6:56 am I suspect people might get worried about "oversaving" in cases where they don't like what they have to do to make the money. If you hate your job, it would make sense to not work at it a second longer than necessary, and therefore figuring out how much is 'necessary' is important.

I think a better strategy is to accumulate a minimum-viable pile as fast as possible, then (if you want) transition to making more money in a more enjoyable way.

But to answer flyingpylon, I don't intend to spend down my assets throughout my life, I'd prefer to be able to leave it in a trust for future generations.

Any concerns about creating trust fund babies?

I think "trust fund babies" are more the result of bad parenting than having a trust fund.

Thanks for the responses. It's interesting to read different takes on the issue.

For me the question is not so much "when do I stop working" it's more "what lifestyle should I live once I stop working". I have enough family obligations (college, health insurance, etc.) to keep me working for another 5 years or so but after that the options seem to open up (given what I foresee today at least). I don't hate my job but I've reached a plateau. That's a new thing for me to deal with and I'm not sure I see much benefit in hopping to another corporate job so I'll probably just ride it out.

We don't live extravagantly at all, nor do we plan to in the future. We don't have any expensive hobbies or anything. But I kind of feel like we've been "hunkered down" for the last 20 years as we've raised our family. It's not that we've gone without things we needed, but we've watched plenty of friends and neighbors move to nicer homes, drive nicer cars, vacation in far away places, and all of that.

As I've attempted to model our finances in retirement, it has struck me that given our estimated rate of spending our assets end up in roughly the same place as we started. There are some known unknowns that could impact that positively and of course there are unknown unknowns that could go either way.

We will not be overflowing with cash by any means. But it does make me wonder... should we be willing to spend a little more for our next house? Should we take some nicer vacations? Should we eat out a little more often? Should we do all of those things if it means spending down a bit of principal as we go? If not, why did we save so much in the first place? I would never attempt to "die with zero" but what if we planned to die with half of what we started with... would that be so wrong?

flyingpylon wrote: ↑Mon Apr 19, 2021 10:27 am I have enough family obligations (college, health insurance, etc.) to keep me working for another 5 years or so but after that the options seem to open up (given what I foresee today at least). I don't hate my job but I've reached a plateau.

We don't live extravagantly at all, nor do we plan to in the future. We don't have any expensive hobbies or anything. But I kind of feel like we've been "hunkered down" for the last 20 years as we've raised our family. It's not that we've gone without things we needed, but we've watched plenty of friends and neighbors move to nicer homes, drive nicer cars, vacation in far away places, and all of that.

Identical situation here!!!

Looking at a Honda CRV. 10 years ago I would have bought the base model. This summer, going to get the EX-L (leather, etc.)

I have finally stopped giving a shit about how much we spend on groceries. It is basically the only thing we really spend on anyway.

My mother in law, in bad physical shape, laments about how they should have spent more when they were able.

I have my work review on Wed, and management is going to work with me on going to a 4 day week...

On little things here and there I am letting up on my frugal instincts...

Kriegsspiel wrote: ↑Mon Apr 19, 2021 10:08 am I think "trust fund babies" are more the result of bad parenting than having a trust fund.

It's hard to know what happens once significant money enters the picture. Especially for later generations that we won't be parenting.

Where to store gold, and what to leave for future generations, two cosmic questions which result from having more than you need. I guess this is a threadjack, so I'll leave it there.

Flyingpylon and Cortopassi, my answer is YES. Spend and enjoy it. Neither of you are going to endanger your futures.

I think the inflection point occurs when, after allowing for contingencies, you can tell that you are going to have enough at the end. However you define enough.

I Shrugged wrote: ↑Mon Apr 19, 2021 11:50 am

Kriegsspiel wrote: ↑Mon Apr 19, 2021 10:08 am I think "trust fund babies" are more the result of bad parenting than having a trust fund.

It's hard to know what happens once significant money enters the picture.

I didn't mean to imply there would be significant money involved

Love this thread!

I had a similar conversation with a friend of mine the other day. She has always been extremely frugal, but she's been starting to treat herself to things she wants - and she can certainly afford it, so why not. Maybe it has to do with getting older, or maybe it's the effect of a year of lockdowns and not a whole lot else to do. I'm pretty frugal compared to many people i know, but I certainly have my spendy moments which sometimes earn me a stern lecture.

This time, all she had to say was "The shroud has no pockets."

WiseOne wrote: ↑Tue Apr 27, 2021 9:25 pm "The shroud has no pockets."

Oh, that is visceral! Shivers.

Shouldn't be a factor.

Girl's clothes never have pockets.

WiseOne wrote: ↑Tue Apr 27, 2021 9:25 pm Love this thread!

I had a similar conversation with a friend of mine the other day. She has always been extremely frugal, but she's been starting to treat herself to things she wants - and she can certainly afford it, so why not. Maybe it has to do with getting older, or maybe it's the effect of a year of lockdowns and not a whole lot else to do. I'm pretty frugal compared to many people i know, but I certainly have my spendy moments which sometimes earn me a stern lecture.

This time, all she had to say was "The shroud has no pockets."

Very good. Puts things in perspective, doesn't it?