Half of Retirees Afraid to Use Savings

[Atilla]

Unfortunately my mother is in the other half not afraid to use savings. 6-figures plus so far to keep her out of the van down by the river.

[usagi]

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.

Geez, 20 cents a lemon: must be nice to be rich. Lemons keep very well and often come on sale 20 for $1 at which time we stock up. 20 cents a lemon, must be nice - LOL.

More money for my ridiculously expensive soda habit (cane sugar is pricey)

[usagi]

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?

My mother said you went to the early bird to avoid families with small children - LOL.

[usagi]

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.

Those types of experiences can mark your decisions for a lifetime. Mother had two brothers she never saw again. They were given away to families that could provide for them around age 8 to work as farm laborers. Both perished in the War. It impacted my parents greatly.

In turn my family's fall from grace impacted me tremendously. It taints your perceptions.

[drawpoker]

..My mother said you went to the early bird to avoid families with small children - LOL.

My mother would take all the dinner rolls, muffins, cornbread or anything else in the bread basket and surreptitiously (she thought when no one was looking ) slip them into plastic baggies she had stashed in her pocketbook.

And, no, just like the pricey 20 cent lemons, she did not purchase new baggies for this purpose, just re-used them over and over. Not LOL to us!

[usagi]

..My mother said you went to the early bird to avoid families with small children - LOL.

My mother would take all the dinner rolls, muffins, cornbread or anything else in the bread basket and surreptitiously (she thought when no one was looking ) slip them into plastic baggies she had stashed in her pocketbook.

And, no, just like the pricey 20 cent lemons, she did not purchase new baggies for this purpose, just re-used them over and over. Not LOL to us!

Hey I reuse bags. Oddly I have found the bags you get frozen fish, bread wrappers, and the ziplock bags you get cheese in make far better freezer bags than actual freezer bags. I have checked and rechecked this. So now I save old bags...sigh...but they really are far (and I mean far) better.

[Whakamole]

..My mother said you went to the early bird to avoid families with small children - LOL.

My mother would take all the dinner rolls, muffins, cornbread or anything else in the bread basket and surreptitiously (she thought when no one was looking ) slip them into plastic baggies she had stashed in her pocketbook.

Most of that would be thrown out anyway, since the food has already been served. Your mom was a food waste protester before it was cool!

[drawpoker]

Ha, ha, very funny.

Did I neglect to mention she would grab everything out of the basket before the others at the table had served themselves?

[tooluser]

Each person gets to determine how their money is spent.

Unless they are mentally incompetent.
And excepting taxes of course.
Or are both of those the same thing, at least to those in charge?

And then there is theft as well, and burglary and robbery, either "white collar" or thuggish.

Emergencies, war, love. Forced spending at the extremes.

Most countries reserve the right to recall, devalue, inflate, or render illegal all legal tender at their whim.

Was it ever really yours to begin with?

Why are we here?

Did you have a good time? Were you supposed to?

[Gnirk]

My DH continues to be extremely frugal except when it comes to cars, even though he has no need to be, because he wants to leave a legacy to his kids! When we travel internationally, I pay for the both of us to fly business class, and he complains because he says it's way too much money and he'd be happy flying coach.

He has never flown coach internationally because I always buy business class tickets. With his severe arthritis, he would be miserable standing in long lines and cramped into an upright seat for 11 hours. With him it's the $$, with me, it's for our comfort and I can afford it.

I just smile and tell him that if I don't fly business class my kids certainly will. And his kids will inherit enough to fly first class for the rest of their lives!
Note: second marriage, separate finances.

[MikeG62]

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'.

That is the rub - my Mom has complained over the decades of the things she wished they would/could have done. I often hear her say, “I would have loved to have done this or loved to have done that”. So I’m not sure I’d say they were “truly content”. They got by. They lived more frugally then they needed to and made compromises along the way that resulted in her having these regrets. Now she is not on her death bed, but too old now (given her physical state) to go back and do the things she wished she had gotten to do. It’s not a moment in time that she’s felt this way either. Because the reality is they could have very easily afforded to do the things she regrets not having done, I find this sad. Their money will get spent one day, it just won’t be by them.

[MathIsMyWayr]

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.

