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Many people work all their live saving for retirement. Once there, some thrive on the fruit of their labor while others become paralyzed by being on "fixed income."
Will_L first published this commentary in our Bob Brinker Free Discussion Forum here.
In response to Bob Brinker posted by allancoleman:
Happiness is not a monetary location or destination. It is really not anyone else's business to suggest how someone in particular should spend their money in retirement. But I think any of us can relay some observations on the subject that perhaps some don't even consider. An observation that I have is that some seem to be in some sort of a contest to live poor and die rich. Alan's comments again confirm a phenomenon that I have noticed among some older friends who seemed to turn into something of an "armed camp survivalist" mentality when they retired. It seemed that instead of being enabled to pursue things of interest (FOR BOTH MEMBERS OF THE "COUPLE") , they were paralyzed by "we are on a fixed income now", mentality.
These people in a few cases had way more than enough money to live more comfortably, even more than they had during their working life. Yet in the one case that I am most familiar with the guy turned into almost a hoarder. His life was about seeing how much he could "not spend" . His wife of about a half a century now always indulged him and I don't really know for sure, but I doubt very seriously if she shared his new found hobby in retirement of "hoarding". She was a lively energetic person though about 15 years older than I during the time we knew them and her husband was still working. You would see her very engaged with friends and family, always well dressed and driving a nice car. She would plan vacations and enjoyed telling others (not bragging but helping others plan) about the many places they had visited and things they did. Now they do very very little. I know their financial circumstances are such that they could have the same lifestyle they did before retirement. Her husband, a nice enough guy is obsessed with "saving money". Any business person gets a little tired of hearing an excuse for being cheap "I am on a fixed income". Indeed most of the world outside of the Gates are on a "fixed income". "Shut-up about it NOBODY CARES." --is what comes to mind when you hear people use that as an excuse for being cheap.
Read Part 2 here
The copyright of the article How Much to Spend in Retirement P1 in Investment is owned by Kirk Lindstrom. Permission to republish How Much to Spend in Retirement P1 in print or online must be granted by the author in writing.
Comments
May 23, 2007 5:16 PM
Steve Thompson :
.
The entire hypothetical scenario to way of thinking sounds
dysfunctional. Sure it sounds nice for the spouse that doesn't get their
way to often but I doubt it is realistic. Does anyone think the dominate
one of the pair would permit such a plan? In my Father's last days he told
me he regretted not traveling more and he was single and had been for 24
years. He was living on social security and was a net saver. It was a habit
he could break himself of. Maybe becoming a teenager in 1930 had something
to do with that mindset. One of the last things he told me was to not to be
so tight.
The best thing that ever happened to me was marriage.
Been at it for 27 years through the ups and downs. We discussed all aspects
of our life prior to walking down the aisle, I'll leave the other topics
alone and focus on financial matters.
When it comes to money we
are both frugal. We don't mind spending money on quality but never do so
impulsively. When we first started out our agreement was neither of us
could spend more than $20 without consulting the other. That has been
amended since 1980. The point is we decide jointly on major purchases.
We both hate to pay interest so debt has never been a problem. We
have enough in our rainy day fund to pay off our mortgage but haven't since
the rainy day fund would get to a level we would not be comfortable with.
Besides with a fixed 4.75% loan we're not getting hurt to badly paying
interest. We have no other debt.
Life is good and not to
terribly difficult when the regular monthly bills are all that is required
of our income. We do take a couple nice vacations yearly. We both have
hobbies that keep us busy and fulfilled. Our biggest expense is savings. We
do that to a greater extent than the majority of Americans as a percentage
of gross income but we do have a plan. We both do not want to be working
when we turn 60. The way I have things calculated if we stopped adding new
money to retirement savings we could very comfortably retire at age 65 with
a 8% annual return. We are saving to increase our standard of living when
retired and to do so prior to 60. I think this is doable without giving up
the pleasures of life along the way.
