Half of Retirees Afraid to Use Savings

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mickeyd
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Half of Retirees Afraid to Use Savings

Post by mickeyd » Thu Sep 26, 2019 10:18 am

After a brief time of me being reluctant to spend my retirement savings assets, I soon got over it and now DW and I spend away and keep an eye on the bottom line at the same time. What do most of you folks do?
A 2009 study estimated that by the time middle-income retirees are in their 80s, they still had not touched about three-fourths of their savings, and 2016 research found that retirees with substantial assets are the most reluctant spenders. Vanguard recently reported that retirees with very modest savings turn around and reinvest a third of the money they’re required to withdraw under IRS rules after age 70½.
https://squaredawayblog.bc.edu/squared- ... e-savings/
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rich126
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Re: Half of Retirees Afraid to Use Savings

Post by rich126 » Thu Sep 26, 2019 10:35 am

I'm sure it can be a tough thing to do. Spend down something that you can't replace. Of course while some of those people would probably have a more enjoyable retirement if they spent some money, many obviously can live w/o touching it. Most people can't afford not to spend savings if they want to survive, although that assumes they even have any money saved for retirement.

I've never sat down and talked with my father about money. He is in his 80s and unfortunately my mother passed away a decade ago. He lives in a retirement center (they moved in after retirement) and has a pension, social security and whatever savings he accumulated. He was always more of a saver than spender. I'm sure he could spend more but at that age I don't think he has any interest in traveling (a couple of years ago I offered a trip to Europe but he seemed to think he was too old for that) outside the country. He mostly stays within the center except for local road trips to family.

If my spending is going to be like his, I probably should go ahead and retire today (I'm 56) since I will have enough.

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Re: Half of Retirees Afraid to Use Savings

Post by livesoft » Thu Sep 26, 2019 10:38 am

From the article about the study
Many of the study’s findings seem like common sense.
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Re: Half of Retirees Afraid to Use Savings

Post by Dantes » Thu Sep 26, 2019 10:58 am

I don't think "afraid" is quite justified here. Not spending money you don't need to spend is a perfectly reasonable response to the uncertainties of the future, including long term and terminal care. Reinvesting RMD's that you don't need is a fine thing to do. Clicking though I did not see the actual Vanguard report about RMD's being reinvested, but I am skeptical about how accurate a single investment company can be about that sort of thing. TIAA thinks I'm going to be broke soon; Vanguard thinks I'm withdrawing at about 5%; Fidelity thinks I'm still adding to investments.

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Re: Half of Retirees Afraid to Use Savings

Post by FireProof » Thu Sep 26, 2019 11:02 am

So the basic narrative (of financial journalism in general, not oly this article) is
1. Americans save FAR TOO LITTLE for retirement
2. Once they retire, they spend EVEN LESS than their miserly savings allow

So, at first glance, either Americans are reduced to paupers in retirement, or the necessary savings are actually far less than those promoted.

However, there is another way to reconcile the two narratives. Perhaps Americans really did save too little, but through an incredible Monte Carlo outlier of soaring stocks, bonds, and real estate over the past 30+ years, the Baby Boomers still ended up with too much money. The next generation may not be so lucky, especially if imbued with false confidence by what they've seen. Of course, once they start inheriting all those swollen Boomer portfolios, maybe they'll be OK in the end, too.

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Re: Half of Retirees Afraid to Use Savings

Post by RickBoglehead » Thu Sep 26, 2019 11:03 am

One of the problems with a study like this is that it doesn't take into account the knowledge, awareness, or education of the parties surveyed.

My in-laws were able to save money most years from Social Security and a very tiny pension. They could have spent more, but did not understand that. They did not understand the stock market or investments in general. A few years before his death, my FIL expressed regret at being cheap his whole life, and wished he had done things differently. He then expressed a desire to give away tens of thousands of dollars, which given the uncertainty of his future care needs, we talked him out of.
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Re: Half of Retirees Afraid to Use Savings

Post by carolinaman » Thu Sep 26, 2019 11:44 am

I have been retired 9 years (age 75). I have 2 pensions and SS which still more than cover our living expenses and maintenance and repair items. My goal was to not touch our savings for at least 5 years which was easily achieved. We did purchase 2 vehicles from savings and paid for a major kitchen remodel from savings. Even with all of that, our savings has increased by 61% with a 40/60 AA.

My pensions are non COLA but we have been blessed with low inflation the last 9 years so I do not see the need to tap savings for living expenses for years. Also, we are now in the "Slo Go" stage of retirement and do not spend as much for travel, leisure, etc as we did 9 years ago.

I think I would have some anxiety on spending from savings if I did not have our other income sources. However, one in that position needs to do good financial planning to provide greater assurance that their money will last.

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Re: Half of Retirees Afraid to Use Savings

Post by MathWizard » Thu Sep 26, 2019 11:57 am

mickeyd wrote:
Thu Sep 26, 2019 10:18 am
After a brief time of me being reluctant to spend my retirement savings assets, I soon got over it and now DW and I spend away and keep an eye on the bottom line at the same time. What do most of you folks do?
A 2009 study estimated that by the time middle-income retirees are in their 80s, they still had not touched about three-fourths of their savings, and 2016 research found that retirees with substantial assets are the most reluctant spenders. Vanguard recently reported that retirees with very modest savings turn around and reinvest a third of the money they’re required to withdraw under IRS rules after age 70½.
https://squaredawayblog.bc.edu/squared- ... e-savings/
and 2016 research found that retirees with substantial assets are the most reluctant spenders.
1) The conclusion could have also been that the most reluctant spenders were those with the most substantial assets.
(Correlation is not causation.)