If you are able to get the same thing done, why pay more? I often see Expensive cars pulling into the cheapest among four gas stations at an intersection and wait at the end of a long line. Oil billionaire Paul Getty used to go and wait until 4:00 pm for discounted early bird dinners. It is a lifelong habit.

[JoeRetire]

My mother would take all the dinner rolls, muffins, cornbread or anything else in the bread basket and surreptitiously (she thought when no one was looking ) slip them into plastic baggies she had stashed in her pocketbook.

Sounds like my late mother in law.

But she added butter, jams, salt, pepper - basically anything that wasn't tied down. She would even ask the server for extras, then take them home. And she didn't have any plastic baggies in her pocketbook. She just wrapped them up in a napkin.

Whenever we took her out to eat, she wanted to go to a restaurant near where I worked, because the portions were so large that she could "get three meals out of it". Ugh. What they lacked in quality, they made up for in quantity.

She was a "character". Clearly, growing up in the Depression left scars that never healed.

[TheNightsToCome]

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.

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.

"Father retired at 55. Successful RE investor. Net Worth around $750K...in 1973."

According to the calculator below, $750K in 1973 is equivalent to $4,333,750 today.

https://www.usinflationcalculator.com/

Your father was very wealthy at 55 but his portfolio did not survive a 30-year retirement. That's a cautionary tale.

[MathIsMyWayr]

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'.

Don't be carried away by things superficial: the brevity of the moment does not diminish the depth of meaning. 'Regret on your death bed' is like a moral compass or the North Star. The only problem is that we mortals usually do not find one until it is too late.

[BogleFanGal]

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.

Yes and no. When I read this, I thought "heck yeah - I'd save $200 in a heartbeat with an earlier flight." (Although I'd have gladly passed up those savings if it meant a red eye.) But it IS other people's business when you impact their lives to save your buck. If their family had to get up ridiculously early to drive them to the airport, it's a selfish choice. Take a uber or cab, so others aren't paying for your bargain. If MikeG62 had to listen to their complaints afterwards about how tired they were - when the inlaws knew exactly what the tradeoff would be to get the better deal- they made it his business too.

It's like the elderly mom or dad who could easily afford to, but refuses to hire help because they don't want to spend the money- then expects their adult kids who work full time to spend their weekends doing repairs, maintenance, etc., perhaps even driving 1-2 hours each way to get there.

[willthrill81]

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'.

That is the rub - my Mom has complained over the decades of the things she wished they would/could have done. I often hear her say, “I would have loved to have done this or loved to have done that”. So I’m not sure I’d say they were “truly content”. They got by. They lived more frugally then they needed to and made compromises along the way that resulted in her having these regrets. Now she is not on her death bed, but too old now (given her physical state) to go back and do the things she wished she had gotten to do. It’s not a moment in time that she’s felt this way either. Because the reality is they could have very easily afforded to do the things she regrets not having done, I find this sad. Their money will get spent one day, it just won’t be by them.

Yes, that truly is sad. My in-laws were very much the same. They focused on working hard, scrimping and saving (but only used CDs and a little bit of real estate to invest), and then my FIL passed away at 65 never having done many of the things he wanted to, and my MIL still wishes that they had done things at least a bit differently.

[willthrill81]

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'.

Don't be carried away by things superficial: the brevity of the moment does not diminish the depth of meaning. 'Regret on your death bed' is like a moral compass or the North Star. The only problem is that we mortals usually do not find one until it is too late.

Maybe it's a personal choice, and maybe you're right. But if someone is truly content for 99.999% of their life, then their feelings during the other .001% seem to be less worthwhile to me. I think that you're suggesting that someone who is discontented with their life choices on their death bed was not truly contented during their life, and I wouldn't dispute that that may often, even usually, be accurate.

[TomatoTomahto]

My DH continues to be extremely frugal except when it comes to cars, even though he has no need to be, because he wants to leave a legacy to his kids! When we travel internationally, I pay for the both of us to fly business class, and he complains because he says it's way too much money and he'd be happy flying coach.

He has never flown coach internationally because I always buy business class tickets. With his severe arthritis, he would be miserable standing in long lines and cramped into an upright seat for 11 hours. With him it's the $$, with me, it's for our comfort and I can afford it.

I just smile and tell him that if I don't fly business class my kids certainly will. And his kids will inherit enough to fly first class for the rest of their lives!
Note: second marriage, separate finances.

