Does being healthy mean you should save more for retirement?

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anonforbogleheads
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Does being healthy mean you should save more for retirement?

Post by anonforbogleheads » Fri Oct 30, 2015 11:15 am

If a person and immediate family are considered to be in good health (e.g. non-smokers, healthy weight, no genetic history of cancer or diseases) is it always assumed that means one should save significantly more for early retirement? I.e. closer to 40-50x expenses rather than the standard 25-30x often talked about?

Are there ever any scenarios in which this is not the case?

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Re: Does being healthy mean you should save more for retirement?

Post by Call_Me_Op » Fri Oct 30, 2015 11:24 am

As you are well aware, we cannot predict the future. Some folks are given 6 months to live at age 25 and live to their 90's. So bottom line is nearly everyone should plan for the 3-sigma outcome, which means living into their 90's.

Very few people have families totally free of genetic diseases - diabetes, heart disease, etc.

In any case, 30X is pretty conservative, even with today's meager expected returns.
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Re: Does being healthy mean you should save more for retirement?

Post by Rodc » Fri Oct 30, 2015 11:51 am

Call_Me_Op wrote:As you are well aware, we cannot predict the future. Some folks are given 6 months to live at age 25 and live to their 90's. So bottom line is nearly everyone should plan for the 3-sigma outcome, which means living into their 90's.

Very few people have families totally free of genetic diseases - diabetes, heart disease, etc.

In any case, 30X is pretty conservative, even with today's meager expected returns.
I agree, absent a known already present severe medical condition you need to plan for a long life. 30x desired income is plenty, especially if there is some wiggle room (ie not 30x bare minimum to survive).
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

bigred77
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Re: Does being healthy mean you should save more for retirement?

Post by bigred77 » Fri Oct 30, 2015 11:54 am

The only time you should save 50x expenses is if you want to continue living the same lifestyle and have more certainty that you will leave behind an inheritance many multiples higher than your original nest egg at retirement.

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Re: Does being healthy mean you should save more for retirement?

Post by EnjoyIt » Fri Oct 30, 2015 12:03 pm

anonforbogleheads wrote:If a person and immediate family are considered to be in good health (e.g. non-smokers, healthy weight, no genetic history of cancer or diseases) is it always assumed that means one should save significantly more for early retirement? I.e. closer to 40-50x expenses rather than the standard 25-30x often talked about?

Are there ever any scenarios in which this is not the case?
I think you are correct that if longevity is in your family, you should consider that longevity will follow with you. I also think 40-50X is a ridiculously high number and striving for that number will decrease your happiness prior to retirement.

25x may be risky if 25x just buys you the bare necessities of living. 25x is just fine if it includes plenty of fun money. You can always cut down a little on your fun when times are tough. remember the 25x included times of the great depression, great recession, high inflation, and every other period from the 1920's to today. And that was for a 30 year retirement. 65-95 years old. Keep in mind social security will be there with a very decent base making 25x even more secure.

Most sane people just by human nature tend to spend less in bad times. If the markets are crashing, believe me, you will be spending less.

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Re: Does being healthy mean you should save more for retirement?

Post by hnzw rui » Fri Oct 30, 2015 12:04 pm

25x is just a little shy of worst case so far for a 30-year retirement period. For ~45 years retirement, historical SWR is ~3.1% which translates to ~32x. Alas, we don't really have sufficient data for 50+ years as doing so will drop some of the worst case scenarios (e.g. 1965-1969).

Also, do note that this is for inflation-adjusted spending with no regard for human flexibility. I don't know about you but if my portfolio drops 30% in a year or if there's runaway inflation, I'd probably tighten the belt a bit instead of increasing my withdrawals from the portfolio to adjust for inflation.

I do think 30-35x is already sufficiently conservative if you're willing to sell shares from time to time. Heck, 30x will more often than not leave your heirs with a fairly comfortable inheritance. Aiming for 40-50x would likely mean having a gigantic pile of money by the end.

