Emotional impact of spending down assets?

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Re: Emotional impact of spending down assets?

Post by friar1610 » Thu Oct 26, 2017 3:54 pm

Sandtrap wrote:
Thu Oct 26, 2017 9:40 am
Sheepdog wrote:
Thu Oct 26, 2017 9:30 am
This conversation may really be of value for some. Interesting that there is a discussion. At retirement I worried about what would happen if we spent down our assets too early. As an 84 year old married to a 77 year young lady some of your comments fit us.
We have not changed our spending habits....still careful where and how much we spend on things, but we don't hold back. Frugal sometimes, but that is our nature. The only thing missing today are long flights because it is painful sometimes for my spouse, but not because of money. We did all we wanted to do. We hit retirement 19 years ago with $640,000 for us to live on along with SS. My wife decided that we will not move away from this low cost of living town. Dadgummit, I wanted to be a snowbird!!!! We have over 50% more today and it is growing; and half of that time we were and are still invested with only 22 to 23% stocks. We keep up a nice home and property. We never hire anyone to do anything maintenance wise. except re roofing and rare major kitchen and bath remodeling, not because we are cheap, but because we never have. I like to do those things including painting, landscaping and snow removal, so I don't want to give them up. Even though I started worrying about running out of money, that worry has been gone, at least after 2009 :wink: . We spend a good amount at nice restaurants, professional football, concerts and theater virtually every week. Our last big vacation was 2 years ago on a luxury 2 week cruise in the Western Caribbean, but that will probably be our last one because it is difficult for my spouse's mobility. We still do and will domestically. (I drove over 1500 miles two weeks ago for fall color viewing in Wisconsin, for example.) We are giving away a lot more to charities. Our 2 sons won't take anything, they really won't.
When this retirement journey started I was very worried that I may not be able to manage our money. Of course, I worried about "spending down". Thank you Diehards and Bogleheads, we did it. There is a good possibility that our home and other physical assets plus investments will be given to worthy causes. (And our sons will get some whether they want it or not. :happy )
I will admit that I watch our account balances every day and I never guessed that spending and giving away all we wanted to there was a possibility of having increased assets after these many years.
I leave the worrying to those of you yet to start your journey
Thanks for sharing, "Sheepdog"
How inspiring.
Just keep shining that light so I can see the path to follow. . . . .
J :D

+ 1

Sorta like the octagenarians I see at the gym and I think to myself, "That's the way I want to be if I live that long." Same goes with Sheepdog and his story! Thank you (from a septuagenarian.)
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Re: Emotional impact of spending down assets?

Post by blueblock » Thu Oct 26, 2017 6:50 pm

RobertonMIA wrote:
Wed Oct 25, 2017 9:15 pm
I don't really know how my octogenarian self would feel, finding himself on that trajectory, to which I had committed him during my 60s and 70s. I wonder what thoughts or experiences people have about this.
I'm 65 and have been retired two and a half years.

What I'm not seeing in the responses so far—but maybe I missed it/them?—is that it's not like you cannot make changes to your trajectory once you retire. Me, I do not feel committed to any one course and will make adjustments as needed as time goes by. This is in addition to incrementally reducing my exposure to equities as I approach my 70s and 80s. I also like hefty buffers in taxable and Roth, which I have no plans to use otherwise. Additionally, I have 2-3 years' living expenses in cash, so it's not like any ugly market swings are going to affect me unless they are sustained, and if so I have plenty of room in my budget for expense cutting and time to implement those.

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Re: Emotional impact of spending down assets?

Post by cherijoh » Thu Oct 26, 2017 7:55 pm

Sheepdog wrote:
Thu Oct 26, 2017 9:43 am
Ron Scott, Sandtrap, et al....give it up on helping your octogenarians. We in our 80s and 90s are The Depression era kids. We will do what we want to do, when we want to do it, if we want to do it, and do it cheaply if we do it at all.
My mom has been gone 11 years and this thread really makes me think of her - she passed at age 83 and the depression definitely had a huge impact on her view of spending money. She didn't scrimp on stuff like food, books, or everyday items but she was always a bargain hunter and lifetime coupon clipper. My dad was an avid gardener and growing up we canned a lot of produce every summer, which really helped with the food bills.

After we lost my dad, she was fortunate to be able to cover her everyday expenses with a combination of the survivor benefit from my dad's pension, SS and RMDs from a small IRA. The house was paid off and there was also a decent nest egg of taxable investments. Despite our encouragement to spend the money, she was very resistant to dipping into the taxable investment account - she considered that my brother's and my inheritance. IIRC, she was even reinvesting capital gains and dividends so the funds had an opportunity to grow.

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Re: Emotional impact of spending down assets?

Post by Johnnie » Thu Oct 26, 2017 8:15 pm

I'm three years out from retirement. It makes me happy to have a respectable portfolio, and I would be unhappy without one, even with mortality looming. However, "respectable" is a relative term. If I were worth half as much at age 85 as at 65 that would probably be good enough.

I also look forward to leaving a respectable legacy, but again that's a relative term. Leaving fond memories behind is good enough, I don't feel any duty to change lives.

As for end of life expenses, I was very impressed by the arguments Zeke Emmanuel made in an Atlantic Monthly article titled "Why I Hope to Die at 75" - except for one detail that everyone I have talked to about this agrees with: 75 is too young. My number is 85, and I don't "hope" to die then. I just hope when the first bad diagnosis arrives to have the courage to say to say, "I have lived enough, that is all," without a lot of fuss and agony. It has just always seemed to me like a such huge waste to pour so much into getting so little at that point.