2) Most people will chose those SW rates from Trinity study which project failure rates of 2 to 4% (e.g. 4% rule)
But with such low failure rates, the median terminal value of the account ends up being very large, well
over double the initial portfolio value:

Code: Select all

https://www.onefpa.org/journal/Pages/Portfolio%20Success%20Rates%20Where%20to%20Draw%20the%20Line.aspx
E.g. 4% WR; 50/50 AA, 30 years: Table 2 shows 96% success rate, and Table 4 shows a median terminal value of nearly 3x the initial portfolio.

This point becomes pretty obvious when you consider that if you picked a WR where the median terminal value was at or near zero,
then the projected failure rate must by definition be 50% . (E.g. 50/50 AA 6% WR). This is clearly not acceptable, and could hardly be
called a sustainable withdrawal rate.

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Re: Half of Retirees Afraid to Use Savings

Post by MikeG62 » Thu Sep 26, 2019 12:58 pm

I did not read the article, so just responding to the thread title.

DW and I are in our 4th year of retirement. I do think it’s common to be nervous when moving from working and saving all ones life to living off one’s savings/investments. I addressed this nervousness by researching everything I couldn’t read on living off ones accumulated asset for well over a year before I retired. Developed an IPS and WPS (withdrawal policy statement). I prepare a detailed budget before the start of every year. Track actual expenses by month against the budget. While we spend what feels like a great deal (including lot’s of discretionary expenses, such as for travel and entertainment), the process I outlined provides great comfort to me that we are fine to spend as we are. In fact, we just had a large unplanned expense hit us this summer (replacement of septic field at cost of around $25K) and we did not blink an eye as we simply managed it within the discretionary spending bucket or our budget.

So to me this is a case where knowledge is power. With that knowledge comes great confidence that one can spend as planned. Without going through a process such as this - for example, such as relying on a someone else’s opinion, even that of a financial planner - I can understand why people would be reluctant to spend (i.e., afraid to use their savings).
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backofbeyond
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Re: Half of Retirees Afraid to Use Savings

Post by backofbeyond » Thu Sep 26, 2019 2:18 pm

A couple observations:

1. Best friend retired from Gov't with 34 years in, age 56. Did well in TSP and side investments. Wife continued to work. First 6 months, love it. Afterwards, hated it. No one his age was able to "play" during the day, as they were all working. Wife wasn't home. So he golfed, got sick of it. Got a part time job that paid 1/5 of what his previous salary was just for something to do. I asked him how his finances were holding up and he said he hasn't spent a dime of TSP or investments because it bothered him to watch the balances go down. He has over $2M and works for $9 an hr now. :shock:

2. Father retired at 55. Successful RE investor. Net Worth around $750K...in 1973. Only pension was SS and VA. Lived to be 85. All he had left was his house when he died and the two small pensions. All 5 of his children offered to have him live with them or help pay for a retirement home. He refused. Too proud. Ended up taking an overdose of meds vs losing his freedom/independence.

3. Sister just retired after 20 years with Govt. Has a small FERS) pension, SS and decent size TSP ($300k ish). Had two RE investments that she got in a divorce 22 years ago. Lives on $800 a month, drives a 15 year old car, shops at Goodwill. Refuses to sell any RE. Refused to touch TSP balance. As she wanted to leave something to her two kids. One is married to a millionaire, the other is about ready to retire from the Coast Guard. Recently the son in the CG asked for a loan from his inheritance as he wanted to buy a new truck and camper for a steal ($75K). Fourth new vehicle in 4 years. Opened up my sister's eyes on how her hard earned life savings would be spent. Now decides to spend some money enjoying traveling with us and taking her grandchildren on side trips while she is alive.

Three different insights on how peeps deal with drawing down Savings.
The question isn't at what age I want to retire, it is at what income. - George Foreman

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Re: Half of Retirees Afraid to Use Savings

Post by drawpoker » Thu Sep 26, 2019 2:40 pm

mickeyd wrote:
Thu Sep 26, 2019 10:18 am



.... and 2016 research found that retirees with substantial assets are the most reluctant spenders. .....
What's so surprising about that? The rich are notorious for being tight-fisted, stingy, penny pinching skinflints.

True story: Close relative of mine asked me what to do about the stink coming from her garbage disposal. In the kitchen of her luxurious CCRC cottage.

I said buy a few lemons next time at the grocery store. When you get home, take one and cut it up into one-eighth sections, peel and all. Throw it down the disposal and grind it up with a few ice cubes. Do this for a minute or so every week, no more bad smells, both the underside of the flapper and the blades themselves will get a thorough scrubbing. No more food debris, particles, clinging behind, leaving the nasty odors.

Her response? "What? Throw away lemons? Perfectly good lemons! Who would do such a thing, not me, that's ridiculous".

At the time, the going rate for lemons was around 20 cents each. As I recall. :mrgreen:

StandingRock
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Re: Half of Retirees Afraid to Use Savings

Post by StandingRock » Thu Sep 26, 2019 2:45 pm

Maybe they don't want anything. I bet 99.99% of them would spend it all in one pop to be 18 again.

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Re: Half of Retirees Afraid to Use Savings

Post by JackoC » Thu Sep 26, 2019 2:58 pm

rich126 wrote:
Thu Sep 26, 2019 10:35 am
I'm sure it can be a tough thing to do. Spend down something that you can't replace. Of course while some of those people would probably have a more enjoyable retirement if they spent some money, many obviously can live w/o touching it. Most people can't afford not to spend savings if they want to survive, although that assumes they even have any money saved for retirement.
Seems to me a common situation that BH's wouldn't naturally think of would be people with relatively little savings, who are basically surviving on Social Security and pensions. That's in contrast to the average relatively younger and relatively well off BH where the standard is generally to not expect a private pension and even be uncertain about receiving SS (not to debate the merits of that concern) but anyway savings will have to provide a lot or most of their retirements. But a person basically getting by on SS/pension with a bit set aside for emergencies wouldn't be as likely to spend that emergency money.

