'Running out of money'?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills

'Running out of money'?

Postby mortal » Wed Feb 13, 2013 12:37 am

I constantly see people talk of the fear of "running out of money" in retirement. By the way the subject is discussed, you would think that the very instant the last cent drains from their 401k men in suits come in and drag them off to make soylent green.

I find it odd, because of the older friends and family I know who are 'retired' most of them live off social security (granted, we're talking about rural Alabama). It certainly isn't so bad that I would insist upon a SWR < 3% simply to ensure there is absolutely *no* chance of running out. After all, wbern noted in his work that planning for a success rate greater than 85% really only raises the likelihood that some unforeseen threat wipes you out.

I would much rather take a small chance of dying broke than a 100% chance of dying with a large estate. I mean really what's the worst that could happen?
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Re: 'Running out of money'?

Postby shel1 » Wed Feb 13, 2013 12:40 am

I have to go live with my kids.
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Re: 'Running out of money'?

Postby cheese_breath » Wed Feb 13, 2013 1:22 am

mortal wrote:I would much rather take a small chance of dying broke than a 100% chance of dying with a large estate.

To each his own, but my preference would be leaving a large estate. Going broke would mean I'd be a burden on my kids. On the other hand I wouldn't mind leaving something behind for them. My financial projections predict our investments should provide a comfortable living for my wife and I into our 90s. If we go earlier, so be it. I don't feel any pressure to get everything spent before I die. And I don't want to run out of money too early and rely on my children to support and house me.
Last edited by cheese_breath on Wed Feb 13, 2013 7:31 am, edited 1 time in total.
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Re: 'Running out of money'?

Postby jsl11 » Wed Feb 13, 2013 3:55 am

Most people become accustomed to a certain standard of living during their working years. I would think that most of them would like to continue that standard during retirement. However, they may or may not be able to do that financially. In either case, they will establish a retirement standard of living. The idea of keeping that standard of living, and then running out of resources and having to make a major life style reduction, is not looked upon favorably by many (most?) people. Living on only SS would be a major comedown and disappointment and is something most people would like to avoid if they can.
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Re: 'Running out of money'?

Postby Easy Rhino » Wed Feb 13, 2013 3:27 pm

This has irked Rick Ferri a few times, I've seen him advise a higher (dunno specifically how much) withdrawal rate, and then lower it if necessary.

It irks me too, having a portfolio with a very small chance of failing and a very large chance of leaving a large estate.

Another option is annuitizing sort of a base level of income, then go play roulette with the rest of the portfolio.
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Re: 'Running out of money'?

Postby cheese_breath » Wed Feb 13, 2013 3:42 pm

Easy Rhino wrote:This has irked Rick Ferri a few times, I've seen him advise a higher (dunno specifically how much) withdrawal rate, and then lower it if necessary.

Is this because it irks him, or because younger people are more active and may need a larger income to support their lifestyle than older people whose physical limitations restrict their activities?

Rick, chime in if you're out there.
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Re: 'Running out of money'?

Postby tyrion » Wed Feb 13, 2013 3:43 pm

I like to think of it in terms of 'required' expenses (insurance, property taxes, food, electricity, water, etc) and 'discretionary' expenses (restaurants, travel, etc).

I could live with some risk on the discretionary side, as long as the required expenses are provided for by social security or some other permanent mechanism.

The problem is, as you increase your withdrawl rate to avoid potentially leaving a large estate, you are increasing your standard of living to the point where some of your discretionary expenses will start to feel like required expenses.
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Re: 'Running out of money'?

Postby Mitchell777 » Wed Feb 13, 2013 4:24 pm

It is a very personal decision. I believe these issues get back to how much of a worrier you are. If you are comfortable with 85% chance of running out of money (for whatever those estimates are worth), then you get to retire earlier and enjoy your retirement with little worry. That's a good deal. I recall another post months ago where someone noted they would not be comfortable with 99% assurance. Most people are somewhere in the middle of those 2 numbers, but whatever you feel comfortable with is the answer I believe.
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Re: 'Running out of money'?

Postby EternalOptimist » Wed Feb 13, 2013 4:25 pm

mortal wrote:I constantly see people talk of the fear of "running out of money" in retirement. By the way the subject is discussed, you would think that the very instant the last cent drains from their 401k men in suits come in and drag them off to make soylent green.

I find it odd, because of the older friends and family I know who are 'retired' most of them live off social security (granted, we're talking about rural Alabama). It certainly isn't so bad that I would insist upon a SWR < 3% simply to ensure there is absolutely *no* chance of running out. After all, wbern noted in his work that planning for a success rate greater than 85% really only raises the likelihood that some unforeseen threat wipes you out.

I would much rather take a small chance of dying broke than a 100% chance of dying with a large estate. I mean really what's the worst that could happen?


I agree with you totally. It's kinda like the guy who read that most accidents happen within 5 miles of home, so he's never leaves the house :(
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Re: 'Running out of money'?

Postby hsv_climber » Wed Feb 13, 2013 4:38 pm

A few notes:

- It depends on how big are your friends SS check. If they've worked their entire lives at ~$30k / year jobs and retired at the age of 65-67 then SS checks would be only slightly less than their take home pay during working years. Many people on this forum make and spend much more than that, so SS check won't cover their expenses.