Second marriage for me, first for her, combined finances. Maybe we should separate finances only for flights I have broached paying for business class, but she just won’t pull the trigger. She will splurge for Premium Economy, which to my mind solves a non-problem (we are both shortish, so extra legroom is nice, but meh). We can easily afford business class (heck, we can afford First, but that’s a bridge too far for me).

[delamer]

Keep in mind that most elders who have gone to Applebee’s their entire lives aren’t suddenly going to start going to Michelin 3 star places. Nor are those who have always driven Chevy’s going to start buying BMWs when they turn 70. And if they’ve bought their clothes at Macy’s, they aren’t going to start buying Yves St. Laurent.

And they aren’t going to feel deprived.

My parents were definitely conscious of not wanting to appear “above their station” despite having substantial savings plus a pension and Social Security in retirement. Looking at their lifestyle, people would have been shocked to find out how big an inheritance I received.

[Alan S.]

Keep in mind that most elders who have gone to Applebee’s their entire lives aren’t suddenly going to start going to Michelin 3 star places. Nor are those who have always driven Chevy’s going to start buying BMWs when they turn 70. And if they’ve bought their clothes at Macy’s, they aren’t going to start buying Yves St. Laurent.

And they aren’t going to feel deprived.

My parents were definitely conscious of not wanting to appear “above their station” despite having substantial savings plus a pension and Social Security in retirement. Looking at their lifestyle, people would have been shocked to find out how big an inheritance I received.

Agree entirely. If you have been saving and putting money away your entire life, you normally do not feel comfortable flipping a switch and suddenly dramatically increasing your spending. That's probably also true even if a charity will be your main beneficiary.

Another influence is the cumulative financial meltdowns seniors have witnessed over their lifetimes. 2008 was the worst since the great depression. Then there is the constant drivel from the financial press actually encouraging people to cash out. People cannot escape the daily doom and gloom predictions.

So unlike many similar articles, I have no problem buying into this one in general, although how they arrive at the 50% figure may not be fully credible.

[backofbeyond]

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.

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.

"Father retired at 55. Successful RE investor. Net Worth around $750K...in 1973."

According to the calculator below, $750K in 1973 is equivalent to $4,333,750 today.

https://www.usinflationcalculator.com/

Your father was very wealthy at 55 but his portfolio did not survive a 30-year retirement. That's a cautionary tale.

Yes, but the rest of the story is that he was married 4 times and divorced 4 times. Getting "hair cuts" that often has a tendency to knock the wind out of your money sail. It's cheaper to keep her he would always tell me.

[jose]

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.

That change in attitude with age is very common. It is explained by "human capital". When we are young, retirement is so far, and we have so much time and energy to work and make money, that we don't really care. I also used to buy things when I was younger and poorer that I would not buy today.

Fear to spend comes from the feeling that we are unable to make money if we needed. Age discrimination, and our decline in health, skills, and energy makes feel unable to make money. The most difficult part of retirement is that it is a decision difficult to reverse. So once we spend the money, it is gone forever, and... it is scary.

Still for people that have grown up accustomed to not spending, then "having to spend the money" is quite uncomfortable. I like to have money to be able to spend it, but not to actually spend it.

jose

[willthrill81]

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.

That change in attitude with age is very common. It is explained by "human capital". When we are young, retirement is so far, and we have so much time and energy to work and make money, that we don't really care. I also used to buy things when I was younger and poorer that I would not buy today.

Fear to spend comes from the feeling that we are unable to make money if we needed. Age discrimination, and our decline in health, skills, and energy makes feel unable to make money. The most difficult part of retirement is that it is a decision difficult to reverse. So once we spend the money, it is gone forever, and... it is scary.

Still for people that have grown up accustomed to not spending, then "having to spend the money" is quite uncomfortable. I like to have money to be able to spend it, but not to actually spend it.

jose

Those who experience the 'retirement poverty' mindset might be well served with an income flooring strategy, whereby guaranteed income sources such as SS benefits, SPIA payouts, etc. are used to cover all anticipated essential spending, reserving the remainder of their portfolio for discretionary spending.

[Godot]

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'.