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Re: Does being healthy mean you should save more for retirement?

Post by MathWizard » Fri Oct 30, 2015 12:20 pm

The only time you would need to worry about planning a much higher multiple for a 45-50 year retirement would be
if the returns were not sustaining the principal. This case would be an extremely conservative portfolio.
100% bonds or worse 100% CDs would not be advisable for a 50 year retirement horizon. (Of course, 100% stocks wouldn't
be advisable either).

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Will do good
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Re: Does being healthy mean you should save more for retirement?

Post by Will do good » Fri Oct 30, 2015 12:29 pm

As other has say, if you count in Social Security you should have fine. Unless you are a super high earner.

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Re: Does being healthy mean you should save more for retirement?

Post by Grt2bOutdoors » Fri Oct 30, 2015 12:52 pm

Will do good wrote:As other has say, if you count in Social Security you should have fine. Unless you are a super high earner.
Instead of a super high earner, you should say "a super high spender". Saving for retirement is to solve for an income solution. Your target should be 25x your annual spending needs less known income sources such as pension, Social Security or trust/dividend income. If you are spending at your level of earnings, and plan on continuing down that path until retirement, you will need to save ALOT more. If you are spending on a LBYM budget, your necessary savings will be a lot less than your earnings.
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dm200
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Re: Does being healthy mean you should save more for retirement?

Post by dm200 » Fri Oct 30, 2015 1:11 pm

There are, in my opinion and observation, several categories of being "healthy" or not in the retirement years (or decades).

Some situations of being healthy/unhealthy relates to life expectancy. So, if you are healthy and live longer AND are active/functioning over a long retirement period - then drop dead - you may want more savings to spend over those "extra" years.

If being "unhealthy" means you continue functioning and then drop dead earlier, you need less.

It is the case, I believe, that many "unhealthy" people can live a long lifespan (because our health/medical systems can prolong life), but are very limited in functioning AND have to spend a lot on medical care and various kinds of 'assistance' needed because of being "unhealthy".

From some recent experiences with a close relative (on good Obamacare Silver Plan) just under Medicare eligibility - ONE episode of a health issue that resulted in only three days in the hospital with tests, procedures, followup outpatient surgery, etc. will cost between $4,000 and $5,000 beyond what insurance covers. Being "unhealthy" then might cost many thousands of dollars per year over the retirement years vs. being "healthy". You cannot know for certain, but this relative has (or had) multiple "lifestyle" risk factors that are documented for the condition/episode that led to the hospitalization.

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Re: Does being healthy mean you should save more for retirement?

Post by celia » Fri Oct 30, 2015 1:20 pm

I think unhealthy people should save more since their health care expenses will be more if they live a long life.

So, add them to your assumption: Healthy and unhealthy people should save more for retirement (but for different reasons).
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Re: Does being healthy mean you should save more for retirement?

Post by cheese_breath » Fri Oct 30, 2015 1:42 pm

celia wrote:I think unhealthy people should save more since their health care expenses will be more if they live a long life.

So, add them to your assumption: Healthy and unhealthy people should save more for retirement (but for different reasons).
I was thinking the same thing, but you said it much better.
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Re: Does being healthy mean you should save more for retirement?

Post by jlawrence01 » Fri Oct 30, 2015 2:05 pm

anonforbogleheads wrote:If a person and immediate family are considered to be in good health (e.g. non-smokers, healthy weight, no genetic history of cancer or diseases) is it always assumed that means one should save significantly more for early retirement? I.e. closer to 40-50x expenses rather than the standard 25-30x often talked about?

Are there ever any scenarios in which this is not the case?

I know that what I am posting is anecdotal but I do want to raise a point.

At age 55, my FIL was diagnosed with colon cancer. He underwent surgery immediately. In the past 27 years, there has been NO evidence that the cancer has returned. In fact, at age 82, yesterday, he climbed a tree (30 feet) that be was cutting down.

