Author Topic: How do you make sure you don't leave money on the table after you die?  (Read 5789 times)

Padonak

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Many retirees who follow the 4% rule or use even more conservative withdrawal rates are likely to have more money than they need and leave a lot of it behind after they pass away. The idea behind the safe withdrawal rate is that you don't run out of money in most except for the very worst case scenarios. By design, in most scenarios you will have extra money left, maybe even much more than the initial Ďstache. If you have real estate (your own and/or rentals), you are likely to leave that behind as well.

Itís great if you have children and/or a surviving spouse who can inherit your assets, but what if you donít? Maybe you are single and donít have children or you are the surviving spouse with no children who doesnít plan on getting married again. How do you make sure that you donít leave money on the table? More importantly, how do you make your retirement more ďefficientĒ in this case by either retiring earlier, saving less, spending more while you are younger and can have more fun traveling, etc., or all of the above?

A few ideas:

Higher withdrawal rate. Youíll need less money and can retire earlier, but you are more likely to deplete your portfolio. Another approach may be to use a conservative withdrawal rate when you retire but adjust it upwards as you get older if your portfolio keeps growing. The disadvantage is that youíll still spend less while you are younger and may not need that much money at an older age because, for example, you wonít be able to travel as much if at all.

Annuities. A good idea in theory, but youíll have to pay extra to somebody else for taking longevity risk (the risk of you living too long and collecting too much money to make it profitable for them). I havenít studied this in detail but I heard that the profit margins of annuity providers are so high that a retiree may be better off if they assume their own longevity risk and just keep investing more conservatively and/or spending more aggressively instead.

Reverse mortgage if you have real estate. Good idea in theory, but the same problem as with annuities: the expected profit margin of the mortgage company may be too high for you to get good value.

A retirement community or retirement home. Letís say you have reached an age when you need support and canít travel or live independently anymore. For example, you are 80 years old and saved $1M which may be in investment accounts and real estate. You also have receive social security and maybe another pension. You make an arrangement with a private retirement home: you move there and let them spend down your assets and take care of you until you die. If you run out of money before you die, theyíll use Medicaid (which you paid for while working, to address potential ethical concerns) and/or reduce your rate. If you die before they spend down all your money, theyíll get to keep the rest. As far as I know, there are retirement homes that offer this type of arrangements, though I donít know all the details. To make your money go even further, this retirement home may be in a cheaper part of the US or even a low cost country overseas, though I am not sure how reliable and trustworthy these retirement homes are, especially the ones based in low cost countries overseas.

Thoughts/ideas?
 




Bateaux

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #1 on: February 10, 2018, 09:14:04 AM »
Charity.

Catbert

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #2 on: February 10, 2018, 09:26:47 AM »
Spend quick and then suicide.😉

Padonak

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #3 on: February 10, 2018, 09:29:30 AM »
Charity.

It makes sense to will your money to charity if you don't have any heirs. Even if you try to not leave any money behind after you die, chances are you'll still have some assets left.

However, suppose you want to retire as early as possible. You can retire earlier and enjoy more free time, particularly while you are young enough to enjoy it. You can even work for charity for free while retired instead of sitting in a cubicle and making money for a megacorp and their shareholders many of whom are already rich. Alternatively, you play it safe, retire years later than you would otherwise, and leave hundreds of thousands or even millions behind after you die. I would choose the first option.

The question I am asking is not why but how to do it and make sure you don't run out of money.

PhilB

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #4 on: February 10, 2018, 09:42:40 AM »
Unless you know when you are going to die, any drawdown based strategy that has a low probability of running out of money, pretty much by definition carries a very high likelihood of dying with loads of money unspent.  Your best strategy is probably some kind of deferred annuity.  If you buy an annuity at 65 that doesn't pay out until 85 then you know you have precisely 20 years to spend down what's left, and the annuity isn't too expensive as the insurer has a good chance of you dying before it even starts.
Alternatively you could just plan to marry a 20 year old when you're a rich 90 year old!

jim555

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #5 on: February 10, 2018, 09:43:42 AM »
Smith and Wesson plan.  Pick your date and plan everything around it.  This requires precise EXECUTION.