In between I think of my late parents. They each had pretty generous public employee pensions, plus fairly significant assets, over $1mil which included their house but this was also 20+ yrs ago's $'s. While my dad was around he kept all financial stuff to himself but after he passed I had to help my mom unsnarl the rat's nest (generally successful investing, but all over the place with no master list of what was where) and then could see she was steadily adding to savings from SS+pension. I guess they generally had been ever since retired.

My mom in particular was psychologically scarred by the Great Depression: her family went from upper middle class to a long struggle not to be out on the street. So she was quite afraid of running out of money. OTOH they lived completely comfortably, not wild spenders but not super-frugal like some internet people at least claim to be nowadays, on just pension and SS, though also without a monthly mortgage or rent payment.

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Re: Half of Retirees Afraid to Use Savings

Post by bhsince87 » Thu Sep 26, 2019 3:38 pm

That would be me! :(

I've only been retired for 10 months. I'm starting to get more comfortable with the thought, but still....

I retired at 53, wife was planning to retire in July, but her job got extended, possibly until July next year. So that has impacted original plans quite a bit.

Original plan was to try a 3% WR, and then bump that up to about 3.5% if/when we needed ACA insurance and couldn't get subsidies.

I'll get a small, non cola pension at 65 (about $9k per year). SS should be around $50k combined if we wait till 70.

Latest plan is to just spend interest and dividends for a few years and see how that goes. So far, I'm having trouble doing even that. Spent less than half so far this year. So maybe about a 1% rate!

We really haven't needed to cut back, and in fact, have been trying to spend a bit more. We took an extra 5 day vacation this year, and have been eating out a couple times a month.

Still spending on hobbies, but have been reluctant to spend $4k on a camera lens I'd really like to have! Tried fishing, which I used to love, but it just didn't "catch" with me this year. Maybe next year it will.

I'm also toying with getting a part time job or do some contract/freelance work. I still miss "being in the game", so to speak, so maybe that's affecting things too.

Hoping I'll be more comfortable spending after we are both retired and have some time living entirely from investments under our belts.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

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Re: Half of Retirees Afraid to Use Savings

Post by Watty » Thu Sep 26, 2019 3:43 pm

Half of Retirees Afraid to Use Savings
Pretty much by definition half of retirees will get higher than expected investing returns which may be more than their spending.

When you look at the 4% safe withdrawal rate studies a high percentage of people will have a lot more after 30 years than they started out with.

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Re: Half of Retirees Afraid to Use Savings

Post by jebmke » Thu Sep 26, 2019 3:51 pm

Retired in December, 2007 with 10-years ahead with no pension and no SS. No choice but to spend savings.
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Re: Half of Retirees Afraid to Use Savings

Post by jose » Thu Sep 26, 2019 4:20 pm

I propose an explanation, and a solution:

1. People are either spenders or savers. Few are in the gray area. This is a permanent trait.

2. Spenders are likely to spend all they have, both before and after retirement.

3. Savers are reluctant to spend, both before and after retirement. (This explains the phenomenon).

I am a saver and, because of a number of reasons (philosophical, ethical) believe that everyone should be reluctant to spending needlessly, regardless of their wealth. Our ever wanting more and chronic consumption is the cause of most of our problems. We should change our mentality from "more" to "enough".

jose

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Re: Half of Retirees Afraid to Use Savings

Post by Smoke » Thu Sep 26, 2019 5:19 pm

We spend on what we need and what we want, if our portfolio is larger than our needs/wants...We don't see that a bad thing.
I leave the worry about the subject to those who like to make reports, charts, click bait etc.
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Re: Half of Retirees Afraid to Use Savings

Post by RadAudit » Thu Sep 26, 2019 5:26 pm

backofbeyond wrote:
Thu Sep 26, 2019 2:18 pm
Sister just retired after 20 years ... Opened up my sister's eyes on how her hard earned life savings would be spent. Now decides to spend some money enjoying traveling with us and taking her grandchildren on side trips while she is alive.
Another one to add to the list. Once close relatives believe you have enough money, they come up with reasons why they need some of it. In some cases, it is difficult to say no. i.e.: Kids who made a U-turn and had to come back home before a re-launch, grandkids' education because the parents didn't save, etc.

Now, some may find it easy to say no. Others may be less inclined to avoid helping out when funds are available. It's the unknowns of retirement spending / life that give some folks pause in using savings too soon.
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Re: Half of Retirees Afraid to Use Savings

Post by One Ping » Thu Sep 26, 2019 5:32 pm

Dantes wrote:
Thu Sep 26, 2019 10:58 am
I don't think "afraid" is quite justified here. Not spending money you don't need to spend is a perfectly reasonable response to the uncertainties of the future, including long term and terminal care. Reinvesting RMD's that you don't need is a fine thing to do.
[emphasis added, above] I think this is a key observation. Not afraid, just prudent.
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Re: Half of Retirees Afraid to Use Savings

Post by BarbBrooklyn » Thu Sep 26, 2019 7:19 pm

Oh lord, afraid, hesitant... scared to death! Of 1929, 2008 Germany in the 1930s and 1970s inflation.

I'm retired less than a year and have a pension, spousal SS. I have substantial 403b, IRA and 457 funds. Am not wanting to spend any of it.

The thing is, you KNOW when you're going to retire. You KNOW when your kids will graduate from college.

You don't know when you are going to die or if your spouse or you will develop dementia and need expensive long term care.