Agreed. The idea and image of the "deathbed" is quaint and detached from how most of us will actually die, i.e., in our sleep, clutching our chest while we drive to the E.R., drooling into our socks after a decade of fierce cognitive decline. The last thing most of us will be engaged with is the idea of regret. This coupling of regret and the "deathbed" is Hollywood dreck.

[Greentree]

I had an aunt that was very frugal. She drove a cheap car, lived with relatives and didn't spend money. She was generally a fearful person. When she passed away, it turned out she had saved almost $1 million.

My uncle on the other hand had a very low paying job, was frugal as well, but was easy to talk to and didn't worry. When he passed, we were amazed to find out that he had saved a few hundred thousand on basically nothing.

They were both frugal and great savers. My lesson from that was, if you have the money, and don't want to spend it, you should at least not worry about it. At that age, you don't need the worry to keep you from spending, it is probably built in.

[willthrill81]

I had an aunt that was very frugal. She drove a cheap car, lived with relatives and didn't spend money. She was generally a fearful person. When she passed away, it turned out she had saved almost $1 million.

My uncle on the other hand had a very low paying job, was frugal as well, but was easy to talk to and didn't worry. When he passed, we were amazed to find out that he had saved a few hundred thousand on basically nothing.

They were both frugal and great savers. My lesson from that was, if you have the money, and don't want to spend it, you should at least not worry about it. At that age, you don't need the worry to keep you from spending, it is probably built in.

There's nothing wrong with being very frugal. Compared to most people we know, my wife and I are very frugal, but we are not cheap. There is a big difference. People who are cheap don't want to spend money even if doing so will provide them with significant value, whereas those who are frugal try to extract as much value as they can from the money they spend. The two are probably correlated to some extent, but they are definitely distinct. My in-laws were downright cheap, and they grew to regret it later in life.

It sounds like your aunt was cheap but your uncle was frugal.

[Greentree]

I agree with you willthrill81, that was the case.

[smitcat]

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

" People are either spenders or savers. Few are in the gray area. This is a permanent trait."
FWIW - we do not fall neatly into either category and that is a good thing.

"We should change our mentality from "more" to "enough"."
Thankfully I get to decide what is enough for us and not someone else.

[willthrill81]

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

" People are either spenders or savers. Few are in the gray area. This is a permanent trait."
FWIW - we do not fall neatly into either category and that is a good thing.

I agree that there seems to be a wide range when it comes to individuals' preference to spend or save, but I also agree with jose's point that it does seem like people usually gravitate toward either end of the spectrum.

[jose]

I had an aunt that was very frugal. She drove a cheap car, lived with relatives and didn't spend money. She was generally a fearful person. When she passed away, it turned out she had saved almost $1 million.

My uncle on the other hand had a very low paying job, was frugal as well, but was easy to talk to and didn't worry. When he passed, we were amazed to find out that he had saved a few hundred thousand on basically nothing.

They were both frugal and great savers. My lesson from that was, if you have the money, and don't want to spend it, you should at least not worry about it. At that age, you don't need the worry to keep you from spending, it is probably built in.

There's nothing wrong with being very frugal. Compared to most people we know, my wife and I are very frugal, but we are not cheap. There is a big difference. People who are cheap don't want to spend money even if doing so will provide them with significant value, whereas those who are frugal try to extract as much value as they can from the money they spend. The two are probably correlated to some extent, but they are definitely distinct. My in-laws were downright cheap, and they grew to regret it later in life.

It sounds like your aunt was cheap but your uncle was frugal.

Great thread! Agree with frugal vs. cheap. There are diminishing marginal returns in spending, and at some point owning the money gives you more return than spending it.

I guess I don't follow the logic of having to spend your money or "the goal is to die with zero dollars". I'd be happy if I die with money left over for heirs or charity. However, I do not suggest an unnecessary sacrifice.

jose

[smitcat]

I had an aunt that was very frugal. She drove a cheap car, lived with relatives and didn't spend money. She was generally a fearful person. When she passed away, it turned out she had saved almost $1 million.

My uncle on the other hand had a very low paying job, was frugal as well, but was easy to talk to and didn't worry. When he passed, we were amazed to find out that he had saved a few hundred thousand on basically nothing.

They were both frugal and great savers. My lesson from that was, if you have the money, and don't want to spend it, you should at least not worry about it. At that age, you don't need the worry to keep you from spending, it is probably built in.