As of now I expect to take
out 3.5% in retirement. It means starting retirement with a little bigger
pile of money. This gives a little more cushion and should last a little
longer if we are able to make it into our 90s. If not we had a good ride
and there are going to be a few chari
May 25, 2007 3:07 PM
:
Will comments were very interesting and well written and I agree with Steve
that a successful marriage is vital concerning money matters but:
I admit that my wife and I have trouble spending money freely after
a life time of contributing to Keoghs, defined benefit plans, traditional
IRAs and Roth IRAs. We always avoided debt and we were on the same page
together concerning money expenditures. In the 37 years we've been married
I honestly can't remember an argument over money/income/spending. Our knock
down drag out events always related to our children. Both of us were DNA
savers and constantly squirreled away money and have more than necessary to
qualify as having critical mass. We were reared in the same religion that
preached self reliance and frugality. But we really don't consider
ourselves misers.
We travel frequently, take cruises, and
enjoy life but we remain frugal. After retiring, we both found part time
work because we enjoy staying busy and working with friends and associates.
Because of sheer luck, I reinvested equity funds into the market in March
2003 and just about have had a double so since retiring we have been
blessed financially.
So why can't we splurge with a 2nd
beach front home, high profile cars, designer clothes, etc? I really think
it's built into our DNA. We are just not comfortable living a high profile
life style. Will's comments made us both reevaluate why we live below our
means. To date we don't have a real reason. I don't know what would happen
if we won the CA jack pot. I think we would still be living and doing about
the same things we enjoy now but would share our windfall with our
children. As Will wrote, "some people are frugal and some people are
cheap. The former can be something of an attribute...the latter is a pain
in the a** to not just those they deal with but friends and family as
well." Here's hoping we are the former, not the latter.
Six
May 25, 2007 4:43 PM
tjg911 :
Wow Steve, that was great! You and your wife are really lucky people to
have each other. I don't even know you but I like you and feel good just
reading what you wrote. We all should be so happy!
.
I thought
Will's post was spectacular but as usual I was so far behind reading here
that his comments were 2 or 3 pages back and I was leaving work early so I
did not comment on it.
.
I think that Steve actually nailed the
reason this behavior exists when he said "In my Father's last days he
told me he regretted not traveling more and he was single and had been for
24 years. He was living on social security and was a net saver. <b>It
was a habit he could break himself of. (TOM HERE I THINK STEVE MEANT COULD
NOT) Maybe becoming a teenager in 1930 had something to do with that
mindset.</b>"
.
The other other comment
<b>"I know their financial circumstances are such that they
could have the same lifestyle they did before retirement. Her husband, a
nice enough guy is obsessed with "saving
money"."</b>
.
I saw a short movie 15 years ago
that I think was made in the 70's. I found it facinating as it was about
human behavior. The name of it was "What You Are Now Is Where You Were
When" and there's no typo there. The basis of the movie of perhaps 30
minutes was that different people are moviated by different things but
generally your desires and wants are formed when you were young. So a
person raised in the depression was so tramatized that even as a wealthy
adult they take napkins and ketchup packs from McDonald's or reuse paper
towels - it's just been so ingrained in them they still try to conserve and
make do. These people were moviated by and responded to money. Baby boomers
never were broke and had it good so money did not motivate them but
personal satisfaction was their movtiving factor so time off to persue
their desires appealed to them not money.
.
So I think that when
you spent your entire working life, 30 or 40 years, saving and investing,
making good money over the decades in the markets, you are so geared to
saving and investing and seeing the bottom line grow year by year that when
you retire this is a shock to the system. You now don't see the bottom line
increase monthly and yearly by contributions from salary. Growth is just
from returns on investments while you start to draw down the balance. To
some people I think this pretty sacry and they withdraw into this cheap
behavior as they fear that they are no longer making money and growing th
May 26, 2007 11:17 AM
:
"WHATEVER THE VIRTUES OF HOARDING FOR ITS OWN sake, saving is more
properly viewed as a necessary sacrifice for the accumulation of assets;
try adding a "y" to "miser."
<i>As reported in today's Barrons.</i>
Six
4 Comments
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May 23, 2007