It's the unknown stuff that makes for terror and hesitancy.
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Re: Half of Retirees Afraid to Use Savings

Post by alec » Thu Sep 26, 2019 7:51 pm

livesoft wrote:
Thu Sep 26, 2019 10:38 am
From the article about the study
Many of the study’s findings seem like common sense.
:D :D :D :D
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Re: Half of Retirees Afraid to Use Savings

Post by TheEleven » Thu Sep 26, 2019 7:57 pm

Unless you're quite well off in retirement I can see penny pinching. There could be hundreds of thousands in health/long term care issues ahead, you don't just know. You might save and leave a big chunk on the table at death, or you might spend down and end up in a really lousy health care situation that may arise late in retirement that you wish you saved for. Not that much of an issue for a lot of Bogleheads, it would seem, but I will probably be very conservative when retirement comes, maybe more than I'll need to. But penny pinching doesn't have to mean not being happy.

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Re: Half of Retirees Afraid to Use Savings

Post by delamer » Thu Sep 26, 2019 8:05 pm

jose wrote:
Thu Sep 26, 2019 4:20 pm
I propose an explanation, and a solution:

1. People are either spenders or savers. Few are in the gray area. This is a permanent trait.

2. Spenders are likely to spend all they have, both before and after retirement.

3. Savers are reluctant to spend, both before and after retirement. (This explains the phenomenon).

I am a saver and, because of a number of reasons (philosophical, ethical) believe that everyone should be reluctant to spending needlessly, regardless of their wealth. Our ever wanting more and chronic consumption is the cause of most of our problems. We should change our mentality from "more" to "enough".

jose
We’ve always saved first and lived on the rest. But as our income has grown and some major expenses are behind us (college for the kids and an almost-paid-off house), we’ve spent more on things/experiences.

But we aren’t buying more, but rather are spending on higher quality things/experiences.

So I’d argue that more spending doesn’t always mean more acquiring stuff. For example, you may spend more on apples because you choose to buy organic apples, not because you are buying more apples.

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Re: Half of Retirees Afraid to Use Savings

Post by JoeRetire » Thu Sep 26, 2019 8:14 pm

mickeyd wrote:
Thu Sep 26, 2019 10:18 am
After a brief time of me being reluctant to spend my retirement savings assets, I soon got over it and now DW and I spend away and keep an eye on the bottom line at the same time. What do most of you folks do?
A 2009 study estimated that by the time middle-income retirees are in their 80s, they still had not touched about three-fourths of their savings, and 2016 research found that retirees with substantial assets are the most reluctant spenders. Vanguard recently reported that retirees with very modest savings turn around and reinvest a third of the money they’re required to withdraw under IRS rules after age 70½.
https://squaredawayblog.bc.edu/squared- ... e-savings/
I'm not afraid to spend my savings.

But I may very well fall into the "had not touched about three-fourths of their savings" category when I get to my 80s. And I may very well decide to reinvest some of the RMD withdrawals. Why on earth would I spend more than I need while still enjoying the lifestyle I choose?

That's not being reluctant. That's having plenty of savings and spending what I choose.

Sorry if I'm helping to skew the statistics.

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Re: Half of Retirees Afraid to Use Savings

Post by JoeRetire » Thu Sep 26, 2019 8:20 pm

drawpoker wrote:
Thu Sep 26, 2019 2:40 pm
What's so surprising about that? The rich are notorious for being tight-fisted, stingy, penny pinching skinflints.
That might be true of some, but overall it's a silly stereotype.

I know plenty of very wealthy folks. With very few exceptions, they are all extremely generous.

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Re: Half of Retirees Afraid to Use Savings

Post by bhsince87 » Thu Sep 26, 2019 9:37 pm

BarbBrooklyn wrote:
Thu Sep 26, 2019 7:19 pm
Oh lord, afraid, hesitant... scared to death! Of 1929, 2008 Germany in the 1930s and 1970s inflation.

I'm retired less than a year and have a pension, spousal SS. I have substantial 403b, IRA and 457 funds. Am not wanting to spend any of it.

The thing is, you KNOW when you're going to retire. You KNOW when your kids will graduate from college.

You don't know when you are going to die or if your spouse or you will develop dementia and need expensive long term care.

It's the unknown stuff that makes for terror and hesitancy.
Unfortunately, many people don't even know when they're going to retire! We read about it on here every day.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

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Re: Half of Retirees Afraid to Use Savings

Post by randomguy » Thu Sep 26, 2019 9:52 pm

mickeyd wrote:
Thu Sep 26, 2019 10:18 am
After a brief time of me being reluctant to spend my retirement savings assets, I soon got over it and now DW and I spend away and keep an eye on the bottom line at the same time. What do most of you folks do?
A 2009 study estimated that by the time middle-income retirees are in their 80s, they still had not touched about three-fourths of their savings, and 2016 research found that retirees with substantial assets are the most reluctant spenders. Vanguard recently reported that retirees with very modest savings turn around and reinvest a third of the money they’re required to withdraw under IRS rules after age 70½.
https://squaredawayblog.bc.edu/squared- ... e-savings/
Imagine we look at all retirees since 1980. How many of them would have 75% of their savings if they invested like 30/70 and were using a 5 or 6% SWR? Other than the few who retired in 2000-2, pretty much all of them. I just don't think very many people are going to ramp up their spending in their 80s no matter how much money they have so this end result isn't too shocking to me.

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Re: Half of Retirees Afraid to Use Savings

Post by Gnirk » Thu Sep 26, 2019 10:13 pm

I don't spend much of my retirement savings...perhaps a half % per year, on average, in addition to a small cola'd pension and small social security. This year I splurged on a river cruise in southern France for DH, me, and my two daughters to celebrate a milestone birthday.

One of the reasons I am reluctant to spend is that Alzheimer's seems to run in my family, and those who have had it have needed 8-12 years or more of specialty care once the disease reaches the stage where they are unable to care for themselves, even with some help. I view my investments/savings as my Long Term Care "policy". Whatever is left will be my daughters' inheritance.