Family history also suggests that's prudent, with one caveat: If over the next 20 years there are any really dramatic extensions to the period of relatively vigorous old age I might not want to miss the boat, but I suspect changes in that arena to be incremental not revolutionary.
Last edited by Johnnie on Thu Oct 26, 2017 8:24 pm, edited 7 times in total.
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Re: Emotional impact of spending down assets?

Post by Johnnie » Thu Oct 26, 2017 8:16 pm

Oops - dupe.
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Re: Emotional impact of spending down assets?

Post by Wildebeest » Thu Oct 26, 2017 8:24 pm

I think at one point might I realize I will not live forever. When that happens, I might feel It is great to spend down assets.

Till that time it I would like to accumulate assets to leave it to it to a worthwhile cause.
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Re: Emotional impact of spending down assets?

Post by finite_difference » Thu Oct 26, 2017 8:31 pm

Taylor Larimore wrote:
Wed Oct 25, 2017 10:06 pm
RobertonMIA wrote:
Wed Oct 25, 2017 9:15 pm
Say you are at the point of retiring and have respectable life savings in a well-designed portfolio, plus a modest pension including subsidized health insurance, a SPIA, and a LTC policy. You anticipate deferring Social Security to age 70. You have no legacy motive. You would not be able to live as you'd like to based only on your pension, SS, annuity, and investment income, so you make a plan to methodically spend down your investment assets to zero over 30-35 years, probably giving you a buffer of several years at the end of your anticipated lifespan.

You arrive in your early to mid-80s. Your formulas and forecasts were accurate, you have executed the plan with discipline, and the liquidation of your assets is proceeding on its intended path toward zero. You don't really expect to outlive your savings, and even if you did it would not be truly catastrophic because of the pension, SS, and annuity.

So far, so good. And yet: do people sometimes experience unhappiness from seeing their nest egg dwindle towards nothing, even though that is exactly what their retirement-planning selves intended? Perhaps along the lines of "for much of my life I was a person with a fair amount of money, but no more," or "my shrinking portfolio is a depressing reminder of my mortality?" The thoughts might not be fully rational, and might not be consistent with prior world-views, but I imagine they could feel very real, especially in combination with other burdens of aging. Is such an emotional consideration a factor that should be planned for, and perhaps an argument against a complete liquidation strategy, even at the cost of working longer or resolving to live more modestly in retirement?

I find it easy to say at my age, "My Vanguard balance is not intrinsically important to me and I'd be happy to die having systematically spent all my investment assets," but I don't really know how my octogenarian self would feel, finding himself on that trajectory, to which I had committed him during my 60s and 70s. I wonder what thoughts or experiences people have about this.
RobertonMIA:

My personal and financial situation is similar to what you describe. It is, indeed, mentally difficult to change direction from increasing net worth to reducing net worth. In fact, most of the old people I have known ended up giving a large part of their life-savings to attorney's, taxes, and heirs who no longer need the inheritance.

When my wife of 62 years died 4 years ago, and I had no more financial concern for her, I began giving a substantial portion of my savings to my heirs and charity. It is, indeed, a bit disconcerting to see my savings dwindle, but I know deep down the savings are no longer needed.

The pleasure of giving my heirs their inheritance now, and the pleasure of being able to give more to charity (and bigger tips for good service) brings me inner happiness--like donating the royalties from my new book to The John C Bogle Center for Financial Literacy.

If things work perfectly, my bank balance and last check will go to the undertaker.

Best wishes
Taylor
I can’t help but feel Taylor’s way of thinking is psychologically correct.

It is not helpful to be overly attached to money, since then your happiness depends upon it.

I think having enough of an income stream (SS+SPIAs, etc.) would help a lot so you don’t have to worry about running out though. Then it doesn’t matter if you spend it all down!

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Re: Emotional impact of spending down assets?

Post by Taylor Larimore » Thu Oct 26, 2017 8:48 pm

I think having enough of an income stream (SS+SPIAs, etc.) would help a lot so you don’t have to worry about running out though. Then it doesn’t matter if you spend it all down!
finite_difference:

I agree. My wife and I bought two immediate life-income annuities {SPIAs} in our early 80s. It has proven to be a great investment/insurance. This guaranteed income allows us to spend whatever we want and/or give the rest to our heirs and charity now without worrying about running out of money.

Best wishes.
Taylor
Last edited by Taylor Larimore on Thu Oct 26, 2017 9:27 pm, edited 1 time in total.
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Re: Emotional impact of spending down assets?

Post by itstoomuch » Thu Oct 26, 2017 9:19 pm

I/we constructed our retirement for Income and not on assets with a inflation/deflation buffer.
Ultimately your Index has to return to you Income by selling off or by taking interest/dividends/capgains. This assumes that you are taking the risk in the management of the assets.
Re-think it.
YMMV
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Emotional impact of spending down assets?

Post by itstoomuch » Thu Oct 26, 2017 9:25 pm

Taylor Latimore wrote:I agree. My wife and I bought two immediate life-income annuities {SPIAs} in our early 80s. It has proven to be a great investment/insurance. This guaranteed income allows us to spend whatever we want or give to our heirs and charity our remaining investments now without worrying about running out of money.
We were too young to buy SPIA in 2008 and realized that interest rates would decline causing SPIA's to have lower yields.
We did the next best hedge annuity option and bought GLWB's .
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Emotional impact of spending down assets?

Post by rgs92 » Thu Oct 26, 2017 9:58 pm

I like the idea of having a "floor" of income for the rest of my life (well, both of us considering my wife and me).
That's how I deal with living without a salary emotionally. There should always be a decent amount of money coming in, a foundation, to prevent Armageddon.

I like the OP's question. It's very central to the idea of risk tolerance.

With an income for life, net worth, assets, and your retirement balance become more of a theoretical thing, a floating number that is not immediately relevant, kind of like your retirement balance number when you are working and still in your accumulation phase.

