Saving vs Spending in Retirement ~

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Jerry55
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Saving vs Spending in Retirement ~

Post by Jerry55 » Fri Jun 19, 2015 5:14 am

I've been investing since the DOW was around 3000. I enjoyed savings and investing, starting out with STRONG Funds (Wisconsin) and Janus Funds. Moved on when TSP allowed CSRS to invest in more than the TSP G Fund, then doubled down. Home paid off (2005) w/ 15 year loan, turned age 50, then maxed it out again.

Here's my issue, that I have a difficult time overcoming. Maybe some of you have as well.

I've been a conservative spender, looking to save 50 cents on a loaf of bread, and then some, but I find it difficult to just go ahead and spend the 50 cents and not travel the extra 2 miles to save that 50 cents now, although I have those inclinations to do just that. Put my last daughter thru college, scrimped on the hotel in Orange County, CA at a cheap hotel, but finally figured out that I'd rather stay at Embassy Suites for twice the price. (took me 2 years to get there) To this day, I still struggle with "Spending and Enjoying it" because of my lifestyle since 1985. I'm slowly getting over it, and to be honest, my older children are showing me why I see bumper stickers that say " I'm Spending my Children's Inheritance" and start understanding WHY. Retired @ 57, just turned 60. Maybe it takes circumstances like this to make me (us) actually figure it out ? Anyone else having trouble making this transition or feel this ???
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Re: Saving vs Spending in Retirement ~

Post by Mick » Fri Jun 19, 2015 6:15 am

Well, we retired at 57 in early 2008 just in time for the recession. We got real frugal watching every dime going out. It really wasn't until the last year that we loosened things up. Of course that was after our investments had recovered and two nice inheritances came along. Even now, we watch expenses while spending lavishly. For example, shopped for a lower price hotel to use for a week in London. We enjoy life and travel but still refuse to be wasteful.

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Re: Saving vs Spending in Retirement ~

Post by NightFall » Fri Jun 19, 2015 6:28 am

I don't have a good answer to this question because I'm still in the early part of the op's description in terms of life. However, having young children myself, I was wondering how your older children are showing you why you should spend their inheritance. Perhaps it's something I need to watch out for.

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Re: Saving vs Spending in Retirement ~

Post by RadAudit » Fri Jun 19, 2015 6:47 am

I have similar concerns. We were frugal for so long because we had to be it's difficult to break the habit.

Then I read on this board an observation from a well known economist on money at this stage in life. Simply put - slightly modified - you have three options. You can whiz it away, your heirs can whiz it away, or the government can whiz it away. You choose the whizzer.

I broke out the spreadsheets and ran a few projections. You can use a few on-line calculators. I convinced myself that based on the present trajectory, which we are comfortable with, DW and I would run out of money when she got to 109. (I'll probably be long gone by then.) Made a commitment to continue on the trajectory; but, if anything came along that we wanted to do - we'd spend it. Haven't got to our new max targeted SWR ceiling that should give us at least 30 years spending from this point, yet. But, we aren't actively avoiding experiences either.
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Re: Saving vs Spending in Retirement ~

Post by RadAudit » Fri Jun 19, 2015 6:51 am

NightFall wrote:I was wondering how your older children are showing you why you should spend their inheritance. Perhaps it's something I need to watch out for.
Don't worry. You'll know it when you see it.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

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Re: Saving vs Spending in Retirement ~

Post by ResearchMed » Fri Jun 19, 2015 7:16 am

There have been a few recent threads about this.

Bottom line for some of us (in this case, DH and me) is that we realized a bit late, but "not too late", thank goodness, the reality of YOLO.
That's "You Only Live Once".

We waited and kept planning "all of those special trips", which kept getting postponed because DH likes his work and has no interest (yet?) in retiring. He'd just keep doing the same work, paid or not, so... might as well collect the money.

Then 2 years ago, I convinced him to, at the least, start taking "real" vacations (instead of a weekend before/after a business trip).

So... we planned the first "big one": long plane flight, 1 week cruise, 1 week at a very special hotel.

With less than 2 weeks to go, DH had a medical emergency, and everything was totally cancelled.
The next few months were spent ferrying DH to assorted medical appointments.
Oh, and he could still do his work :shock:
He just couldn't leave town/leave proximity to medical care and some procedures.

Once he recovered (thank goodness he did!), we bumped up the schedule for future trips, and we've already taken 4 biggies, with more planned.