BlueMR2

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #6 on: February 10, 2018, 09:49:51 AM »
I don't even know why that's a concern.  If you've got nobody you want to leave the money to, and you want to make sure you don't run out, yeah, you're likely to have an excess.  Why would you even care?  Once you are dead it doesn't matter...

Padonak

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #7 on: February 10, 2018, 10:01:16 AM »
I don't even know why that's a concern.  If you've got nobody you want to leave the money to, and you want to make sure you don't run out, yeah, you're likely to have an excess.  Why would you even care?  Once you are dead it doesn't matter...

Because, for example, if you leave $1M behind, two people could have retired on your 'stache, or you could have retired years earlier. I understand this is in hindsight. What is the best way, if any, to prevent it?

jamesplease

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #8 on: February 10, 2018, 10:29:46 AM »
The Hebeler Autopilot withdrawal strategy is a little smarter than the 4% rule, and adjusts your spending to follow your portfolioís performance without drastically decreasing its chances for success.

Accordingly, if the market does really well during your retirement, then you will end up with less when you die than had you withdrawn 4% instead.

With that said, I think it is a really strange goal to try and completely spend down your Ďstash during your life. It sounds really risky to me. Thereís a good chance that you will mess up, and running out of money at 70 years old (or whatever) sounds scary to me.

RH

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #9 on: February 10, 2018, 11:16:01 AM »
What if you organize things so that you spend all your retirement funds until age 70 and then just live of social security? Seems most folks here could live off SS due to managing their expenses and living frugal. Maybe keep a buffer of $50K in your savings account in case you want to do some cruises/vacations with old friends.

SwordGuy

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #10 on: February 10, 2018, 12:20:01 PM »
Marry a gold-digger, then get divorced and cleaned out in the courts.  Solves your too-much-money problem in one swell foop.

Seriously, after it become obvious that you're stash is growing much faster than you are spending it, just spend more as you go along.  Just make sure that it's one-off spending, not contractually obligated spending over time.  That way, you can cut back promptly if market conditions require it.

MrThatsDifferent

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #11 on: February 10, 2018, 02:01:40 PM »
Iím disappointed with the cruel and flippant suicide responses.  I would expect better from people on this forum.

To the OP: my idea will be to create a foundation that will become my legacy. Iíd love to create something that will provide educational opportunities for disadvantaged kids. That way the money isnít a waste and all the hard effort (and passive growth) will be meaningful. It wonít make sense to spend like mad while Iím around if Iíve already created a life that isnít consumer focused, more money is meaningless. So yes, charity, by your own design, may be the best way.

matchewed

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #12 on: February 10, 2018, 03:24:18 PM »
I'm pretty sure when you're dead you haven't left money on the table. There is no table when you're dead, or money for that matter, or probably anything. So setup something in your will if it concerns you and utilize it as you wish in a way that reflects your values and hopefully does some good in this world.

LadyMaWhiskers

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #13 on: February 10, 2018, 03:33:50 PM »
Your question makes some emotional sense, but itís a dead end. You are trying to optimize a mathematical situation where the most critical variable is unknown, i.e. the date of your death. Because going broke in old age is much worse* than dying with money, common sense directs you to strategies that make the latter more likely than the former. The alternative is to pick your death date and stick with it. Not likely to appeal to a many people.

*this is a critical assumption. The devilís advocate position might be to treat them as equally bad, and embrace destitution in old age. This is likely to reduce your comfort and dignity, regardless of your age or how you die. To you prefer that to dying with a positive net worth?

jim555

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #14 on: February 10, 2018, 03:46:05 PM »
Annuitize all assets at 75, takes care of the problem.  Make sure you tell your family and watch their faces when they hear the news, priceless.





Rural

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #15 on: February 10, 2018, 04:51:55 PM »
Live in the US, grow old, need healthcare. Done.