There's nothing wrong with being very frugal. Compared to most people we know, my wife and I are very frugal, but we are not cheap. There is a big difference. People who are cheap don't want to spend money even if doing so will provide them with significant value, whereas those who are frugal try to extract as much value as they can from the money they spend. The two are probably correlated to some extent, but they are definitely distinct. My in-laws were downright cheap, and they grew to regret it later in life.

It sounds like your aunt was cheap but your uncle was frugal.

Great thread! Agree with frugal vs. cheap. There are diminishing marginal returns in spending, and at some point owning the money gives you more return than spending it.

I guess I don't follow the logic of having to spend your money or "the goal is to die with zero dollars". I'd be happy if I die with money left over for heirs or charity. However, I do not suggest an unnecessary sacrifice.

jose

"I'd be happy if I die with money left over for heirs or charity."
That makes sense because you then have a purpose for the money - in fact you are planning to spend it as well.

[randomguy]

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.
=

"Father retired at 55. Successful RE investor. Net Worth around $750K...in 1973."

According to the calculator below, $750K in 1973 is equivalent to $4,333,750 today.

https://www.usinflationcalculator.com/

Your father was very wealthy at 55 but his portfolio did not survive a 30-year retirement. That's a cautionary tale.

Yes, but the rest of the story is that he was married 4 times and divorced 4 times. Getting "hair cuts" that often has a tendency to knock the wind out of your money sail. It's cheaper to keep her he would always tell me.

Yeah I was about to ask what is the cautionary tale to learn? It is was a period of a 4.5% SWR (not great but definitely not horrible) so to be broke would require either excessive spending or below average returns. Now in 1973 both were pretty easy to do. It wasn't like the 4% rule was out there or that buying a diversified portfolio was easy. But divorce is also an easy way to change your financial picture. Can't imagine what 4 of them does...

[robphoto]

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.

This is off the main topic, but if you want to have some fun with lenses, and without spending 4K all at once, consider renting lenses from lensprotogo.com or equivalent; you get to see what it's like, and you can try various exotic lenses. From 50 to a few hundred dollars; if you're really in love with it after use, you can go ahead and buy one!

[2pedals]

The last sentence of the article states:

Retirees who want to enjoy their hard-earned savings have to learn to live with some uncertainty so they don’t shortchange themselves.

While it is true people live with different variations of uncertainty in life, I don't agree they are "shortchanging" themselves if they can sleep better a night. Aren't they investing in their happiness because and doing what they prefer? The article seems to imply that the authority here is the study not the individual owner and spender.

[MomBasenji4]

My husband retired in February, I haven't worked outside the home since 1990, and we think the same. Part of the reason is because I have oodles of ancestors, on my maternal and paternal side, who lived past 95, a few past 100! Without going into details, I am healthy, never smoked, and eat well.

What changed all this is the change in the tax rates. He will get Railroad unemployment at his FRA, 66, and I will get mine at the same time(I am 2 years younger. Now, we are converting as much traditional IRA to Roth as we can, up to the Medicare top limit (sorry, don't remember the correct term for it)

We have enough 'other' money to live on, and pay the taxes, until he is 65, so then, we will be forced to eat at the stash. I suspect by then, we will adjust and feel more comfortable about spending.
I'm thinking about having a sign made up
That's Why You Saved It!!!!!

[Dandy]

I think that is very understandable. People work, save, invest get company matches and see their nest egg grow. If they have been frugal as a lifestyle that has become a way of life. Suddenly ?, in retirement with a loss of human capital, decades of possible retirement and not only not adding to their nest egg but taking money out Watching their nest egg value decline by their withdrawals will pale in comparison to a major market decline (and withdrawals from that depleted nest egg.

I have been retired for 11 years and it took a decades bull market, collecting SS at 70 so that my income almost equals are expenses, to feel secure. Objectively, I should feel very secure and spend a lot more. I have upped spending a bit but I have not really loosened up. My needs are few and my wants have been tamed by decades of fugal living. I have upped charity contributions a bit and gifts to my children a lot. I'm sure when the next "correction" occurs I'll feel some unnecessary panic.