In our case, we don't have significant bequest desires/needs, so "continuing to save" makes even less sense.
We've recently even stopped contributing to 403b/IRA (not recommended if we were younger or with fewer assets at this point), although Employer still does contribute (no match required).

Because travel is the "extra" that we enjoy (plus some nice wine!), we've now set aside a nice pot each year, and we've done a good job spending it.
There are already some restrictions on how/where we can travel, due to health, so we are first doing the trips that are the most active, etc.

And we've now each had a medical emergency while traveling, requiring out-of-country ER care.
Not fun.

And last year a good friend/colleague just about DH's age literally just dropped dead one weekend, with no warning whatsoever.
That really shook us both up. A lot.

We deeply wish we had started taking these major trips much earlier, even if only once every couple of years.

We can't really start "spending down" yet, as most of the money is locked up in 403b's (nicely invested) that we can't access until DH really retires, and much of the IRA money is a generous "emergency fund" for us, just in case. (Also the next car or two.)
But we certainly are NOT SAVING MORE at this point.

We can't take it with us...

RM
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Re: Saving vs Spending in Retirement ~

Post by Grt2bOutdoors » Fri Jun 19, 2015 7:43 am

Welcome to the club, you are not alone. My folks fit in the category of continuing to practice frugality when they could "loosen" up a bit. No amount of talking to them can convince them to spend for convenience ~ always keeping a sharp eye out for savings. Then, they take the savings and bank it for "future" use - they are a product of their upbringing. Growing up in a deprived environment, they never forgot where they came from and they have zero desire to go back to that place, hence the saving.
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Re: Saving vs Spending in Retirement ~

Post by 1210sda » Fri Jun 19, 2015 10:58 am

To quote a famous politician "I feel your pain".

It ain't easy. After a lifetime of being in a saving mode, it takes some effort to reverse the role.

Hard as it may be, I am making a concerted effort to do a little "fringe" spending. So far so good.

To me it's like a Tug-of-War between this new effort and my old frugal tendencies. As long as the two sides are fairly balanced overall, I may swing to one side or the other for a brief period, but when it gets too extreme, the other side brings me back to the middle.

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Re: Saving vs Spending in Retirement ~

Post by drzzzzz » Fri Jun 19, 2015 11:00 am

I think it is a difficult mental transition to move from save, save, save to spend, but the purpose behind saving was so you would be able to spend it - it is just harder to watch the balance go down and to write the checks to spend when no new income is coming in. That being said, I am also a firm believer that no one knows what tomorrow will bring so you should enjoy life. Also love the quote that a financial analyst that i have read says - you don't need to be the wealthiest person in the cemetery. Enjoy today!

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Re: Saving vs Spending in Retirement ~

Post by Sconie » Fri Jun 19, 2015 11:11 am

Kind of the same issue/feelings here. One thing you should probably ask yourself is, "Can my heirs (as well as their spouses, etc.) spend my money better than I can spend my money?"

That said, and, as a bit of a compromise, my wife and I have gotten to the point in terms of our investment portfolio---that is, the real (not nominal) annual growth of our investment portfolio---we spend half of the gain and retain the other half of the gain in the portfolio for our heirs/kids. (In terms of pension benefits, social security, etc., we spend it all on ourselves).

Thus far, I'd have to say, "so far, so good." Let's just say that "it works for us." :-)
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Re: Saving vs Spending in Retirement ~

Post by Mike Scott » Fri Jun 19, 2015 11:12 am

My 90 year old father spends about 30% of his monthly income on himself and thinks he is living pretty well. Other than buying himself a new tractor and a bulldozer for his 87th birthday, he has no more desires that money can fix. He enjoys giving cash gifts to the grand kids and takes great pleasure in seeing them mark life milestones. He does not expect to leave any significant estate. It works for him. The only thing he really needs/wants from anyone else is some time spent sitting and chatting.

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Re: Saving vs Spending in Retirement ~

Post by Jerry55 » Fri Jun 19, 2015 11:50 am

RadAudit wrote:
NightFall wrote:I was wondering how your older children are showing you why you should spend their inheritance. Perhaps it's something I need to watch out for.
Don't worry. You'll know it when you see it.
+1.