So back when interest rate were higher, I bought a series of SPIAs (5 of them over a 5 year span), all lifetime ones.
Plus, we both took our cash balance plans as single life annuities, and a severance payment as yet another.

So we have 8 of these things coming in for life (most as single lifers). It adds up to six figures a year (all non-COLA'd though).
A couple of social security streams down the road (someday, maybe at FRA or somewhat earlier) will add up to 10 streams, maybe around $150K a year total.

I may even convert some more segments of our leftover 401Ks (about a 60/40 stock/bond allocation) to these also.

I know the arguments against fixed annuities (losing control, no inflation protection, no legacy, and more), but I *need to know* there is a substantial guaranteed inflow as long as I live in order to relax.

[Neither of us ever made a whole lot of money, just mid-level corporate salaries in the $25K - $90K range with a few layoffs too and long periods of unemployment, so this seems to work even if you are not in a very high income bracket and do some diligent saving and investing, and you don't even have to be super-frugal (we are only moderately frugal.) ]

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Re: Emotional impact of spending down assets?

Post by Sandtrap » Fri Oct 27, 2017 12:07 am

itstoomuch wrote:
Thu Oct 26, 2017 9:19 pm
I/we constructed our retirement for Income and not on assets with a inflation/deflation buffer :?: .
Ultimately your Index has to return to you Income by selling off or by taking interest/dividends/capgains. This assumes that you are taking the risk in the management of the assets.
Re-think it.
YMMV
please explain. :?:
thanks :D
j

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Re: Emotional impact of spending down assets?

Post by itstoomuch » Fri Oct 27, 2017 12:16 am

^See Bobcat2's "Funding Ratio" on this forum's Google search
Pretty simple. Essentially a "cap rate"
I designed income streams. see descriptions in signature line below.
YMMV.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Emotional impact of spending down assets?

Post by Gnirk » Fri Oct 27, 2017 1:25 am

My parents were children of the Great Depression. My parents put savings first and lived below their means. Mom bought everything from thrift stores. Long story short, she was able to amass a multi-million dollar portfolio, plus had my dad’s cola’d Police retirement, her very small retirement, and her small SS ( dad paid 10% of his salary into his retirement system, and none to SS),.totaling a bit over $70,000 per year. She had no debts, LCTI, and lived on $20,000 per year. She always had a fear of outliving her money.

Because of that fear, she not only didn’t spend down her assets, she continually added to them. Many would say she didn’t enjoy her money. And perhaps according to other people’s ideas of enjoying your money, she didn’t.

But I think she lived her life exactly how she wanted, until she started having memory problems, and subsequently suffered from Alzheimer’s for 12 years. Her LTCI, retirement income, and investment portfolio allowed her to have the best care possible for the 8 years she required care.

And now I find I’m a bit like my mom......I don’t want to spend down my assets, either. Just in case......

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Re: Emotional impact of spending down assets?

Post by SpaceCowboy » Fri Oct 27, 2017 1:49 am

msk wrote:
Thu Oct 26, 2017 4:43 am
Those who live beneath their means continue to do so, indefinitely. In retirement their NW will go up, not down. 18 years after retiring I console myself that my standard of living is in the top 1%, perhaps even 0.1% and I'll leave whatever is left to my offspring.
When my Mom hit 90, I was finally able to get her to increase her withdrawal rate from 2% to 3%. People are shaped by their experiences. She remembers the hyper inflation of WWII and feels the need for a large cash buffer. She never has spent money foolishly and is certainly not going to start now.

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Re: Emotional impact of spending down assets?

Post by goblue100 » Fri Oct 27, 2017 7:46 am

itstoomuch wrote:
Fri Oct 27, 2017 12:16 am
^See Bobcat2's "Funding Ratio" on this forum's Google search
Pretty simple. Essentially a "cap rate"
I designed income streams. see descriptions in signature line below.
YMMV.
I took your search advice, the formula is a little complex and I will be studying it more and calculating out my own positions and see if my assumptions fit the math.
for anyone else here is the link:
viewtopic.php?t=205824

From a little later in the thread, I think this post from Bobcat2 and the quote from Robert Merton sort of hits at what OP was talking about. How to prevent keeping the investment account from being the end goal, rather than a means to an end.

"Here Robert Merton discusses what's wrong with picking a portfolio level at retirement, instead of income in retirement, as the retirement goal.
The issue here is a confusion of means and ends. Of course, you need a pot of money to buy a retirement income, but the pot is the means to an end, not the end itself. Confusing the two can lead to costly mistakes. The size of the pot measured in wealth terms is not sufficient to tell one how much retirement income the pot produces. That depends on interest and longevity rates. Yet, common practice in the industry is to think
of a DC pension account purely as a means to accumulate assets, not as a means to achieve an income goal. Consequently, most DC schemes are
designed and operated as investment accounts, and member communication is entirely framed in terms of assets and returns. Indeed required
disclosures focus on value changes and not changes in income. The income that the member will need to maintain his lifestyle when he finishes
working is almost an afterthought that is only considered in any depth at the eleventh hour.
The funding ratio frames the retirement issue on the appropriate goal - retirement income."
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

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Re: Emotional impact of spending down assets?

Post by Dandy » Fri Oct 27, 2017 8:37 am

Oh I can relate to that feeling even though I'm not at that point yet. It is emotional but logical. You spend a life time of saving and living somewhat frugally and have had decades of seeing your nest egg grow. Then at a certain age you find your asset level very depleted and see that there aren't as many Springs left.

I am not at that point but shortly will be taking my first RMD. While portfolio growth might delay the year over year drop in nest egg value it will be hard to adjust to know that it has peaked. It seems to be a tipping point for more than the decline in nest egg but also the idea of declining health, sharpness, and life span. I get a sense of that and am not quite 70. I can imagine that can deepen as time goes on.