[sperry8]

I had to learn this lesson (and am still learning). I retired younger than most and into the great recession (2007). I initially watched about 1/2 of my retirement savings disappear and lowered my spend. It left some scars but as I watched the savings re-grow to an eventual profit I have recently decided to begin to spend more. I spent ~3.25% per year over the past decade... but now realize I can likely increase that. So far I haven't but the 3.25% is on a higher asset base so I am spending more on a $ basis although the % remains similar. This board taught me about sequence of return risk so I still have to consider withdrawal rates... but after 12 years of "stats" the scars don't affect me as much and I'm able to see that I can easily increase to 4-5% without taking on too much risk. It is hard to spend it - since if I miscalculate (or the markets do something unreasonably different than the past), I will have to work again. At a later age this likely will not prove as fruitful as it was when I was younger. Thus the quandary. Nevertheless I realize it's better to spend at a younger healthy age and tighten when I'm older. Many on this thread seem quite worried about poor health at a very advanced age. Personally I'm not concerned about that at all. As someones father did in his mid-80s... if I'm in a really poor state at that time, there are options one can choose. I don't need to grasp a few extra very unhealthy years. Now if I'm healthy, that's a totally different story but at that age can't imagine needing the same money/spend I do today.

[arizonaslim]

That's me to a tee. I had to semi-retire in order to manage my elderly parents' affairs, and I did. Not. Like. It.

Not one bit. The cash burn REALLY got to me. In a big way.

Even though I'm old enough to fully retire, I want to go back to work.

Only thing that's stopping me is my mother's estate settlement. Not as complex as my father's was, but yeesh. Make it stop. I've had enough.

[visualguy]

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?

I always viewed it as a metaphor for regret when it's too late to do anything about it, not your actual "death bed". For example, regretting not traveling more when still in good health, regretting not retiring earlier, regretting not having kids, etc. The type of regrets that can affect you in the later stages of life when it's not possible to change those things any longer because the time for that has passed.

[willthrill81]

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?

I always viewed it as a metaphor for regret when it's too late to do anything about it, not your actual "death bed". For example, regretting not traveling more when still in good health, regretting not retiring earlier, regretting not having kids, etc. The type of regrets that can affect you in the later stages of life when it's not possible to change those things any longer because the time for that has passed.

In that regard, I entirely agree. My in-laws focused so much on work and savings that they didn't do some of the things that they really wanted to, then my FIL passed away at 65.

It's important for each of us to find the right balance between enjoying today and delayed gratification, which is a highly individualistic ongoing choice.

[hand]

People saved all of their lives to make sure they will enjoy retirement. So why are they so reluctant to spend the money for the purpose it was intended?

Great straw man to begin a click-bait article... I wouldn't be suprised to see a follow-up pitch for an annuity.

My take is that of the people who save all their lives, many do so to ensure 1) they will have a secure retirement or 2) to ensure security for their descendents. Additionally, those retired today are very likely to have significantly more money than they expected given *great* returns over the past decades. It does not suprise me that people who have more than expected (and possibly more than pre-retirement) and who care about security and their descendents are not spending every last penny of their nest egg.

[willthrill81]

People saved all of their lives to make sure they will enjoy retirement. So why are they so reluctant to spend the money for the purpose it was intended?

Great straw man to begin a click-bait article... I wouldn't be suprised to see a follow-up pitch for an annuity.

My take is that of the people who save all their lives, many do so to ensure 1) they will have a secure retirement or 2) to ensure security for their descendents. Additionally, those retired today are very likely to have significantly more money than they expected given *great* returns over the past decades. It does not suprise me that people who have more than expected (and possibly more than pre-retirement) and who care about security and their descendents are not spending every last penny of their nest egg.

It's not a straw man. Data from the BLS and other sources support the argument that many retirees don't spend down their assets much, if at all, during retirement. As I noted above, the reasoning for this is simple: many retirees don't have enough assets to comfortably spend down at all.

I'm not sure what "great returns over the past decades" you're referring to. The most recent decade was very good, but returns since 2000 have been well below average for stocks (3.68% real) and bonds (2.65% real).

[vineviz]

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 data I’ve seen shows that wealthy retirees barely spend more than the “small nest egg” retirees.

IOW, the low spending - in aggregate- seems to be more of a choice than a necessity. Obviously some folks have little choice, but it doesn’t seem accurate to suppose that ability to spend is the primary driver.