At age 66, my father had triple by-pass surgery due to multiple blockages. He is about to turn 86 and still shovels snow and rides his stationary bike 1-2 hours per day. This despite years of him telling us that he "would never make 70."

In other words, you just don't know. Personally, I would rather be at age 90 with $1 MIL in the bank wondering what I am going to do with it than to be like some of my neighbors who are wondering at age 85 where their next meal is coming from or scared to death that the school levy will pass and their property taxes will go up $50 next year.

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Re: Does being healthy mean you should save more for retirement?

Post by whomever » Fri Oct 30, 2015 2:43 pm

"In other words, you just don't know..."

+1

I think people misunderstand the math here. We read something that says 'people who (smoke/have high cholesterol/eat bacon/whatever) on average die X years sooner' and think that means 'if I (do whatever) I will die X years sooner'. But that's not correct; even though the mean lifespan of smokers and nonsmokers is different, the variance is quite large. We've all heard the anecdotes where they ask a centenarian the secret to their long life, and the answr is something like 'I start every day with a cigar, a shot of whiskey, and bacon'. I know that in my own extended family, many of the people you would have predicted would die young in their 50's have long outlived their apparently healthier siblings.

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Re: Does being healthy mean you should save more for retirement?

Post by CoAndy » Fri Oct 30, 2015 2:59 pm

For some reason, the OP reminded me of an interview I read with George Burns, when he was in his late 80's. He was asked what his doctor thought of his 3 daily cigars and his 4 daily martinis. He said "my doctor is dead". :sharebeer

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Re: Does being healthy mean you should save more for retirement?

Post by 22twain » Fri Oct 30, 2015 3:47 pm

It was probably stress that got to Burns's doctor. I can't imagine Burns being stressed out. :beer
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Re: Does being healthy mean you should save more for retirement?

Post by cherijoh » Fri Oct 30, 2015 4:45 pm

Grt2bOutdoors wrote:
Will do good wrote:As other has say, if you count in Social Security you should have fine. Unless you are a super high earner.
Instead of a super high earner, you should say "a super high spender". Saving for retirement is to solve for an income solution. Your target should be 25x your annual spending needs less known income sources such as pension, Social Security or trust/dividend income. If you are spending at your level of earnings, and plan on continuing down that path until retirement, you will need to save ALOT more. If you are spending on a LBYM budget, your necessary savings will be a lot less than your earnings.
Well, the OP posted on another thread that he currently has ~900K in debt including mortgage on primary residence, mortgage on rental house that was formerly primary residence, HELOC on rental house that is ending its draw period (and will convert to an amortized mortgage), and $30K in credit card debt that he has been moving around the past few years to capture 0% offers.

He also claims on this thread that he expects be at FI and possibly ready for early retirement when the eldest of his three kids is ready to apply for college in 5 years. I gather from his posts that he THINKS he is LBYM, but in my opinion something doesn't add up.

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Re: Does being healthy mean you should save more for retirement?

Post by randomguy » Fri Oct 30, 2015 5:39 pm

It is probably more accurate to say if you are unhealthy, you don't have to save as much.:)

Seriously things like 40-50x (or the 2.5% SWR) are insane unless you are retiring at 40 or so (then they are just crazy). Unless some crazy life extension (i.e. life expectency goes up 20+ years) happens, 50x allows you to invest in tips and get enough real return for like 60 years of expenses. With any sane portfolio you are ending up with a huge pile of cash.

25 and 30 x both sound really similiar. 30x though is radically more conservative. That extra 20% provides a huge safety margin over an already very conservative number.

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Re: Does being healthy mean you should save more for retirement?

Post by Independent » Fri Oct 30, 2015 8:34 pm

30x is virtually a perpetuity. If you're comfortable with a mix of stocks and bonds, you should be able to take out 3.3% forever. (or at least until WWIII, Weimar Republic style inflation, the asteroid strike, or the Yellowstone volcano explodes)

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Re: Does being healthy mean you should save more for retirement?