Thanks for the comments everyone ! I have some friends who have no issues with spending, but very few that do. For instance, one of my retired friends decided to make an addition onto their 2,200 sq. foot home and turn it into a 3,400 sq ft home. I haven't said anything, other than I'm happy for the both of you. But, I wonder why a couple would want an extra 1200 sq ft of space to clean in their 70's, But it's really none of my business.
I see I'm not the only one that deals with this in one fashion or another.
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Re: Saving vs Spending in Retirement ~

Post by DVMResident » Fri Jun 19, 2015 12:31 pm

My parents and my mentor are in the same boat. After a lifetime of saving and only real extravagant spending on other people's happiness (e.g. child's education), they can't bring themselves to spend what they have on themselves.

Now, my retired mentor takes his daughter's scout troop on camping trips and paying for the poorer troops. My parents make frequent out-of-state trips to see and help raise the grand kids. They find happiness in creating experiences with family and friends. Seems like a good way to live :beer

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Re: Saving vs Spending in Retirement ~

Post by astrohip » Fri Jun 19, 2015 1:59 pm

I come from a save & invest background, and used to run projections like "if I divide my savings by 40, I can spend $x/year until I'm 98". That should be safe". Then one day I was talking to my dad (80+), who retired well funded. Not 1% money, but plenty for the two of them to do whatever. He said he had the same disease I did (guess where I got it from?), always saving for the next round. But as he passed 80, he realized he had been too conservative. It's much harder to spend your money in your 80's than it is your 70's. You wear the same clothes, you have no interest in new houses, major trips are more trouble than they're worth, etc etc. Instead of Europe they go to Florida or NYC or CA. He's unhappier about RMD than lower interest rates. And it made me realize I should enjoy more NOW, rather than later. (I'm 59 and retired)

So my wife & I are spending at about twice the suggested rate. Whether we could keep it up or not doesn't matter. We know in 20 years our lives will be much slower, so YOLO.

I am careful to not incur debt, or long-term commitments. I'm not stupid, just having more fun now as versus later. And there's no way I'll run out of money; my nature won't let me get that low on the savings pole.
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Re: Saving vs Spending in Retirement ~

Post by havehad » Fri Jun 19, 2015 5:01 pm

Being practical never stops with me. I Priceline hotels in cities. Look to see if there's a discount I am eligible for when renting car and buying
store brand ibuprofen and whatever storage bags are on sale at the supermarket. I am not compulsive about it. It just makes sense to me.

Instead, we like to enjoy time with family and friends. So if we take a trip, we are happy staying at a nice 3 or 4 star hotel in Europe that I researched
and taking my sister who has two in college along rather than going by ourselves and sending a postcard from the Four Seasons.

I remember my father talking about retiring 40 years ago and saying that if he kept working, now that we were out of the house etc he
could buy Florsheim shoes instead of Father's and Sons or drive a Cadillac instead of a Chevrolet. But he said the ability to spend time with
woman he married 35 years earlier meant more to him than fancier shoes. So he did retire and for nearly 30 years they traveled, simple trips, bigger trips, value-priced trips and they were more lunch than dinner out types. They never thought about skimping or splurging just enjoying time with each other. Shortly, before he died my father said he was so happy he had made the decision to retire early and enjoy every day he spent with my mother. This year she said almost the same thing before she died. It was how they were. They knew what made them happy didn't have a price tag on it only an
expiration date.

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Re: Saving vs Spending in Retirement ~

Post by privatefarmer » Fri Jun 19, 2015 7:16 pm

I imagine most bogleheads are savers vs spenders. I think it's a good problem to have. You can always figure out ways to spend money but not always figure out ways to make more of it.

One thing I don't agree with is the public perception that parents need to pay for kids' college and/or pass on $$$ to their children. I understand it may be nice to do so but I certainly do not feel responsible for doing so (not a parent yet although my wife is prego). I paid for my own school through the military and could expect my future kids to do the same. I plan on my wife and I spending every last penny before we die. If our kids end up getting any inheritance they'll be fortunate but I do not feel responsible to leave anything.

I too struggle w/ my wife regarding the saving vs spending. She's more of a spender than I. What I am trying to do now is take a more practical view of money. As long as we have enough money to comfortably retire in our 70s I let my wife buy whatever she wants, not ever spending more than we take home. Anything left over I invest w/ the hopes of retiring sooner than 70.

To my surprise, I end up investing over half of our take home income... I worried that if given the okay my wife would spend everything we have but that's just not the case. We are both happy with our jobs and work only as much as we want, so I don't see our income going down by much. Kids will change things but I figure as long as we don't spend more than we take in each month we shouldn't have much to worry about.