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Re: Half of Retirees Afraid to Use Savings

Post by drawpoker » Thu Sep 26, 2019 10:58 pm

BarbBrooklyn wrote:
Thu Sep 26, 2019 7:19 pm
.... afraid, hesitant... scared to death! Of 1929, 2008 Germany in the 1930s and 1970s inflation......
....terror and hesitancy......
Hey, you left out Black Monday! Oct. 19, 1987. Worst Percentage 1 Day Drop In History of the Dow. Er, remember? Or maybe not hair-raising enough for you to put on your list :? :?

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Re: Half of Retirees Afraid to Use Savings

Post by DonIce » Thu Sep 26, 2019 11:15 pm

A lifetime of saving and investing builds a habit that is hard to break. Those who successfully accumulated substantial assets for retirement have obviously built that habit, probably over 30-40 years. Humans aren't known for easily changing their lifelong behaviors and habits once they are in their 60s.

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Re: Half of Retirees Afraid to Use Savings

Post by willthrill81 » Thu Sep 26, 2019 11:57 pm

IMHO, there's a very simple explanation for this: most retirees didn't save nearly enough for retirement, and they are justly concerned with spending any of their relatively small nest egg.

The net worth of those aged 65-69, excluding home equity, at the 70th percentile is just $300k. Retirees with this much in their portfolio should justly be concerned about sudden, major expenses arising that would require all of those funds and possibly more, such as a long-term event (for either spouse, if married) or family emergency.

Those who saved enough have the luxury of being able to use their portfolio to live on. Those who didn't must often hoard what little they have just to keep afloat.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Half of Retirees Afraid to Use Savings

Post by BarbBrooklyn » Fri Sep 27, 2019 1:42 am

drawpoker wrote:
Thu Sep 26, 2019 10:58 pm
BarbBrooklyn wrote:
Thu Sep 26, 2019 7:19 pm
.... afraid, hesitant... scared to death! Of 1929, 2008 Germany in the 1930s and 1970s inflation......
....terror and hesitancy......
Hey, you left out Black Monday! Oct. 19, 1987. Worst Percentage 1 Day Drop In History of the Dow. Er, remember? Or maybe not hair-raising enough for you to put on your list :? :?
Yep, I do. It was a singularity, as I recall, not a sustained period of misery. Or am I wrong?
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Re: Half of Retirees Afraid to Use Savings

Post by usagi » Fri Sep 27, 2019 2:03 am

BarbBrooklyn wrote:
Thu Sep 26, 2019 7:19 pm
Oh lord, afraid, hesitant... scared to death! Of 1929, 2008 Germany in the 1930s and 1970s inflation.

I'm retired less than a year and have a pension, spousal SS. I have substantial 403b, IRA and 457 funds. Am not wanting to spend any of it.

The thing is, you KNOW when you're going to retire. You KNOW when your kids will graduate from college.

You don't know when you are going to die or if your spouse or you will develop dementia and need expensive long term care.

It's the unknown stuff that makes for terror and hesitancy.
Sadly I concur. Especially in regard to your last sentence. Even worse, perhaps, is fear of a negative future for your grandchildren which often "we" attempt to mitigate by passing on a legacy.

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Re: Half of Retirees Afraid to Use Savings

Post by Derpalator » Fri Sep 27, 2019 5:30 am

jose wrote:
Thu Sep 26, 2019 4:20 pm
I propose an explanation, and a solution:

1. People are either spenders or savers. Few are in the gray area. This is a permanent trait.

2. Spenders are likely to spend all they have, both before and after retirement.

3. Savers are reluctant to spend, both before and after retirement. (This explains the phenomenon).

I am a saver and, because of a number of reasons (philosophical, ethical) believe that everyone should be reluctant to spending needlessly, regardless of their wealth. Our ever wanting more and chronic consumption is the cause of most of our problems. We should change our mentality from "more" to "enough".

jose
Sorry, and with all due respect, I do not agree. When I was younger and financially ignorant I spent every dime I made and also went into consumer debt and at times considered bankruptcy. By forty income had increased and first, as usual, spent wildly until about after two years realized my possessions were beginning to own me. Finally began putting away some for a rainy day and at age 45 signed up for 401k!!!. Began to investigate this "investing" thing. Found MoneyChimp, Mr. Money Mustache, and from there, the Bogleheads forum. Began to consistently save, being able to ramp up to 70% percent of earnings (after tax) over the next 5 years while raising 4 children, owning 2-3 houses, and going on 4-6 weeks of international vacations per year. During this time net worth and returns have tracked the market due to index investing and the three fund portfolio. Fear and ignorance have been dispatched and replaced with confidence in this forum and in the machinery of capitalism providing dividends and capital gains at minimal cost. I can never repay Bogleheads for their guidance and wisdom for they have truly changed my life.

Point being, people CAN wake up and change from being a spender to a saver.

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Re: Half of Retirees Afraid to Use Savings

Post by cherijoh » Fri Sep 27, 2019 7:07 am

mickeyd wrote:
Thu Sep 26, 2019 10:18 am
After a brief time of me being reluctant to spend my retirement savings assets, I soon got over it and now DW and I spend away and keep an eye on the bottom line at the same time. What do most of you folks do?
A 2009 study estimated that by the time middle-income retirees are in their 80s, they still had not touched about three-fourths of their savings, and 2016 research found that retirees with substantial assets are the most reluctant spenders. Vanguard recently reported that retirees with very modest savings turn around and reinvest a third of the money they’re required to withdraw under IRS rules after age 70½.
https://squaredawayblog.bc.edu/squared- ... e-savings/
One thing to consider is whether any of these retirees had generous pensions. (Anyone in their 80s in 2009, probably retired in the 1980's or early 90's). I suspect that the ones VG references with modest IRAs being reinvested may have started saving in such plans mid-career (when their employer began offering them) but could also have been covered by a traditional DB pension. I know my parents barely touched their savings because pension + SS covered all their non-discretionary and most of their discretionary spending. Studies such as this that look at only one leg of the 3-legged stool can easily present a distorted picture.