Cpa Cat

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #16 on: February 10, 2018, 05:27:07 PM »
We have no children. We'll likely annuitize our living expenses once we get older, probably around age 70. The rest, we'll spend down or donate to charity, with perhaps a few specific bequeathals to individuals.

The few times it's come up, not a single one of our relations has reacted positively to the suggestion that we would choose to leave our estate to charity instead of them. It made me realize that an unnerving number of people have thought about and fully anticipated inheriting from us just because we don't have kids.

Rosy

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #17 on: February 10, 2018, 05:38:01 PM »
Live in the US, grow old, need healthcare. Done.

+1

Rosy

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #18 on: February 10, 2018, 05:41:23 PM »
What if you organize things so that you spend all your retirement funds until age 70 and then just live of social security? Seems most folks here could live off SS due to managing their expenses and living frugal. Maybe keep a buffer of $50K in your savings account in case you want to do some cruises/vacations with old friends.

That is an interesting idea and has just solved an entirely different RE problem for me. Thanks!

Bateaux

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Villanelle

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #20 on: February 10, 2018, 11:48:07 PM »
We have no kids and no nieces and nephews that are a meaningful part of our lives. 

We plan on leaving fairly modest amounts to our two siblings, and the rest will go to charity.

Sure, this may mean we work longer than necessary, but that beats the hell out of the the alternative.

I'm not sure why this is any more of a concern with those without heirs than with.  Yes, working longer than necessary sucks.  But so does being broke and destitute.  And while I'm not so much of a pessimist about this that I can't see all the various escape routes from being broke, I'm not willing to push it especially far. 

PhilB

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #21 on: February 11, 2018, 12:41:58 AM »
I'm not sure why this is any more of a concern with those without heirs than with.
I can think of two reasons why it might be.  Firstly, those with kids may see giving excess money to them on death or after annuitisation as a good thing not a bad one so they see less wrong with working the extra year or two beyond what was actually necessary  - 'I did it for the kids'.  A second factor could be that those with heirs worry less about running out of money because the amount earmarked for inheritance is actually an extra buffer against destitution if the SWR fails - 'Sorry kids but we've spent your inheritance'.

Villanelle

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #22 on: February 11, 2018, 01:45:02 AM »
I'm not sure why this is any more of a concern with those without heirs than with.
I can think of two reasons why it might be.  Firstly, those with kids may see giving excess money to them on death or after annuitisation as a good thing not a bad one so they see less wrong with working the extra year or two beyond what was actually necessary  - 'I did it for the kids'.  A second factor could be that those with heirs worry less about running out of money because the amount earmarked for inheritance is actually an extra buffer against destitution if the SWR fails - 'Sorry kids but we've spent your inheritance'.

I guess I can't see leaving money to meaningful charities that do meaningful work as a bad thing.  Which is kind of my point.  You either leave money to heirs or leave it to charities.  To be honest, I think in most cases, the charity path is actually probably better in nearly all ways. 

As to your second point, I don't see how that's different than "sorry, NGO, but I've spent the intended donation", or people who work an extra year because they "did it for the homeless/animal shelter/clean water foundation."

Dicey

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #23 on: February 11, 2018, 08:10:42 AM »
Iím disappointed with the cruel and flippant suicide responses.  I would expect better from people on this forum.

Ditto for this snark:

Live in the US, grow old, need healthcare. Done.

I joke that when I'm old, I don't want to be cold.
FFS, I don't want to be old, cold and worrying about money either.
Money gives you choices. Why would I want to rob myself of the power of choice in my old age?

The solution is simpler than you think. Use the magic of compounding. The earlier you start investing, the fewer dollars you need to save. Squirrel away as much as you can, even if it means living like a monk for a few years. Its a lot easier to do when you're young and it's optional than when you're old and have no other choice. If you wouldn't choose abject poverty now, what makes you think your future self will enjoy it later?