I am fortunate to feel I have "enough' and have decided to try to enjoy the decline(s) by starting a program of gifting a large portion of my RMD to my children for "early inheritance". I want to see them enjoy some of the fruits of my good fortune while I am alive and while their financial needs are a challenge. I'm hoping this takes the focus away from has my nest egg reached a new high to something more positive.

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Re: Emotional impact of spending down assets?

Post by Sandtrap » Fri Oct 27, 2017 9:32 am

itstoomuch wrote:
Fri Oct 27, 2017 12:16 am
^See Bobcat2's "Funding Ratio" on this forum's Google search
Pretty simple. Essentially a "cap rate"
I designed income streams. see descriptions in signature line below.
YMMV.
Thanks for the link, "itstoomuch".
^See Bobcat2's "Funding Ratio"viewtopic.php?t=205824
This makes a strong case for diversification and/or preservation of multiple income streams going into and through retirement as you have done. Also perhaps, strongly supports the use of SPIA's, etc, to add to those income streams where needed.

I can see where focusing on the "funding ration" vs focusing on the total, IE 25x, etc. might lesson the emotional impact of spending down assets.
Is this correct?
mahalo
j :D

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Re: Emotional impact of spending down assets?

Post by itstoomuch » Fri Oct 27, 2017 9:53 am

^Yes.
In many ways, the funding ratio vs S/B asset allocation growth is a how a LL views his assets: cap rate vs property asset appreciation.
ymmv
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Emotional impact of spending down assets?

Post by RobertonMIA » Fri Oct 27, 2017 10:01 am

The continuing responses to my inquiry provide so much food for thought. I sincerely appreciate all of them!

RobertonMIA

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Re: Emotional impact of spending down assets?

Post by gd » Fri Oct 27, 2017 10:06 am

Ron Scott wrote:
Thu Oct 26, 2017 7:15 am
Mom is a young 85. Quick witted/intelligent, friendly, good shape, cooks every day, still drives, got the dog, etc. Lives in a nice place, new car, always smiling.
Mom, why are you trying to live like a pauper?
You don't understand.
I don't either. Nice place, new car doesn't sound like living like a pauper. As people get old, they often get tired of chasing stuff and experiences that appeal to younger people. My elderly parent also seems to have adopted frugality as a bit of a hobby, as other interests become impractical and their life narrows. They also seem to live more vicariously in x-children, and passing money on facilitates and justifies that.

The OP is another of several arguments for putting significant percentages into annuities if appropriate, even if it isn't the optimal wealth strategy for a hobbyist investor.

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Re: Emotional impact of spending down assets?

Post by Toons » Fri Oct 27, 2017 10:06 am

protagonist wrote:
Thu Oct 26, 2017 11:43 am
Interesting question.

I'm happy to see somebody addressing the emotional component of financial decisions. Too often I see discussions focusing only on dollars and cents, ignoring, for example, the emotional value of financial freedom when you pay off your debts, or of simplifying your portfolio, or of where you would be happiest living or working rather than just where you will save the most money.

I think the emotional impact of spending down assets will vary widely, depending upon your personality and the impact spending more will have on your happiness. If you are perfectly content with your lifestyle and would not be much happier if you had more, then spending down your assets beyond what is necessary would seem pointless to you. Perhaps you should have retired sooner and not bothered saving so much, but now that is water under the bridge, so be happy leaving a rich legacy to your heirs. On the other hand, if there are things you want in life that you have deprived yourself of in the past and you know you can afford them, go for it while you still have the chance.

Just my two cents....

:thumbsup :happy
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Re: Emotional impact of spending down assets?

Post by bobcat2 » Fri Oct 27, 2017 10:23 am

goblue100 wrote:
Fri Oct 27, 2017 7:46 am
itstoomuch wrote:
Fri Oct 27, 2017 12:16 am
^See Bobcat2's "Funding Ratio" on this forum's Google search
Pretty simple. Essentially a "cap rate"
I designed income streams. see descriptions in signature line below.
YMMV.
I took your search advice, the formula is a little complex and I will be studying it more and calculating out my own positions and see if my assumptions fit the math.
for anyone else here is the link:
viewtopic.php?t=205824
Forget the formula in the above link. See my later post using the price of a real annuity in the denominator of the funded ratio.
viewtopic.php?f=10&t=219878&hilit=funded+ratio

While people can do this on their own, it requires some knowledge of finance and economics and can become somewhat complicated when we are dealing with couples. The larger point is that DC retirement savings plans should be reporting the funded ratio to plan participants on a regular basis, but they are not doing that. All they would need from the participant is when the participant plans to retire and the level of retirement income the participant is targeting.

BobK aka Bobcat2
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.

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Re: Emotional impact of spending down assets?

Post by GerryL » Fri Oct 27, 2017 10:44 am

From this discussion it seems there is a continuum of "spending down assets." At one end is (1) the urge to continue to save and build principle after wage income stops. Then there is (2) living on interest and dividend, never touching principle. Next is (3) occasionally tapping principle as needed or to finance a splurge. And finally, the YOLO mode of (4) planning to spend everything, with the final dollar going to pay the undertaker.

Along this continuum, I hope to inhabit the area around #3, enjoying my financial good fortune and not dreading the natural decline of my net worth, but not spending for spending's sake. That's what works for me, but others will choose their own position.

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Re: Emotional impact of spending down assets?

Post by technovelist » Fri Oct 27, 2017 11:05 am

I can comment on this from the perspective of two generations.

First, my situation. My wife and I are both in our late 60's and are currently retired.