I recall reading one study about 401k balances vs. age showing how inadequate most people's balances were - with insufficient progression from one age cohort to the next. But the study did not account for rollover IRAs and hence didn't reflect the total picture of people switching jobs and starting over in their 401ks. At the time, I was a few years into a new job and while I had been maxing the 401k plus catch-ups, the balance wasn't all that impressive. In fact, it was right in line with the study's numbers for my age cohort. But my rollover IRA balance was larger than my 401k balance by a factor of 5X - 6X IIRC.

Studies can analyze the heck out of the data they have without questioning whether they have the correct data to draw the conclusions they have made.

People may indeed be afraid to use their savings for fear of needing to go into a nursing home or in a desire to provide a legacy to their children. But I'd take the numbers with a grain of salt.

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Re: Half of Retirees Afraid to Use Savings

Post by MikeG62 » Fri Sep 27, 2019 7:40 am

JoeRetire wrote:
Thu Sep 26, 2019 8:14 pm

...Why on earth would I spend more than I need while still enjoying the lifestyle I choose?

That's not being reluctant. That's having plenty of savings and spending what I choose.
The key is living the lifestyle you choose. For many/most people, their choices are governed by their available resources. And available resources is a subjective thing. Thus the issue for many people (who are afraid to spend).

Let me give an example. My in-laws (in their early 80's) just retuned to NY from a one-week trip to California (visiting family). My wife told me on the morning of their flight home that they had booked a flight departing at 6am. This meant they needed to be at the airport at 4am. Since they were staying with family who live 45 minutes from LAX, they probably had to get up around 2:30am to make that flight. My in-laws are not early birds - they typically sleep until 9am. My wife was shaking her head in disbelief that they would put themselves through that versus taking a flight that would allow them a decent nights sleep the night before. They have all the time in the world. Nothing to rush to get home to. I told her the reason was the cost of the flight. They simply choose the cheapest non-stop flight available on that day. Maybe saved a $100 per ticket. These are people who lived an upper middle class lifestyle - they in fact own two homes (and have for 30 years). Could they have afforded a slightly more expensive ticket? Sure. Yet they choose this ridiculously early flight because it was cheaper. There is no doubt that they spend less than they can afford. Why? Fear of the unknown. Don't want to die in poverty. Always lived frugally. I think they fit the mold of the folks who were surveyed in the OP's initial post.
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Re: Half of Retirees Afraid to Use Savings

Post by drawpoker » Fri Sep 27, 2019 12:42 pm

Hmmmm. Your wife is shaking her head, huh.
FWIW, I am not in my eighties (only 70) but I would get up 6 hours early to save $200. Happily :D

After all, it was a non-stop, they can sleep on the plane.

You call it ridiculous to save $200?

Get real. Like, if they took the packs of free peanuts and saved them to give away as Christmas presents. To the grandkids.
That would be something, um, frugal, to write about.

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Re: Half of Retirees Afraid to Use Savings

Post by MikeG62 » Fri Sep 27, 2019 1:54 pm

drawpoker wrote:
Fri Sep 27, 2019 12:42 pm
Hmmmm. Your wife is shaking her head, huh.
FWIW, I am not in my eighties (only 70) but I would get up 6 hours early to save $200. Happily :D

After all, it was a non-stop, they can sleep on the plane.

You call it ridiculous to save $200?

Get real. Like, if they took the packs of free peanuts and saved them to give away as Christmas presents. To the grandkids.
That would be something, um, frugal, to write about.
Perhaps you missed the point about their owning two homes - one on the beach worth over $1 million. The $200 is meaningless to them in the grand scheme of things. I would not do what they did to take a flight at 6am if it were free. They have done stuff like this before and they complaint afterwards about how tired they are for days after. To add insult to injury they often do this on both legs of their trips. Ridiculous

To each their own I guess.
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Re: Half of Retirees Afraid to Use Savings

Post by drawpoker » Fri Sep 27, 2019 2:26 pm

MikeG62 wrote:
Fri Sep 27, 2019 1:54 pm
Perhaps you missed the point about their owning two homes - one on the beach worth over $1 million. The $200 is meaningless to them in the grand scheme of things......
No, did not miss that. Altho, you did not list in your first post the $1 mil value on one house.

Still, what difference does that make? Doesn't change my view.

Here's the point you and your wife seem to be missing. People who have practiced living frugally, the LBYM BH philsophy, all their lives are not going to change those habits when they reach old age. At least they shouldn't. If they do (as is being amply and scarily demonstrated in the other thread going here about MIL suddenly thinking she is rich) this is a sign they are starting to become a quart low, a couple sandwiches short of a picnic, i.e., undergoing cognitive changes that are affecting their thinking about financial matters.

You look at it and say the $200 is meaningless to them in the grand scheme. Well, obviously it isn't meaningless to them! And the meaning, or lack of, is really only important to them, isn't it. Not you, your wife, or anyone else's business.

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Re: Half of Retirees Afraid to Use Savings

Post by willthrill81 » Fri Sep 27, 2019 2:56 pm

usagi wrote:
Fri Sep 27, 2019 2:03 am
BarbBrooklyn wrote:
Thu Sep 26, 2019 7:19 pm
Oh lord, afraid, hesitant... scared to death! Of 1929, 2008 Germany in the 1930s and 1970s inflation.

I'm retired less than a year and have a pension, spousal SS. I have substantial 403b, IRA and 457 funds. Am not wanting to spend any of it.

The thing is, you KNOW when you're going to retire. You KNOW when your kids will graduate from college.

