Switching to spending down savings

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Just don’t be like my in-laws. They never figured out how to do it. They are worth almost $20M from the sale of a business and live on their social security checks plus about $40k/year.

Maybe they don't want any more? Want to leave it to future generations and/or charity? Or are they fearful?

I agree this doesn't tell us anything. It certainly is sad if they are forgoing enjoyment out of misplaced fear of overspending, but a retired couple with a paid-off house can live quite comfortably on $80,000 a year or so.

I’m the PP with the in-laws. It’s some of both. They aren’t extravagant people but there are definitely things they both want that they don’t allow themselves and it’s silly. FIL would love a new car and MIL really wants to throw a large milestone anniversary party for them and each is telling the other one no. Us kids are telling them do both and don’t give it another thought! They go on and on about wanting to host an extended family vacation (like a cruise or something) but then balk at what it will cost. Their own parents contributed more than half of college expenses for my DH and his two siblings and his parents won’t put anything in our kids 529s. They are in danger of running up against estate tax issues, especially if laws change, and even they hate that idea, but they are too afraid to start transferring even minor amounts of money to their kids or grandkids, even though their portfolio grows significantly every year because they spend so little of the income it throws off. Not saying they need to dramatically change their lifestyle but there is definitely a lot of unfounded anxiety at play and it’s very sad.

Same situation, albeit less funds, but still significant, and it is sad. My mom wanted to go on cruises and take winter vacations in warmer climates, but it was "too expensive." Mom wanted to re-do her house, but only did cheap repairs. They wanted to rent a beach house for all of us, but that never happened. They wanted to help our SN kids, but it never materialized. No 529s. They have car notes that they pay using SS and pensions. It's all anxiety. And it's sad. I have the feeling the funds aren't coming to the kids either - not sure what their estate plans are, but I suspect it's all going to Morgan Stanley folks who have been "advising" them. Remembering now that my step-dad chuckled about how he never spent a SS check, just invested them. He's so proud of that! They are mid-80s. It's not going to change. And worst part is that I worry I'll be just like them. I see the tendencies.

[Anonymous]

Anonymous wrote:I retired almost a decade ago in my early 50s. My net worth at the time was about $4 million. The bulk of our net worth was in retirement accounts, but we also had saved close to $1 million outside of retirement in brokerage and savings accounts. Our net worth is now around $7 million. We’ve been living off of $200-$250k a year in our retirement, which has allowed for a very comfortable even if not extravagant retirement. We travel frequently, eat out regularly, help our kids out financially when necessary or appropriate, and have enough to support both our primary and second homes.

We’ve managed because we have a diversified portfolio and have figured out how to minimize taxes. Obviously savings aren’t taxed, just the earnings on them, but if you play it right the zero percent capital gains tax rate can take you very far. Most years our federal income tax liability has been zero or close to it. One year I made a rookie mistake that ended up costing me more taxes than I wanted to pay (I stupidly went over some limits while trying to help one of the kids buy a house) but it didn’t kill me and I learned from the experience.

And that brings me to my final point. When you’re retired you have more time to track your expenses and figure out what works financially for you. While we were never huge spenders when I was working, we also didn’t carefully track our expenses. After retirement we started doing that (we use Personal Capital) and it’s very comforting and helpful - and actually kind of interesting to see and play around with. We now know exactly what our cash flow is and what expenses we could more easily cut if we had to.

To sum things up, if you have a sizeable nest egg that’s diverse and includes savings and brokerage accounts as well as retirement accounts, you can make this work.

We’re in a similar situation, but older, and you should start to think about RMDs. If your current tax liability is minimal, and most of your $7 million is in qualified accounts, you should look at starting withdrawals now, so as to lower the tax hit later, even if you just reinvest the $$ in a brokerage account.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Just don’t be like my in-laws. They never figured out how to do it. They are worth almost $20M from the sale of a business and live on their social security checks plus about $40k/year.

This is so sad.

I was actually thinking about this same question this morning. We are so focused on saving now, but once college comes around in 5 years, it’s going to be so odd to write checks for $100,000 or whatever it costs then.

Why is that sad? Not everyone gets their dopamine rush from spending.

we are a high income family and in the last few years we have really reflected in what is important and what brings us joy and i’ve come to the conclusion that spending feels good in the moment, but there’s a crash. We’ve been much happier now that we’ve scaled back.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Just don’t be like my in-laws. They never figured out how to do it. They are worth almost $20M from the sale of a business and live on their social security checks plus about $40k/year.

Maybe they don't want any more? Want to leave it to future generations and/or charity? Or are they fearful?

I agree this doesn't tell us anything. It certainly is sad if they are forgoing enjoyment out of misplaced fear of overspending, but a retired couple with a paid-off house can live quite comfortably on $80,000 a year or so.