We are taking about $2000/month out of savings, which when added to our $3000/month joint SS payment, meets our needs with a bit left over in most months.

At that rate, with very conservative assumptions, we should have enough money until our 90th %tile life expectancy, which is about age 99 for both of us. I guess we can always go out and get a job at age 100 if we run out. :mrgreen:

But in the meantime I'm not worried about using up savings at the rate we are consuming them.

Now as for my mother, who is in her early 90's, she is spending about $2000 a month out of savings, and has enough to last until she is 110 before having to dip into what she is planning to leave us.

But she is still concerned about her old age. :confused
In theory, theory and practice are identical. In practice, they often differ.

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Re: Emotional impact of spending down assets?

Post by goblue100 » Fri Oct 27, 2017 11:12 am

Thanks BobK, I will check out the updated link.
GerryL wrote:
Fri Oct 27, 2017 10:44 am
From this discussion it seems there is a continuum of "spending down assets." At one end is (1) the urge to continue to save and build principle after wage income stops. Then there is (2) living on interest and dividend, never touching principle. Next is (3) occasionally tapping principle as needed or to finance a splurge. And finally, the YOLO mode of (4) planning to spend everything, with the final dollar going to pay the undertaker.

Along this continuum, I hope to inhabit the area around #3, enjoying my financial good fortune and not dreading the natural decline of my net worth, but not spending for spending's sake. That's what works for me, but others will choose their own position.
Don't wish to speak for the OP, or hijack his thread, but for me the issue is
A: where do I want to be on your 4 scale (which I like). For me, it's about a 3.5. I'd like to leave some sort of an estate for my daughter but not million(s).
B: Knowing I wish to be 3.5, how do I avoid living like a 1 or a 2?
C: How do I avoid living like a 5, :shock: and avoid running out of money before the end?

Posting in this thread has helped organize my own thinking and wishes.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

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Re: Emotional impact of spending down assets?

Post by Sandtrap » Fri Oct 27, 2017 1:57 pm

itstoomuch wrote:
Fri Oct 27, 2017 9:53 am
^Yes.
In many ways, the funding ratio vs S/B asset allocation growth is a how a LL views his assets: cap rate vs property asset appreciation.
ymmv
Perfect.
Thanks.
j :D

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Re: Emotional impact of spending down assets?

Post by vested1 » Fri Oct 27, 2017 2:00 pm

KlingKlang wrote:
Thu Oct 26, 2017 12:14 pm
vested1 wrote:
Thu Oct 26, 2017 8:57 am
My MIL turned 94 last Saturday. She spent all of her moderate savings, around 250k, on the skilled nursing facility she resides in, and is now on Medicaid. None of her income was protected by COLA, other than SS, and it all goes to the facility with Medicaid paying the rest. She is under the impression that she still has savings that will go to her children, a belief we don't disabuse her of. It gives her some peace thinking that she will help provide for her children, even after death, which may be ten years off due to her relative good health, other than being immobile and blind.

I'd like to think that neither my wife nor I will ever be in that position
What's really so bad about being in that position?

My great-grandmother (b. 1886 - d. 1985) moved out of her house into her daughters' homes immediately after her husband died in 1945 because that was what women had children for - to take care of them after they were widowed. Only 4 of her 8 daughters would rotate taking care of her which made for some amazing family fights. Finally when her septuagenarian daughters could no longer care for her she was placed in a nursing home paid for by Medicaid. For forty years she had a clean bed, never missed a meal, and had no real concerns. She certainly didn't care about leaving anything to her descendants.
This is off topic, but in my opinion, there is a lot more to life than a clean bed and regular meals. You can pretty much get that in prison. Having seen and experienced both sides of this, I can truthfully say that "that position" is not enviable. It is also not a goal for us to die penniless, and while I would like to leave my children something, we will spend it if it needs to be spent.

My parents both lived into their 90's and never went into assisted living, although they probably should have. My sisters, both retired and in their 70's at the time moved in with them and acted as caregivers for the last 4 years of my parent's lives. My brother and I, who were still working, traveled the hundreds of miles most weekends to help out. Our parents left us nothing, as expected, since they never had much of anything, even dying with a mortgage. I don't wish that on my children or myself if I ever get to that advanced age and disability.

My 94 year old MIL refused to move in with us in her 80's, even though we offered repeatedly, and none of the other siblings even offered. She got to a point where we couldn't care for her anyway, and after repeated falls which threatened her life, entered the assisted living facility, which eventually became skilled nursing for her. She is completely immobile, unable to walk, and blind. My wife visits every day for three years now, and we handle all of her financial/medical issues with my wife having full POA duties. Once again, I wouldn't wish that on my children or my wife if she would ever get to that advanced age and disability.

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Re: Emotional impact of spending down assets?

Post by KlingKlang » Fri Oct 27, 2017 2:45 pm

vested1 wrote:
Fri Oct 27, 2017 2:00 pm
KlingKlang wrote:
Thu Oct 26, 2017 12:14 pm
vested1 wrote:
Thu Oct 26, 2017 8:57 am
My MIL turned 94 last Saturday. She spent all of her moderate savings, around 250k, on the skilled nursing facility she resides in, and is now on Medicaid. None of her income was protected by COLA, other than SS, and it all goes to the facility with Medicaid paying the rest. She is under the impression that she still has savings that will go to her children, a belief we don't disabuse her of. It gives her some peace thinking that she will help provide for her children, even after death, which may be ten years off due to her relative good health, other than being immobile and blind.

I'd like to think that neither my wife nor I will ever be in that position
What's really so bad about being in that position?