[drawpoker]

....Fear to spend comes from the feeling that we are unable to make money if we needed. Age discrimination, and our decline in health, skills, and energy makes feel unable to make money. The most difficult part of retirement is that it is a decision difficult to reverse. So once we spend the money, it is gone forever, and... it is scary....

^ this

You nailed it.

[willthrill81]

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 data I’ve seen shows that wealthy retirees barely spend more than the “small nest egg” retirees.

IOW, the low spending - in aggregate- seems to be more of a choice than a necessity. Obviously some folks have little choice, but it doesn’t seem accurate to suppose that ability to spend is the primary driver.

The motivations could vary significantly across different retirees of different means. Those without very much could be (justly, IMO) afraid of spending what little they have, while those with significant portfolios may be able to live very well on dividends and interest.

I certainly agree that ability to spend does not tell the whole story.

[bltn]

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.

Congratulations. I think you are a much to be admired exception to the rule.
I m trying my best to instill in my young adult children the importance of saving in establishing an important component of their happiness, financial security. Hopefully using their mother and me as role models, they ll realize the importance of lbym and the value of accumulation. That will be the most important legacy we can leave, financially.

[randomguy]

People saved all of their lives to make sure they will enjoy retirement. So why are they so reluctant to spend the money for the purpose it was intended?

Great straw man to begin a click-bait article... I wouldn't be suprised to see a follow-up pitch for an annuity.

My take is that of the people who save all their lives, many do so to ensure 1) they will have a secure retirement or 2) to ensure security for their descendents. Additionally, those retired today are very likely to have significantly more money than they expected given *great* returns over the past decades. It does not suprise me that people who have more than expected (and possibly more than pre-retirement) and who care about security and their descendents are not spending every last penny of their nest egg.

It's not a straw man. Data from the BLS and other sources support the argument that many retirees don't spend down their assets much, if at all, during retirement. As I noted above, the reasoning for this is simple: many retirees don't have enough assets to comfortably spend down at all.

I'm not sure what "great returns over the past decades" you're referring to. The most recent decade was very good, but returns since 2000 have been well below average for stocks (3.68% real) and bonds (2.65% real).

And if you change your years a bit (1997 or 2003), your CAGR is right around the historical average. 2.63 is well above the median bond return. The mean is really inflated by the stupid high 80s/90s that stick out in a sore thumb when looking at all the other returns from 1900-2018.

Think about all the people that have been retired for 15+ years. If you retired with say a 50/50 portfolio and a 4% SWR, who would be below their starting values? In nominal dollars (i.e. what the study is looking at)? Nobody. In real dollars you would only see the 1999-2001 crowd being down. 3 years out of say 15-20. So people with less money must either be investing poorly (definitely possible. A 1% ER changes these numbers a bit) or spending a more than 4%. I have a feeling the last is the major factor. Lots of people need approximate 5-6% type SWR (note I am not saying they actually calculate a SWR, it is just that is what their bills work out to) to pay the bills. Those are the people who see a steady draw down of account balances.

People not spending down their accounts is an expected result of any type of conservative spending plan. You could argue that maybe these people should be upping their spending, but how many 75+ years are going to change up thier lifestyles much because they have more money? Not many in my experience. You would have to look at individual situations to know if this is .real problem or a made up one.

[SGM]

I have used my taxable savings to pay for expenses while delaying SS until 70 and to do Roth conversions. In the future I have a plan to spend some of my taxable savings to buy single premium immediate annuities SPIAs. I want some income streams that will likely cover necessary expenses from outside of my portfolio. I am not certain about what exactly is a safe withdrawal rate and that is why I want multiple income streams outside of the portfolio.

I recently read a blog by Dirk Cotton discussing sequence of return risk. He discusses the problem of a long sequence of low returns and its effect on the probability of ruin. The blog can be accessed at obliviousinvestor.com.

[YogurtRunner]

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.

This is me in about 10 years except I hate golf. I'll be visiting national parks and traveling around a lot more, though. I'm trying to get ahead of it and just find a 2nd career right now but it is just so difficult to pull off for some reason. I'm now looking at buying a small business but the risk of all that isn't something I want or need, either. Even a small donut or coffee shop costs big bucks.