Post by anonforbogleheads » Sat Oct 31, 2015 12:06 am

cherijoh wrote:
Grt2bOutdoors wrote:
Will do good wrote:As other has say, if you count in Social Security you should have fine. Unless you are a super high earner.
Instead of a super high earner, you should say "a super high spender". Saving for retirement is to solve for an income solution. Your target should be 25x your annual spending needs less known income sources such as pension, Social Security or trust/dividend income. If you are spending at your level of earnings, and plan on continuing down that path until retirement, you will need to save ALOT more. If you are spending on a LBYM budget, your necessary savings will be a lot less than your earnings.
Well, the OP posted on another thread that he currently has ~900K in debt including mortgage on primary residence, mortgage on rental house that was formerly primary residence, HELOC on rental house that is ending its draw period (and will convert to an amortized mortgage), and $30K in credit card debt that he has been moving around the past few years to capture 0% offers.

He also claims on this thread that he expects be at FI and possibly ready for early retirement when the eldest of his three kids is ready to apply for college in 5 years. I gather from his posts that he THINKS he is LBYM, but in my opinion something doesn't add up.
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Re: Does being healthy mean you should save more for retirement?

Post by White Coat Investor » Sat Oct 31, 2015 12:12 am

anonforbogleheads wrote:If a person and immediate family are considered to be in good health (e.g. non-smokers, healthy weight, no genetic history of cancer or diseases) is it always assumed that means one should save significantly more for early retirement? I.e. closer to 40-50x expenses rather than the standard 25-30x often talked about?

Are there ever any scenarios in which this is not the case?
More insanity on withdrawal rates. Will it ever stop? If you're really THAT worried about running out of money, put more into SPIAs.
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Re: Does being healthy mean you should save more for retirement?

Post by Watty » Sat Oct 31, 2015 12:27 am

anonforbogleheads wrote:Are there ever any scenarios in which this is not the case?
Unhealthy people may have shorter life expectancies but higher medical and assisted living expenses while they are alive.

I would not make any assumptions that being healthy and expecting to live longer will make a big increase in your overall expenses.

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Re: Does being healthy mean you should save more for retirement?

Post by anonforbogleheads » Sat Oct 31, 2015 12:48 am

EmergDoc wrote:
anonforbogleheads wrote:If a person and immediate family are considered to be in good health (e.g. non-smokers, healthy weight, no genetic history of cancer or diseases) is it always assumed that means one should save significantly more for early retirement? I.e. closer to 40-50x expenses rather than the standard 25-30x often talked about?

Are there ever any scenarios in which this is not the case?
More insanity on withdrawal rates. Will it ever stop? If you're really THAT worried about running out of money, put more into SPIAs.
What inflation adjusted yield would you get on a SPIA for someone < 50yo with joint and full survivor annuity?

It's not as insane as you think.

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Re: Does being healthy mean you should save more for retirement?

Post by randomguy » Sat Oct 31, 2015 7:29 am

anonforbogleheads wrote:
EmergDoc wrote:
anonforbogleheads wrote:If a person and immediate family are considered to be in good health (e.g. non-smokers, healthy weight, no genetic history of cancer or diseases) is it always assumed that means one should save significantly more for early retirement? I.e. closer to 40-50x expenses rather than the standard 25-30x often talked about?

Are there ever any scenarios in which this is not the case?
More insanity on withdrawal rates. Will it ever stop? If you're really THAT worried about running out of money, put more into SPIAs.
What inflation adjusted yield would you get on a SPIA for someone < 50yo with joint and full survivor annuity?

It's not as insane as you think.
50x is insane for pretty much any time span. Lets keep it simple. The real rate on tips is ~1.25. How long does 50x last? ~77 years. After 40 years if things are looking grim, buy that annuity. Now imagine you do any type of sane portfolio (i.e. 25/75 if your hyper conservative. Stock wise you have the same upside as a 4% at 50/50). Are you really worried about the risk of global stocks (not one country) returning 2-3% real for like 30 years? And if that happens do you really think that lack of return will be your biggest issue (i.e. not something like global famine, collapse of the global economic system, alien invasion...)