I'm pretty sure when you're dead you haven't left money on the table. There is no table when you're dead, or money for that matter, or probably anything. So setup something in your will if it concerns you and utilize it as you wish in a way that reflects your values and hopefully does some good in this world.

This is the best answer I've seen so far.

To the OP: my idea will be to create a foundation that will become my legacy. Iíd love to create something that will provide educational opportunities for disadvantaged kids. That way the money isnít a waste and all the hard effort (and passive growth) will be meaningful. It wonít make sense to spend like mad while Iím around if Iíve already created a life that isnít consumer focused, more money is meaningless. So yes, charity, by your own design, may be the best way.
MTD, as much as I agree with your first thought, I take issue with this one. Foundations cost a fuckton of money to operate. It is virtually guaranteed that there's already one out there that's doing whatever it is you wish to achieve. Help create economies of scale by giving them your money (provided they're doing it well). Starting a small foundation of one's own tends to be more about ego (or actual job avoidance) than altruism.


PDXTabs

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #24 on: February 11, 2018, 09:38:51 AM »
I for one hope to leave lots of money "on the table." If for some reason it doesn't go to my kids, nieces, younger brother, or romantic partner I'll be happy to leave it for a 501(c)3.

Padonak

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #25 on: February 11, 2018, 11:58:44 AM »
Iím disappointed with the cruel and flippant suicide responses.  I would expect better from people on this forum.

No worries, I have a thick skin. My favorite comedian is George Carlin. It takes a lot more than a couple of suicide jokes to offend me.

Padonak

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #26 on: February 11, 2018, 12:08:37 PM »
Annuitize all assets at 75, takes care of the problem.  Make sure you tell your family and watch their faces when they hear the news, priceless.

Great idea, but I don't know much about this subject.

Is there an quick and easy way to estimate how much you would get paid if you were to buy an annuity depending on the age and other factors? What kind of annuity is it? Is it inflation-adjusted as well?

My concern is that buying an annuity doesn't make sense financially even at age 75. For example, if you manage your own longevity risk and pay yourself using minimum required distributions from a balanced portfolio instead of buying an annuity, are you likely to get paid more or less?

Padonak

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #27 on: February 11, 2018, 12:18:56 PM »

Money gives you choices. Why would I want to rob myself of the power of choice in my old age?


This is a great point. For example, let's say you work longer than you should before retiring, then use a conservative withdrawal rate while retired and accumulate an 8 figure porftolio by the time you get really old. Of course you'll have a lot more choices compared to a poorer person.

Teeth start falling out? Get the best implants from the best dentist you can find and replace natural teeth with artificial ones which look even better than your own even if they cost a 6 figure amount. Can't clean your house anymore? Hire a maid. Can't take care of yourself? Move to a private nursing home where you get your own room and good care instead of a home paid by Medeicaid where you'll have to share a room and perhaps be ignored by caregivers. The list goes on.
« Last Edit: February 11, 2018, 01:21:23 PM by Padonak »

Catbert

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #28 on: February 11, 2018, 02:28:16 PM »
Annuitize all assets at 75, takes care of the problem.  Make sure you tell your family and watch their faces when they hear the news, priceless.

Great idea, but I don't know much about this subject.

Is there an quick and easy way to estimate how much you would get paid if you were to buy an annuity depending on the age and other factors? What kind of annuity is it? Is it inflation-adjusted as well?

My concern is that buying an annuity doesn't make sense financially even at age 75. For example, if you manage your own longevity risk and pay yourself using minimum required distributions from a balanced portfolio instead of buying an annuity, are you likely to get paid more or less?

If interested in actually getting an annuity, you would contact Fidelity or Vanguard to get a quote.  It could be indexed for inflation or not.  It could be immediate or deferred. Whether you're better off with an annuity or managing your own portfolio depends on when you end up dying.  I think that at 75 you'd get more than 4% a year of your original principle because they keep whatever is left when you die. 

jim555

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #29 on: February 11, 2018, 03:06:52 PM »
Annuitize all assets at 75, takes care of the problem.  Make sure you tell your family and watch their faces when they hear the news, priceless.