My great-grandmother (b. 1886 - d. 1985) moved out of her house into her daughters' homes immediately after her husband died in 1945 because that was what women had children for - to take care of them after they were widowed. Only 4 of her 8 daughters would rotate taking care of her which made for some amazing family fights. Finally when her septuagenarian daughters could no longer care for her she was placed in a nursing home paid for by Medicaid. For forty years she had a clean bed, never missed a meal, and had no real concerns. She certainly didn't care about leaving anything to her descendants.
This is off topic, but in my opinion, there is a lot more to life than a clean bed and regular meals. You can pretty much get that in prison. Having seen and experienced both sides of this, I can truthfully say that "that position" is not enviable. It is also not a goal for us to die penniless, and while I would like to leave my children something, we will spend it if it needs to be spent.

My parents both lived into their 90's and never went into assisted living, although they probably should have. My sisters, both retired and in their 70's at the time moved in with them and acted as caregivers for the last 4 years of my parent's lives. My brother and I, who were still working, traveled the hundreds of miles most weekends to help out. Our parents left us nothing, as expected, since they never had much of anything, even dying with a mortgage. I don't wish that on my children or myself if I ever get to that advanced age and disability.

My 94 year old MIL refused to move in with us in her 80's, even though we offered repeatedly, and none of the other siblings even offered. She got to a point where we couldn't care for her anyway, and after repeated falls which threatened her life, entered the assisted living facility, which eventually became skilled nursing for her. She is completely immobile, unable to walk, and blind. My wife visits every day for three years now, and we handle all of her financial/medical issues with my wife having full POA duties. Once again, I wouldn't wish that on my children or my wife if she would ever get to that advanced age and disability.
I'm still sorting out my reactions to vested1's response. For an illiterate woman born to indentured servants in Poland in the 19th century a clean bed and regular meals would pretty much qualify as heaven.

Moving up to the current era, my wife and I both have 90 year old mothers who insist on living in their own homes. They are both stupid, selfish, and insanely cheap - basically they think that they should get everything for free (that includes begging food from their neighbors). Obviously they hate each other. My mother is a lifetime alcoholic with a taste for prescription pain killers. She has had seven falls in the last two years, she thinks that a couple of nights in the emergency room followed by a couple of weeks in a nursing home is a nice diversion. Both of them have the "I want to die in my own home" philosophy. Neither of them consider imposing on their children to be wrong, that's what you have children for.
Last edited by KlingKlang on Sat Oct 28, 2017 8:40 am, edited 1 time in total.

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Re: Emotional impact of spending down assets?

Post by Sandtrap » Fri Oct 27, 2017 3:50 pm

GerryL wrote:
Fri Oct 27, 2017 10:44 am
From this discussion it seems there is a continuum of "spending down assets." At one end is (1) the urge to continue to save and build principle after wage income stops. Then there is (2) living on interest and dividend, never touching principle. Next is (3) occasionally tapping principle as needed or to finance a splurge. And finally, the YOLO mode of (4) planning to spend everything, with the final dollar going to pay the undertaker.

Along this continuum, I hope to inhabit the area around #3, enjoying my financial good fortune and not dreading the natural decline of my net worth, but not spending for spending's sake. That's what works for me, but others will choose their own position.
#1 and #2 for me. #3 and #4 is going to take time.
What is "YOLO mode"?

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Re: Emotional impact of spending down assets?

Post by tennisplyr » Fri Oct 27, 2017 3:59 pm

When you're a saver, you are a saver. Just because you are in your later years I wouldn't expect that mentality/behavior to change very much. I'm not in that situation yet, but I love being a cheapskate!
Those who move forward with a happy spirit will find that things always work out.

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Re: Emotional impact of spending down assets?

Post by mptfan » Fri Oct 27, 2017 4:11 pm

MrDogg wrote:
Thu Oct 26, 2017 8:05 am
On a lighter note: My lawyer friend Larry says his goal is to die a million dollars in debt. That way he will have gotten a million more dollars out of life than he put into it.
This is flawed logic because if you live a life with debt you are paying interest throughout the years on all that debt, and for many people, the amount of interest paid on debt throughout their lives adds up to more than the principal amount of the debt itself.

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Re: Emotional impact of spending down assets?

Post by GerryL » Fri Oct 27, 2017 4:57 pm

Sandtrap wrote:
Fri Oct 27, 2017 3:50 pm
What is "YOLO mode"?
You Only Live Once

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Re: Emotional impact of spending down assets?

Post by drzzzzz » Fri Oct 27, 2017 6:36 pm

A financial advisor that I have used in the past argues that people are divided into savers and spenders and most of the individuals who are on this thread are likely savers and will try to continue to be during retirement - somewhat explaining the angst they have when they see assets going down during retirement. They are intrinsically wired to understand that they should go down, but emotionally it goes against their past behavior.

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Re: Emotional impact of spending down assets?

Post by Sandtrap » Fri Oct 27, 2017 11:42 pm

drzzzzz wrote:
Fri Oct 27, 2017 6:36 pm
A financial advisor that I have used in the past argues that people are divided into savers and spenders and most of the individuals who are on this thread are likely savers and will try to continue to be during retirement - somewhat explaining the angst they have when they see assets going down during retirement. They are intrinsically wired to understand that they should go down, but emotionally it goes against their past behavior.
Well said. Absolutely true it seems. Diehard Savers vs Diehard Spenders? :shock:

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Re: Emotional impact of spending down assets?

Post by Sheepdog » Sat Oct 28, 2017 1:52 pm

drzzzzz wrote:
Fri Oct 27, 2017 6:36 pm
A financial advisor that I have used in the past argues that people are divided into savers and spenders and most of the individuals who are on this thread are likely savers and will try to continue to be during retirement - somewhat explaining the angst they have when they see assets going down during retirement. They are intrinsically wired to understand that they should go down, but emotionally it goes against their past behavior.
ds
That fits me, "savers" that is, I'm afraid. "Better safe than sorry" must be our motto, I guess.
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

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Re: Emotional impact of spending down assets?