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Re: Saving vs Spending in Retirement ~

Post by astrohip » Fri Jun 19, 2015 7:39 pm

privatefarmer wrote:One thing I don't agree with is the public perception that parents need to pay for kids' college <snip>
Interesting point. I think a lot of it has to do with how you were raised. My parents both were the first generation of their family to go to college, and they worked and saved so they could send all three of us kids to college also. My wife... exact opposite. Her family made it clear every kid was on their own the minute they turned 18. No college, no living at home, no nothing--you're on your own. So she worked to go to college, mostly CC.

So our thoughts after marriage, and as kids started growing up, reflected our upbringing. I felt we should do everything possible to help our kids, so they start life out without huge student loans. She felt they could manage on their own.

We got lucky, in that we were successful in life, and could easily pay for higher education without shorting our own future. She bought in to this as it made little difference to us financially. Although she never wanted to make it too easy, so they would understand personal responsibility.

YMMV.
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Re: Saving vs Spending in Retirement ~

Post by Grt2bOutdoors » Fri Jun 19, 2015 8:32 pm

privatefarmer wrote:I imagine most bogleheads are savers vs spenders. I think it's a good problem to have. You can always figure out ways to spend money but not always figure out ways to make more of it.

One thing I don't agree with is the public perception that parents need to pay for kids' college and/or pass on $$$ to their children. I understand it may be nice to do so but I certainly do not feel responsible for doing so (not a parent yet although my wife is prego). I paid for my own school through the military and could expect my future kids to do the same.
Depends on ones environment, in my case education was a ticket out of menial labor, to elevate ones stature in life, education taught the person to fish for themselves rather than be dependent on others. Working to pay for college, nothing wrong with it so long as it did not create such an interference that it became a burden or hinderance and prevents rather than create opportunities. You may believe it is perception, reality says life is unfair - why stack the deck any higher?, easing the burden if possible accelerates rather than detracts the potential. My 2 cents.
Last edited by Grt2bOutdoors on Sat Jun 20, 2015 7:30 pm, edited 4 times in total.
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Re: Saving vs Spending in Retirement ~

Post by sambb » Fri Jun 19, 2015 8:59 pm

It is notable to read a thread in which people say to spend money, and there are countless others against spending on a luxury car, and recc to keep a 10 year old Camry


When I blew money in my 20s on dates, travel, partying, it was a heck of a lot more fun.

Spend in retirement, but also spend along the way as long as you are on track.

No way to turn back the clock. Enjoy what you earn.

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Re: Saving vs Spending in Retirement ~

Post by Acepilot » Fri Jun 19, 2015 9:27 pm

The transition from saving for retirement to spending in retirement is difficult. Old habits are hard to change. I think the key is the proper "balance". Enjoying life, and at times some splurging, without losing sight of your goals and staying true to the principles that got you here. In the end if you are happy as either a spender or a saver, without to many regrets, you did good. I think we tried to balance while saving and hope to do the same while spending.

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Re: Saving vs Spending in Retirement ~

Post by LadyGeek » Fri Jun 19, 2015 9:53 pm

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).
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Re: Saving vs Spending in Retirement ~

Post by GerryL » Fri Jun 19, 2015 11:05 pm

To my great surprise I am starting to get to the "it's okay to spend" mindset. Well into my first year in retirement I have discovered that I have barely made a dent in the cash I set aside for the first 3 years of expenses before I take SS. As that reality sunk in, I started to feel freer to spend -- on myself and in making more charitable donations. I still shop for bargains. It's a sport. But this life-long frugal miser is planning a trip to France that will likely cost twice as much as I would ever have considered spending even a year ago. And I'm enjoying the pre-trip phase and am not anxious about expenses.

If I can make the transition, there is hope for anyone else who is trying to get there.

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Re: Saving vs Spending in Retirement ~

Post by Mel Lindauer » Fri Jun 19, 2015 11:31 pm

Here's a Forbes column I did on this very topic in 2011. The title of the column is "Switching Gears at Retirement: Going from Savings to Spending Mode".

http://www.forbes.com/sites/theboglehea ... ding-mode/
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Re: Saving vs Spending in Retirement ~

Post by Jerry55 » Fri Jun 19, 2015 11:56 pm

Mel Lindauer wrote:Here's a Forbes column I did on this very topic in 2011.
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Re: Saving vs Spending in Retirement ~

Post by Mel Lindauer » Sat Jun 20, 2015 12:23 am

Jerry55 wrote:
Mel Lindauer wrote:Here's a Forbes column I did on this very topic in 2011.
Folks like you are the reason I love being a BH !!!
Thanks, Jerry. Here's Part 2 of that Forbes series on switching from saving to spending in retirement.