Great idea, but I don't know much about this subject.

Is there an quick and easy way to estimate how much you would get paid if you were to buy an annuity depending on the age and other factors? What kind of annuity is it? Is it inflation-adjusted as well?

My concern is that buying an annuity doesn't make sense financially even at age 75. For example, if you manage your own longevity risk and pay yourself using minimum required distributions from a balanced portfolio instead of buying an annuity, are you likely to get paid more or less?

If interested in actually getting an annuity, you would contact Fidelity or Vanguard to get a quote.  It could be indexed for inflation or not.  It could be immediate or deferred. Whether you're better off with an annuity or managing your own portfolio depends on when you end up dying.  I think that at 75 you'd get more than 4% a year of your original principle because they keep whatever is left when you die.
8.94% payment for a 75 yo male, based on a popular annuity web site.

Padonak

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #30 on: February 11, 2018, 06:34:24 PM »
Annuitize all assets at 75, takes care of the problem.  Make sure you tell your family and watch their faces when they hear the news, priceless.

Great idea, but I don't know much about this subject.

Is there an quick and easy way to estimate how much you would get paid if you were to buy an annuity depending on the age and other factors? What kind of annuity is it? Is it inflation-adjusted as well?

My concern is that buying an annuity doesn't make sense financially even at age 75. For example, if you manage your own longevity risk and pay yourself using minimum required distributions from a balanced portfolio instead of buying an annuity, are you likely to get paid more or less?

If interested in actually getting an annuity, you would contact Fidelity or Vanguard to get a quote.  It could be indexed for inflation or not.  It could be immediate or deferred. Whether you're better off with an annuity or managing your own portfolio depends on when you end up dying.  I think that at 75 you'd get more than 4% a year of your original principle because they keep whatever is left when you die.
8.94% payment for a 75 yo male, based on a popular annuity web site.

I ran a couple of very quick scenarios in Excel trying to compare buying an annuity vs using RMD for withdrawals. The idea behind using RMD numbers for comparison came from the Hebler Autopilot article mentioned by jamesplease earlier in this thread. Basically, I am using RMD as a proxy for a withdrawal rate safe enough to not deplete one's portfolio but aggressive enough to not leave too much money "on the table".

Link to the article: https://www.marketwatch.com/story/put-retirement-savings-withdrawals-on-autopilot-2013-07-24

For my comparison I used an example of a 70 year old male who can either buy an annuity for $100K or invest it and use RMD for withdrawals. $100K is just used for simplicity.

I used CNN money for an annuity quote http://money.cnn.com/tools/annuities/ 
The quote for a 100K life annuity, not inflation adjusted: $622/month or 7.46% payout.

For RMD distributions, I used the Charles Schwab calculator https://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/ira_calculators/rmd

All calculations do not take into account inflation (still a valid like to like comparison IMO). Also, rate of return assumptions for investing and RMD distributions do not account for market fluctuations, just assume a certain rate of return on a portfolio as per Schwab calculator. This is something I need to look into if I study this in more detail, but for now I just ran two simple scenarios based on 6% and 8% rates of return.

Scenario 1: 6% expected return on 100K investments in case of RMD calculations vs 100K annuity paying 7.46% per year.

Total payout from RMD distributions exceeds life insurance payout in 30 years or by age 100. The total nominal payout (ignoring inflation) by age 100 is $232K and you would still have $56K left in the portfolio.

Scenario 2: 8% expected return on 100K investments for RMD calculations vs 100K annuity paying 7.46% per year.

Total payout from RMD distributions exceeds life insurance payout in 18 years or by age 88. The total nominal payout (ignoring inflation) by age 88 would is $147K and still $163K left in the portfolio.

Based on this very quick comparison, it probably makes sense to buy an annuity if you don't expect a high rate of return on your portfolio. Based on my examples, at 6% expected return, chances are you'll get more money from an annuity over your lifetime unless you live over 100 years. At 8%, you'll probably get more if you keep the portfolio and use RMD unless you die before you reach age 88.