Post by LK2012 » Sat Oct 28, 2017 4:34 pm

KlingKlang wrote:
Fri Oct 27, 2017 2:45 pm

I'm still sorting out my reactions to vested1's response. For an illiterate woman born to indentured servants in Poland in the 19th century a clean bed and regular meals would pretty much qualify as heaven.

Moving up to the current era, my wife and I both have 90 year old mothers who insist on living in their own homes. They are both stupid, selfish, and insanely cheap - basically they think that they should get everything for free (that includes begging food from their neighbors). Obviously they hate each other. My mother is a lifetime alcoholic with a taste for prescription pain killers. She has had seven falls in the last two years, she thinks that a couple of nights in the emergency room followed by a couple of weeks in a nursing home is a nice diversion. Both of them have the "I want to die in my own home" philosophy. Neither of them consider imposing on their children to be wrong, that's what you have children for.
KlingKlang, that sounds extremely stressful. Ugh! Best of luck to you, your wife, and your family in enduring this situation. It puts a terrible emotional - and surely financial - burden on you.

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Re: Emotional impact of spending down assets?

Post by vested1 » Sun Oct 29, 2017 9:03 am

LK2012 wrote:
Sat Oct 28, 2017 4:34 pm
KlingKlang wrote:
Fri Oct 27, 2017 2:45 pm

I'm still sorting out my reactions to vested1's response. For an illiterate woman born to indentured servants in Poland in the 19th century a clean bed and regular meals would pretty much qualify as heaven.

Moving up to the current era, my wife and I both have 90 year old mothers who insist on living in their own homes. They are both stupid, selfish, and insanely cheap - basically they think that they should get everything for free (that includes begging food from their neighbors). Obviously they hate each other. My mother is a lifetime alcoholic with a taste for prescription pain killers. She has had seven falls in the last two years, she thinks that a couple of nights in the emergency room followed by a couple of weeks in a nursing home is a nice diversion. Both of them have the "I want to die in my own home" philosophy. Neither of them consider imposing on their children to be wrong, that's what you have children for.
KlingKlang, that sounds extremely stressful. Ugh! Best of luck to you, your wife, and your family in enduring this situation. It puts a terrible emotional - and surely financial - burden on you.
Plus the added stress of being the oldest child, if that's the case. I'm the youngest of 5, but my wife is the oldest of 4. Our culture expects the most of the oldest child when it comes to caring for the aging parents. This seems counter-intuitive since the oldest child is ultimately less able physically to provide that care. Sometimes it falls to the one who is most concerned, but likely less often.

Leaving aside anecdotal horror stories, which we all have to one degree or another, I will not burden you with mine, and sympathize with your plight. I fear that the tradition of children caring for an aging parent may fade in this age of increasing self-interest. Your efforts are appreciated KlingKlang, even if not particularly by the one receiving them.

Back to the issue of spending down assets: In regards to aging parents who need financial help, it is curious that those aged who were less disciplined in their savings strategy are usually the ones who are least concerned with the eventual impact on their children.

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Re: Emotional impact of spending down assets?

Post by technovelist » Sun Oct 29, 2017 6:36 pm

vested1 wrote:
Sun Oct 29, 2017 9:03 am
LK2012 wrote:
Sat Oct 28, 2017 4:34 pm
KlingKlang wrote:
Fri Oct 27, 2017 2:45 pm

I'm still sorting out my reactions to vested1's response. For an illiterate woman born to indentured servants in Poland in the 19th century a clean bed and regular meals would pretty much qualify as heaven.

Moving up to the current era, my wife and I both have 90 year old mothers who insist on living in their own homes. They are both stupid, selfish, and insanely cheap - basically they think that they should get everything for free (that includes begging food from their neighbors). Obviously they hate each other. My mother is a lifetime alcoholic with a taste for prescription pain killers. She has had seven falls in the last two years, she thinks that a couple of nights in the emergency room followed by a couple of weeks in a nursing home is a nice diversion. Both of them have the "I want to die in my own home" philosophy. Neither of them consider imposing on their children to be wrong, that's what you have children for.
KlingKlang, that sounds extremely stressful. Ugh! Best of luck to you, your wife, and your family in enduring this situation. It puts a terrible emotional - and surely financial - burden on you.
Plus the added stress of being the oldest child, if that's the case. I'm the youngest of 5, but my wife is the oldest of 4. Our culture expects the most of the oldest child when it comes to caring for the aging parents. This seems counter-intuitive since the oldest child is ultimately less able physically to provide that care. Sometimes it falls to the one who is most concerned, but likely less often.

Leaving aside anecdotal horror stories, which we all have to one degree or another, I will not burden you with mine, and sympathize with your plight. I fear that the tradition of children caring for an aging parent may fade in this age of increasing self-interest. Your efforts are appreciated KlingKlang, even if not particularly by the one receiving them.

Back to the issue of spending down assets: In regards to aging parents who need financial help, it is curious that those aged who were less disciplined in their savings strategy are usually the ones who are least concerned with the eventual impact on their children.
That's not at all curious. Both of those attitudes are the result of high rates of time preference, i.e., not paying much thought to the future consequences of one's actions.
In theory, theory and practice are identical. In practice, they often differ.

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Re: Emotional impact of spending down assets?

Post by Mel Lindauer » Sun Oct 29, 2017 7:13 pm

Many investors (me included) found it very difficult to go from a lifetime of savings to starting to spend down your accumulated assets at retirement.

Some time back, my Forbes editor was approaching retirement age and she asked me what it was like to switch gears. It prompted me to write a three-part series of Forbes articles on this subject. A number of Bogleheads contributed their thoughts and experiences to the series.