You don't know when you are going to die or if your spouse or you will develop dementia and need expensive long term care.

It's the unknown stuff that makes for terror and hesitancy.
Sadly I concur. Especially in regard to your last sentence. Even worse, perhaps, is fear of a negative future for your grandchildren which often "we" attempt to mitigate by passing on a legacy.
I would humbly suggest reading this book.

Image
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Half of Retirees Afraid to Use Savings

Post by MikeG62 » Fri Sep 27, 2019 3:29 pm

drawpoker wrote:
Fri Sep 27, 2019 2:26 pm
MikeG62 wrote:
Fri Sep 27, 2019 1:54 pm
Perhaps you missed the point about their owning two homes - one on the beach worth over $1 million. The $200 is meaningless to them in the grand scheme of things......
No, did not miss that. Altho, you did not list in your first post the $1 mil value on one house.

Still, what difference does that make? Doesn't change my view.

Here's the point you and your wife seem to be missing. People who have practiced living frugally, the LBYM BH philsophy, all their lives are not going to change those habits when they reach old age. At least they shouldn't. If they do (as is being amply and scarily demonstrated in the other thread going here about MIL suddenly thinking she is rich) this is a sign they are starting to become a quart low, a couple sandwiches short of a picnic, i.e., undergoing cognitive changes that are affecting their thinking about financial matters.

You look at it and say the $200 is meaningless to them in the grand scheme. Well, obviously it isn't meaningless to them! And the meaning, or lack of, is really only important to them, isn't it. Not you, your wife, or anyone else's business.
I understand your point, it's simply force of habit. They search for the airline tickets and they instinctively select the cheapest non-stop flight.

Remember, I used them as an example of the type of person surveyed in the Center for Retirement Research article. They are clearly not like their daughter (my DW). When all is said and done, they can either spend their money or their daughters will after they are gone. It's their choice. If given to their daughters it won't be spent on 6am flights or early bird dinner specials - I can assure you of that.
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Re: Half of Retirees Afraid to Use Savings

Post by abuss368 » Fri Sep 27, 2019 3:30 pm

mickeyd wrote:
Thu Sep 26, 2019 10:18 am
After a brief time of me being reluctant to spend my retirement savings assets, I soon got over it and now DW and I spend away and keep an eye on the bottom line at the same time. What do most of you folks do?
A 2009 study estimated that by the time middle-income retirees are in their 80s, they still had not touched about three-fourths of their savings, and 2016 research found that retirees with substantial assets are the most reluctant spenders. Vanguard recently reported that retirees with very modest savings turn around and reinvest a third of the money they’re required to withdraw under IRS rules after age 70½.
https://squaredawayblog.bc.edu/squared- ... e-savings/
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Re: Half of Retirees Afraid to Use Savings

Post by delamer » Fri Sep 27, 2019 3:39 pm

drawpoker wrote:
Fri Sep 27, 2019 2:26 pm
MikeG62 wrote:
Fri Sep 27, 2019 1:54 pm
Perhaps you missed the point about their owning two homes - one on the beach worth over $1 million. The $200 is meaningless to them in the grand scheme of things......
No, did not miss that. Altho, you did not list in your first post the $1 mil value on one house.

Still, what difference does that make? Doesn't change my view.

Here's the point you and your wife seem to be missing. People who have practiced living frugally, the LBYM BH philsophy, all their lives are not going to change those habits when they reach old age. At least they shouldn't. If they do (as is being amply and scarily demonstrated in the other thread going here about MIL suddenly thinking she is rich) this is a sign they are starting to become a quart low, a couple sandwiches short of a picnic, i.e., undergoing cognitive changes that are affecting their thinking about financial matters.

You look at it and say the $200 is meaningless to them in the grand scheme. Well, obviously it isn't meaningless to them! And the meaning, or lack of, is really only important to them, isn't it. Not you, your wife, or anyone else's business.
So the fact that my husband and I now fly business class on long trips — when we used to fly coach — is evidence that we are cognitively impaired?

It couldn’t be because we are more financially secure than we were 20 years ago and put a higher value on our comfort than on the marginal cost difference?

Sure, people who want to get up at 2:00 am for a flight because that’s what they’ve always done get to live how they prefer. But to suggest that someone in identical circumstances is impaired because they have changed their habits is ridiculous.

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Re: Half of Retirees Afraid to Use Savings

Post by JBTX » Fri Sep 27, 2019 3:55 pm

Somebody using a 4% rule Would look like they were afraid to spend in recent history. Portfolio returns have generally exceeded 4%.

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Re: Half of Retirees Afraid to Use Savings

Post by drawpoker » Fri Sep 27, 2019 4:14 pm

MikeG62 wrote:
Fri Sep 27, 2019 3:29 pm

...it's simply force of habit. They search for the airline tickets and they instinctively select the cheapest non-stop flight....
..used them as an example of the type of person surveyed in the Center for Retirement Research article...When all is said and done, they can either spend their money or their daughters will after they are gone. It's their choice. If given to their daughters it won't be spent on 6am flights or early bird dinner specials - I can assure you of that.
This really amounts to a diff. of opinion among the diff. generations posting here. Like so many of the forums here on BH, the younger generation and the old folks are going to hold diff. opinions.

Nothing wrong with what you say for your own position. I agree totally for younger people still working at their careers, millennials, Generation X or Y, whatever, time can be more important than money. They are willing to spend a little more to achieve more benefit from a much-needed vacation or rest. Time off from demanding jobs that consume so much of their hours. I get that.

Of course you and your wife deserve to make those choices. Yes, forget the 6 am flights.

However, when you are no longer working, retired, in your eighties - and assuming you are still solvent :wink: - you might think very differently about those 6 am flights that save $200.