I’m the PP with the in-laws. It’s some of both. They aren’t extravagant people but there are definitely things they both want that they don’t allow themselves and it’s silly. FIL would love a new car and MIL really wants to throw a large milestone anniversary party for them and each is telling the other one no. Us kids are telling them do both and don’t give it another thought! They go on and on about wanting to host an extended family vacation (like a cruise or something) but then balk at what it will cost. Their own parents contributed more than half of college expenses for my DH and his two siblings and his parents won’t put anything in our kids 529s. They are in danger of running up against estate tax issues, especially if laws change, and even they hate that idea, but they are too afraid to start transferring even minor amounts of money to their kids or grandkids, even though their portfolio grows significantly every year because they spend so little of the income it throws off. Not saying they need to dramatically change their lifestyle but there is definitely a lot of unfounded anxiety at play and it’s very sad.

lololol! i see what’s going on here. you are soooo mad you aren’t on the payroll🤣🤣

[Anonymous]

Anonymous wrote:I retired almost a decade ago in my early 50s. My net worth at the time was about $4 million. The bulk of our net worth was in retirement accounts, but we also had saved close to $1 million outside of retirement in brokerage and savings accounts. Our net worth is now around $7 million. We’ve been living off of $200-$250k a year in our retirement, which has allowed for a very comfortable even if not extravagant retirement. We travel frequently, eat out regularly, help our kids out financially when necessary or appropriate, and have enough to support both our primary and second homes.

We’ve managed because we have a diversified portfolio and have figured out how to minimize taxes. Obviously savings aren’t taxed, just the earnings on them, but if you play it right the zero percent capital gains tax rate can take you very far. Most years our federal income tax liability has been zero or close to it. One year I made a rookie mistake that ended up costing me more taxes than I wanted to pay (I stupidly went over some limits while trying to help one of the kids buy a house) but it didn’t kill me and I learned from the experience.

And that brings me to my final point. When you’re retired you have more time to track your expenses and figure out what works financially for you. While we were never huge spenders when I was working, we also didn’t carefully track our expenses. After retirement we started doing that (we use Personal Capital) and it’s very comforting and helpful - and actually kind of interesting to see and play around with. We now know exactly what our cash flow is and what expenses we could more easily cut if we had to.

To sum things up, if you have a sizeable nest egg that’s diverse and includes savings and brokerage accounts as well as retirement accounts, you can make this work.

Thanks for your detailed posts over time. You'd once posted how your cashflow was derived to get to $200K and yet qualify for Obamacare (pre-65). Can you repost that if possible? I'd saved it somewhere but can't find it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I retired almost a decade ago in my early 50s. My net worth at the time was about $4 million. The bulk of our net worth was in retirement accounts, but we also had saved close to $1 million outside of retirement in brokerage and savings accounts. Our net worth is now around $7 million. We’ve been living off of $200-$250k a year in our retirement, which has allowed for a very comfortable even if not extravagant retirement. We travel frequently, eat out regularly, help our kids out financially when necessary or appropriate, and have enough to support both our primary and second homes.

We’ve managed because we have a diversified portfolio and have figured out how to minimize taxes. Obviously savings aren’t taxed, just the earnings on them, but if you play it right the zero percent capital gains tax rate can take you very far. Most years our federal income tax liability has been zero or close to it. One year I made a rookie mistake that ended up costing me more taxes than I wanted to pay (I stupidly went over some limits while trying to help one of the kids buy a house) but it didn’t kill me and I learned from the experience.

And that brings me to my final point. When you’re retired you have more time to track your expenses and figure out what works financially for you. While we were never huge spenders when I was working, we also didn’t carefully track our expenses. After retirement we started doing that (we use Personal Capital) and it’s very comforting and helpful - and actually kind of interesting to see and play around with. We now know exactly what our cash flow is and what expenses we could more easily cut if we had to.

To sum things up, if you have a sizeable nest egg that’s diverse and includes savings and brokerage accounts as well as retirement accounts, you can make this work.

Thanks for your detailed posts over time. You'd once posted how your cashflow was derived to get to $200K and yet qualify for Obamacare (pre-65). Can you repost that if possible? I'd saved it somewhere but can't find it.

+1 for being thankful for this PP. I, too, printed out the details but can't find it.

I would love to know current asset allocation. I think he/she had healthcare through law firm after retirement.

[Anonymous]

Wondering this myself. We've always been savers. Spouse retired and I'm eligible. However, we are both just having a hard time thinking we will ever spend any of our savings - and between retirement accounts and outside savings it's significant. Given we have pensions that will cover our very frugal spending, it truly is a psychological hurdle we both need to get over. My parents both died young, spouses parents never had much (both Depression era). Would love to hear others take on this.

[Anonymous]

Anonymous wrote:Wondering this myself. We've always been savers. Spouse retired and I'm eligible. However, we are both just having a hard time thinking we will ever spend any of our savings - and between retirement accounts and outside savings it's significant. Given we have pensions that will cover our very frugal spending, it truly is a psychological hurdle we both need to get over. My parents both died young, spouses parents never had much (both Depression era). Would love to hear others take on this.

We're also savers and are not yet retired, but getting there soon. One way we are preparing has been allocating amounts of our assets to specific purchases in our overall accounting. So we have an earmarked amounts for car replacement, home renovations, travel, long term care, medical, dental etc. rather than a big bucket of savings. For us, just seeing the accounts listed that way psychologically tells us-" that money is designated for travel, it's okay to spend." There's still a big bucket that is our general savings, but we're psychologically moving parts to planned expenses that are not our basic bills income stream.
The hope is that if we see the planned expenses categories there long enough it will feel natural to spend them that way. Kind of like paying for kids' college with college savings didn't feel like we were spending down 'real' savings.

[Anonymous]

If you’re afraid of spending on yourself….try increasing your giving.

[Anonymous]

Anonymous wrote:If you’re afraid of spending on yourself….try increasing your giving.

I think people are worried they will run out in old age and become a burden on their families or unable to receive quality medical/long term care when they need it. Donating to charity doesn't really solve this problem.