http://www.forbes.com/sites/theboglehea ... nt-part-2/
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Re: Saving vs Spending in Retirement ~

Post by Mel Lindauer » Sat Jun 20, 2015 12:25 am

Best Regards - Mel | | Semper Fi

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Re: Saving vs Spending in Retirement ~

Post by The Wizard » Sat Jun 20, 2015 12:35 am

My last two decades of employment, I saved a decent percentage for retirement, but also spent a fair amount on 4-6 weeks of travel per year.
Now retired, my travel expenses cover at least a dozen weeks per year.

But managing my retirement income hasn't really changed. It's all taxable income (from 403b withdrawals) so the only big change is that I'm no longer saving 25-30% of gross off the top.
Actually, my main issue to address from year to year in retirement is whether to ramp up my retirement income a bit more, but that could be a mistake if one doesn't allow for the next stock market crash...
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Re: Saving vs Spending in Retirement ~

Post by Jerry55 » Sat Jun 20, 2015 8:02 am

havehad wrote: They knew what made them happy didn't have a price tag on it only an
expiration date.
So Sad, but soo very true !!! They had the gift many of us wish for.
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Re: Saving vs Spending in Retirement ~

Post by derosa » Sat Jun 20, 2015 7:37 pm

The kids are telling you to spend your money on yourself. T

They are saying they don't need it and don't want it. They have their money and are doing fine.

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Re: Saving vs Spending in Retirement ~

Post by Jerry55 » Sun Jun 21, 2015 6:05 am

derosa wrote:The kids are telling you to spend your money on yourself. T
They are saying they don't need it and don't want it. They have their money and are doing fine.
Thanks, I needed that, and you seem to be 100% Correct too !!!
Apparently, they know more at their young age than I ever did.
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Re: Saving vs Spending in Retirement ~

Post by retired early&luv it » Sun Jun 21, 2015 8:52 am

When I was in college, I developed a bit of odd philosophy. Happiness is like rain. You need the money to afford to buy the buckets to capture it. But having the buckets does not mean it will rain happiness upon you. For that you have to rely on luck. No money to buy the buckets means no ability to capture happiness when it falls like rain.

I was unemployed for over a year and a half in the early 1980s when unemployment was over 10 percent. Had just graduated from college, had student debts to pay, completely ran out of savings, moved back home with parents, was flat broke. When I finally got a job (bad job with no benefits, but it was a job) I celebrated with my first pay check and went to McDonalds to eat the first meal I could pay for with my own money in months.

My brain became hard wired to be a consummate saver that abhors debt. I bought my condo in the early 1990s, paid off the mortgage in less than three years. Only once in my life have I bought a new car. I currently drive a 2003 model. My brain is still wired that way.

I am 61.5 and retired at 56.5. I am a Vanguard Flagship member. I have a small defined benefit pension that I put into withholding to pay my investment income taxes. My expenses are about half of what the 4 percent rule allows. This coming December my pension gets cut in half, I will have to start paying estimated quarterly taxes as my pension will be less than my income taxes.

But I am still a saver, although I do not need to be. Last week I bought a month supply of bread (all that the fridge will hold) because the brand I like was on sale. My point is that you do not have to stay at the expensive motel. If you enjoy a lower cost motel, stay there. I was in a Travellodge a couple weeks ago. Before that my last motel stay was in a Motel 6.

My savings allow my to splurge for one time expenses for additional enjoyment. I have been to Europe twice since I retired and plan to do that again. I spent a month and a half bicycle touring on the Pacific Coast last summer, mostly camped in $5 hiker/biker sites in State Parks, also stayed in a low cost Hostel near Fishermans Wharf in San Fransisco while sightseeing. I am frugal while I enjoy life. If I would not get more enjoyment out of extravagant spending, why do it?

I bought another touring bicycle, value about $3k that I plan to use for more bicycle touring. Since my brain became wired to be frugal during my long stretch of unemployment, if I regularly spent more money than I am accustomed to on living expenses, I would not enjoy it. So, I do not try to spend more. But it is nice to be able to occasionally splurge for additional enjoyment.

Bottom line - if you can enjoy life just fine while being frugal, then continue doing what you are doing. If occasional splurges increase your enjoyment, then do so.

I am fortunate that I have all the buckets I need to capture maximum happiness, but it was not always that way.

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