Also, may I point out something else about those early bird, 4 or 5 PM senior specials dinners out? It is not always the cheaper cost at play. Old folks, even in seemingly good health, are advised not to eat their big meal of the day at dinner. Much better for digestion and sleep to eat a little later in the day, or early in the evening than the young'ins.

Have you ever asked them about it?

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Re: Half of Retirees Afraid to Use Savings

Post by Dead Man Walking » Fri Sep 27, 2019 5:13 pm

The bad thing about those early bird specials at 4 pm is that I am hungry at 10 pm! Fortunately, I can eat pizza with hot peppers and pepperoni at 10:30 pm and sleep well. I may be an atypical septuagenarian.

I would suggest that their is a difference between savers and investors. I’m an investor who understands asset allocation; therefore, my portfolio includes equities, bonds, CDs, and cash. I know retirees who are savers that only have bank savings investments and savings bonds. They may be the fearful ones.

DMW

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Re: Half of Retirees Afraid to Use Savings

Post by MikeG62 » Fri Sep 27, 2019 5:17 pm

drawpoker wrote:
Fri Sep 27, 2019 4:14 pm
MikeG62 wrote:
Fri Sep 27, 2019 3:29 pm

...it's simply force of habit. They search for the airline tickets and they instinctively select the cheapest non-stop flight....
..used them as an example of the type of person surveyed in the Center for Retirement Research article...When all is said and done, they can either spend their money or their daughters will after they are gone. It's their choice. If given to their daughters it won't be spent on 6am flights or early bird dinner specials - I can assure you of that.
This really amounts to a diff. of opinion among the diff. generations posting here. Like so many of the forums here on BH, the younger generation and the old folks are going to hold diff. opinions.

Nothing wrong with what you say for your own position. I agree totally for younger people still working at their careers, millennials, Generation X or Y, whatever, time can be more important than money. They are willing to spend a little more to achieve more benefit from a much-needed vacation or rest. Time off from demanding jobs that consume so much of their hours. I get that.

Of course you and your wife deserve to make those choices. Yes, forget the 6 am flights.

However, when you are no longer working, retired, in your eighties - and assuming you are still solvent :wink: - you might think very differently about those 6 am flights that save $200.

Also, may I point out something else about those early bird, 4 or 5 PM senior specials dinners out? It is not always the cheaper cost at play. Old folks, even in seemingly good health, are advised not to eat their big meal of the day at dinner. Much better for digestion and sleep to eat a little later in the day, or early in the evening than the young'ins.

Have you ever asked them about it?
I understand your point and generally agree. I see it with my parents too (who are mid to late 80's). They pinch pennies even though they don't need to - just the way they've been their entire lives. Their assets grow every year because their pensions and SS and investment income exceeds their expenses. I wish they'd spent more when they were younger (the first 10-20 years of their retirement), instead of simply accumulating more assets to ultimately give to their kids. However, they chose to live their life their way. Their choice. I hope they don't regret it on their death beds. I'd personally have gotten more joy out of having seen them spend more on experiences for themselves than ultimate bequeathing it to me and my siblings (for us to spend on experiences for ourselves).

FWIW, DW and I are completing our 4th year of early retirement this year. I am 57 and she is 55. So I am not in the cohort of people willing to spend a bit more because I have precious little time off.

For my DW and I, we lived well below our means while I worked, but far from frugally. I chose to wait to retire until we could live the life we wanted the way we want to live it. I often characterize it as saying, we lived below our means while I worked and we are now living up to the level of our means in retirement.
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Re: Half of Retirees Afraid to Use Savings

Post by willthrill81 » Fri Sep 27, 2019 5:31 pm

MikeG62 wrote:
Fri Sep 27, 2019 5:17 pm
I understand your point and generally agree. I see it with my parents too (who are mid to late 80's). They pinch pennies even though they don't need to - just the way they've been their entire lives. Their assets grow every year because their pensions and SS and investment income exceeds their expenses. I wish they'd spent more when they were younger (the first 10-20 years of their retirement), instead of simply accumulating more assets to ultimately give to their kids. However, they chose to live their life their way. Their choice. I hope they don't regret it on their death beds.
I've heard the 'don't do something you'll regret on your death bed' idea before, and maybe this is too philosophical for this forum, but I'm no longer convinced that that should be the driving force behind any choice we make. Why should it matter whether I'll regret something for a matter of hours or days? Is it not far more important that we are content with the choices we make during the decades that represent the bulk of most of our lives?

If your parents have been truly content living a life of frugality, then I think that that carries much more weight than whether they briefly regret it 'on their death bed'.

What initially got me thinking about this was a small-scale poultry farmer talking about slaughtering his birds. He talked about providing them with lots of space to do what they naturally want to do, feeding them well, etc. As he put it, nearly all their lives are generally ideal for them, and then they have one bad day, really one bad moment. Now while I know that we aren't poultry, I think that there is a lesson to be learned there.
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Re: Half of Retirees Afraid to Use Savings

Post by drawpoker » Fri Sep 27, 2019 5:38 pm

Dead Man Walking wrote:
Fri Sep 27, 2019 5:13 pm
The bad thing about those early bird specials at 4 pm is that I am hungry at 10 pm! Fortunately, I can eat pizza with hot peppers and pepperoni at 10:30 pm ........
You old fool, at your age, you oughta be in bed by 10 PM :P :P (Just kidding)

Seriously, you make a good point about investors still in the game versus savers who just opt out in favor of CD's, bonds, and other either no-risk or low-risk vehicles. Obviously, those folks are not seeing real growth any more. Of course, they are also not seeing any white-knuckle days, market plunges, since they are out of the equities.

Fear? I am still in the game, at 70 riding a 65-30-5 AA split, dialed down from 70-30. But I still get fearful about the future. Just not enough to go to an all no-risk portfolio, tho.

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