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Re: Does being healthy mean you should save more for retirement?

Post by TroutMD » Sat Oct 31, 2015 8:56 am

I am an ER doctor.

I have coded as many fit, non smoking, marathon runners as fat, diabetic, dialysis patients.

Ok, maybe note quite as many. But I don't think it should impact the amount you save for retirement...

Everyone is going to get to that finish line and comorbidities do not always predict a shorter life.

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Re: Does being healthy mean you should save more for retirement?

Post by White Coat Investor » Sat Oct 31, 2015 3:29 pm

anonforbogleheads wrote:
EmergDoc wrote:
anonforbogleheads wrote:If a person and immediate family are considered to be in good health (e.g. non-smokers, healthy weight, no genetic history of cancer or diseases) is it always assumed that means one should save significantly more for early retirement? I.e. closer to 40-50x expenses rather than the standard 25-30x often talked about?

Are there ever any scenarios in which this is not the case?
More insanity on withdrawal rates. Will it ever stop? If you're really THAT worried about running out of money, put more into SPIAs.
What inflation adjusted yield would you get on a SPIA for someone < 50yo with joint and full survivor annuity?

It's not as insane as you think.
Yes, it is. At 0% real, a 3.33% withdrawal rate (30X) will last 30 years. If you cannot construct a portfolio that will beat 0% real over the long run, we (as a society) have got bigger problems than what your withdrawal rate will be.

The trinity study demonstrated quite well that a 25X (4% rule) lasted through the Great Depression, WWII, the cold war, Stagflation, the great recession etc etc etc. On average, people died with 2.8X what they retired with. Besides, you can adjust as you go.

50X, 60X, 100X....that's just being paranoid. The same skills that allowed you to accumulate 25-30X will be the ones that allow you to cope if you get poor early portfolio performance.
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Re: Does being healthy mean you should save more for retirement?

Post by ladders11 » Sat Oct 31, 2015 7:03 pm

Does being healthy mean you should save more for retirement? Not for me. I would say when you are 50-60 you appraise your health and career options - if you are still going strong you keep working and maybe expect to work a little longer and live a little longer. Most 80-90 year olds who remain in good health are fairly sedentary and not traveling the world, not maintaining a 3bd house with lawn and garden, and have lower expenses.

Other salient points I agree with have already been mentioned: healthy people also die, and the safe withdrawal rate concept is designed for this.

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Re: Does being healthy mean you should save more for retirement?

Post by TradingPlaces » Sat Oct 31, 2015 8:38 pm

Being healthy probably has very noisy correlation with ones longevity.

However, if you can predict your death year within +/-3, then yes, I would say, plan for it.

I can not even predict my death year within 20.

Here is a fun joke.

An older looking man goes to doctor, with a lot of complaints.

Doctor examines him. But before giving out his prognosis, he asks the man:

Q: do you drink? A: Yes.
Q: do you smoke? A: A lot.
Q: do you party? A: helluva lot.
Q: unprotected sex with people of questionable morals? A: Always, and a lot.
Q: drugs? A: More than you can think of.

Doctor goes: I am afraid that with this lifestyle, you can live to no more than 65 years.
Ah, the man, goes, dissapointed.

Doctor asks one final question: how old are you.
Man responds: 100.

Doctor: in that case, keep doing what you have been doing: drink, smoke, party, sex, and drugs.

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Re: Does being healthy mean you should save more for retirement?

Post by HIinvestor » Sun Nov 01, 2015 7:40 pm

If you plan to have an active retirement with expensive hobbies including travel, try to save more. I know of several people in their mid 80s and 90s that are still traveling, including cruises, trips abroad, tours and more, as well as golfing. That said, expensive healthcare for folks in poor health can certainly suck up a lot of $$$ fast!

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