Here are links to the three columns:
https://www.forbes.com/sites/theboglehe ... 86d6297adc

https://www.forbes.com/sites/theboglehe ... a7a9322f1f

https://www.forbes.com/sites/theboglehe ... 482fb8675b
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Re: Emotional impact of spending down assets?

Post by jmndu99 » Sun Oct 29, 2017 8:32 pm

I'm still in the accumulation stage but this had peaked an interest in me. Thank you OP for posting this.

Here is a paper by Metlife www.metlife.com/paycheckstudy. That shows respondents who took lump sum payouts of their defined contribution plans spent all the money in line 5.5 years, due to the "lottery effect" and shows that respondents who chose to annuitize their defined contribution plans are much better off.

It seems most of the posters here know how to annuitize on their own and that's great we can all learn from you. Thank you.

Good stuff and more plainly written with pictures.

Thank you

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Re: Emotional impact of spending down assets?

Post by Sandtrap » Sun Oct 29, 2017 8:44 pm

Mel Lindauer wrote:
Sun Oct 29, 2017 7:13 pm
Many investors (me included) found it very difficult to go from a lifetime of savings to starting to spend down your accumulated assets at retirement.

Some time back, my Forbes editor was approaching retirement age and she asked me what it was like to switch gears. It prompted me to write a three-part series of Forbes articles on this subject. A number of Bogleheads contributed their thoughts and experiences to the series.

Here are links to the three columns:
https://www.forbes.com/sites/theboglehe ... 86d6297adc

https://www.forbes.com/sites/theboglehe ... a7a9322f1f

https://www.forbes.com/sites/theboglehe ... 482fb8675b
Thanks for the article, "Mel".
Applied perfectly to DW and I.
j

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Re: Emotional impact of spending down assets?

Post by Tamalak » Tue Oct 31, 2017 8:53 am

Because people, no matter what they tell themselves they feel and what others tell them they should feel, don't want to die.

But as a society it's so impolite to express that opinion that people are in denial that they have it, and then get confused by their own emotions :confused

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Re: Emotional impact of spending down assets?

Post by fantasytensai » Tue Oct 31, 2017 11:38 am

Buy annuity...problem solved?

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Re: Emotional impact of spending down assets?

Post by fposte » Tue Oct 31, 2017 12:10 pm

I felt that one of my jobs as an adult child was to convince my savings-focused father to spend money on himself after his retirement. Not in the "You should buy a Bentley!" kind of way, but in that there were things he liked but was uneasy about splashing out on. He did a round-the-world trip on a cargo ship in his late 70s and had an amazing time, and I'm proud that I helped convince him to do it. ("But what if I go and it turns out I don't like it?" "Then you'll fly back home from the next suitable port." "But the money isn't refundable!" "So what? It makes more sense to spend the money and enjoy yourself elsewhere than to spend it and be miserable there.")

I don't have kids so I hope my friends do the same for me.

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Re: Emotional impact of spending down assets?

Post by technovelist » Tue Oct 31, 2017 2:54 pm

fantasytensai wrote:
Tue Oct 31, 2017 11:38 am
Buy annuity...problem solved?
That is the financial solution if you have enough money with an annuity but can't be sure of that otherwise.

But it doesn't solve the emotional problem.
In theory, theory and practice are identical. In practice, they often differ.

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Re: Emotional impact of spending down assets?

Post by SGM » Tue Oct 31, 2017 5:03 pm

The emotional impact of spending down assets is different if you have a cost of living adjusted pension and other income streams vs. depending only on a portfolio for retirement income. I know a lot of couples with two cola pensions who spend very freely.

In our case we are delaying SS and will buy an SPIA ladder at some point. Meanwhile we are looking for more ways to spend money. :D

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Re: Emotional impact of spending down assets?

Post by fantasytensai » Wed Nov 01, 2017 8:52 am

technovelist wrote:
Tue Oct 31, 2017 2:54 pm
fantasytensai wrote:
Tue Oct 31, 2017 11:38 am
Buy annuity...problem solved?
That is the financial solution if you have enough money with an annuity but can't be sure of that otherwise.

But it doesn't solve the emotional problem.
It kinda does. OP is emotionally hit with the feeling of the account dwindling by the day. However, if he goes out and buy an annuity, he wouldn't have to deal with that problem.

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Re: Emotional impact of spending down assets?

Post by technovelist » Wed Nov 01, 2017 10:22 am

fantasytensai wrote:
Wed Nov 01, 2017 8:52 am
technovelist wrote:
Tue Oct 31, 2017 2:54 pm
fantasytensai wrote:
Tue Oct 31, 2017 11:38 am
Buy annuity...problem solved?
That is the financial solution if you have enough money with an annuity but can't be sure of that otherwise.

But it doesn't solve the emotional problem.
It kinda does. OP is emotionally hit with the feeling of the account dwindling by the day. However, if he goes out and buy an annuity, he wouldn't have to deal with that problem.
Sure, but in order to buy the annuity you have to take a bunch of money out of your account.

I've run into that issue with my mother, who is 91 and has been worried that she will run out of money, which at her current spending rate could happen... in 25 years. :mrgreen:

So I said, "Okay, then buy an annuity."

To which she said, "I don't have enough money to buy an annuity."

To which I said... :confused
In theory, theory and practice are identical. In practice, they often differ.

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Re: Emotional impact of spending down assets?

Post by wrongfunds » Wed Nov 01, 2017 10:24 am

OP is emotionally hit with the feeling of the account dwindling by the day. However, if he goes out and buy an annuity, he wouldn't have to deal with that problem.
Actually, instead of the account dwindling by the day, it will get decimated the very instance he buys an annuity! Are you forgetting that part?

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