- When people are asking the question "Can I retire now?", they really mean "early retirement". And in that case, someone should account for less than 35 years of SS credits, longer withdrawal period, and many years prior SS and government provided healthcare insurance.

- It also should be noted, as indicated on wiki, people tend to spend more money earlier in retirement than later, since they tend to travel more while they still have the energy.
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Re: 'Running out of money'?

Postby Jay69 » Wed Feb 13, 2013 4:56 pm

When I go to eat at my favorite ma and pa breakfast place, I have had the same watress, cooks etc for 20 years. I'm sure they don't make a ton of cash and I have the feeling they will be happy on only SS.

To be honest, somtimes I think they may have the right idea, they just are happy people who seem to enjoy the job and I bet they LBYM. Is that life for every one, I'm sure not, but it does make you think if you trying to save to much and not enjoying enough!
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Re: 'Running out of money'?

Postby EternalOptimist » Wed Feb 13, 2013 4:58 pm

Jay69 wrote:When I go to eat at my favorite ma and pa breakfast place, I have had the same watress, cooks etc for 20 years. I'm sure they don't make a ton of cash and I have the feeling they will be happy on only SS.

To be honest, somtimes I think they may have the right idea, they just are happy people who seem to enjoy the job and I bet they LBYM. Is that life for every one, I'm sure not, but it does make you think if you trying to save to much and not enjoying enough!




Yep, sometimes life is not about money...the good things in life are free :wink:
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Re: 'Running out of money'?

Postby Skiffy » Wed Feb 13, 2013 6:41 pm

Seeing the in-laws trying to live on social security makes us save more! Car breaks down, no $$ to fix it; utilities go up, can't afford it-whoops heat gets turned off; medical costs go up every year; insurances go up every year. . you get the idea.

Just compare how much things cost 20 years ago when they retired and today, and you will not be in the camp of "living on SS" it is a spartan way to live and very depressing.
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Re: 'Running out of money'?

Postby cheese_breath » Thu Feb 14, 2013 1:11 am

Mitchell777 wrote:I recall another post months ago where someone noted they would not be comfortable with 99% assurance.

I suspect with some people it’s insecurity and wondering what will happen to them if they run out of money. But with others it may be wanting to assure they can provide for themselves rather than foisting that responsibility onto someone else in their old age.


Jay69 wrote:When I go to eat at my favorite ma and pa breakfast place, I have had the same watress, cooks etc for 20 years. I'm sure they don't make a ton of cash and I have the feeling they will be happy on only SS.

To be honest, somtimes I think they may have the right idea, they just are happy people who seem to enjoy the job and I bet they LBYM. Is that life for every one, I'm sure not, but it does make you think if you trying to save to much and not enjoying enough!

I wonder how happy they are when they’re not working and don’t have to be all perky and friendly to encourage the customers to tip more. Anyone want to quit his job and get one at one of these restaurants? Report back to us in about a year. I’d be interested in the results.


EternalOptimist wrote:Yep, sometimes life is not about money...the good things in life are free.

Ah, yes. The simple life. I remember it well. First job out of college. Living in a mobile home with my new wife. Watching TV on a used black & white TV we bought on credit because that’s all we could afford. A big night out maybe once a month was dinner at McDonalds and a movie. Trusting my car to hold out a little longer because I couldn’t afford another one. Good times. NOT! Fortunately I got some good raises and was able to leave the simple life behind in a couple years and was actually able to buy some things I wanted. I have no desire to return to a life where the good things are free, and I can’t afford the others.
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Re: 'Running out of money'?

Postby reggiesimpson » Thu Feb 14, 2013 9:29 am

cheese_breath wrote:
Mitchell777 wrote:I recall another post months ago where someone noted they would not be comfortable with 99% assurance.

I suspect with some people it’s insecurity and wondering what will happen to them if they run out of money. But with others it may be wanting to assure they can provide for themselves rather than foisting that responsibility onto someone else in their old age.


Jay69 wrote:When I go to eat at my favorite ma and pa breakfast place, I have had the same watress, cooks etc for 20 years. I'm sure they don't make a ton of cash and I have the feeling they will be happy on only SS.

To be honest, somtimes I think they may have the right idea, they just are happy people who seem to enjoy the job and I bet they LBYM. Is that life for every one, I'm sure not, but it does make you think if you trying to save to much and not enjoying enough!

I wonder how happy they are when they’re not working and don’t have to be all perky and friendly to encourage the customers to tip more. Anyone want to quit his job and get one at one of these restaurants? Report back to us in about a year. I’d be interested in the results.


EternalOptimist wrote:Yep, sometimes life is not about money...the good things in life are free.

Ah, yes. The simple life. I remember it well. First job out of college. Living in a mobile home with my new wife. Watching TV on a used black & white TV we bought on credit because that’s all we could afford. A big night out maybe once a month was dinner at McDonalds and a movie. Trusting my car to hold out a little longer because I couldn’t afford another one. Good times. NOT! Fortunately I got some good raises and was able to leave the simple life behind in a couple years and was actually able to buy some things I wanted. I have no desire to return to a life where the good things are free, and I can’t afford the others.

+1. I've been poor and i've been rich. I prefer rich "Make so much money it doesnt matter".........still my favorite saying after all these years.
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