This comparison doesn't account for sequence of returns or inflation. Also, an annuity is a stable source of income. However, keeping your investments gives you more flexibility in case of unexpected expenses, e.g. healthcare. Also, if you use RMDs you'll still have some money left after you die which you can will to family or charity.

Please let me know there are any errors or logical flaws in this comparison, particularly regarding using RMDs as a withdrawal strategy Alternatively, perhaps I'll try to use use a combination of RMDs and the 4% rule as per Hebler Autopilot from the linked article. The withdrawal rate in this case would be calculated as 0.5 x (Last year's withdrawal amount x (1 + Inflation %) + Last year's ending balance / RMD). However, if using this formula results in lower withdrawal amounts, RMD formula will still have to be used for tax advantaged accounts which are subject to RMDs after age 70.

Another aspect I haven't taken into consideration is tax treatment of annuities vs investments and whether that would tip the scale either way.

Also, I can post the calculation tables from Excel, not sure how to quote tables in forum messages.

So far the conclusion is that an annuity is worth considering at an older age. I wouldn't annuitize my entire porfrolio though, would probably go with a combination, for example 50% annuities / 50% balanced portfolio.
« Last Edit: February 11, 2018, 06:54:57 PM by Padonak »

obstinate

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #31 on: February 11, 2018, 09:57:44 PM »
I would not think it a bad thing to leave money on the table. The goal is not to maximize my lifetime consumption. That's not what this site is about.

Also: "Better to die with money than to live without."

Cpa Cat

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #32 on: February 12, 2018, 03:19:04 AM »

So far the conclusion is that an annuity is worth considering at an older age. I wouldn't annuitize my entire porfrolio though, would probably go with a combination, for example 50% annuities / 50% balanced portfolio.

Agreed. I think 8% is a little high to expect from a conservative portfolio at age 80. Few elderly people want to take much risk at that level. I think an annuity is a good way to virtually eliminate risk on the portion of the portfolio that is required for living expenses, and allow them to feel more comfortable with risk in the remainder.

The tax status of annuities is similar to other investments. You can purchase an annuity with qualified retirement funds - in which case they're taxed at ordinary tax rates, just like RMDs from qualified retirement funds. OR you can purchase an annuity with after-tax funds, and growth is taxed at ordinary rates (not preferred long term capital gains rates). So taxes could make a difference if comparing taxable investments vs non-qualified annuity, but don't really impact the RMD vs qualified annuity question.

partgypsy

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #33 on: February 12, 2018, 06:30:32 AM »
Your question makes some emotional sense, but itís a dead end. You are trying to optimize a mathematical situation where the most critical variable is unknown, i.e. the date of your death. Because going broke in old age is much worse* than dying with money, common sense directs you to strategies that make the latter more likely than the former. The alternative is to pick your death date and stick with it. Not likely to appeal to a many people.

*this is a critical assumption. The devilís advocate position might be to treat them as equally bad, and embrace destitution in old age. This is likely to reduce your comfort and dignity, regardless of your age or how you die. To you prefer that to dying with a positive net worth?

ditto. You don't know when you will die. You also don't know if towards the end of your years, you develop a costly medical condition, or insert anything that is very expensive. It's better to die with something on the table than be a ward of the state. And so what if it was a million dollars? There are so many good charities (for me environmental) that I would donate more to if I had the wherewithal. Which is worth more than any one individual retiring earlier.

maizeman

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #34 on: February 12, 2018, 06:59:46 AM »
I don't even know why that's a concern.  If you've got nobody you want to leave the money to, and you want to make sure you don't run out, yeah, you're likely to have an excess.  Why would you even care?  Once you are dead it doesn't matter...

Because, for example, if you leave $1M behind, two people could have retired on your 'stache, or you could have retired years earlier. I understand this is in hindsight. What is the best way, if any, to prevent it?

It sounds a like you're asking if there is a way to retire earlier (before hitting the amount of invested assets suggested by the 4% rule) with the same risk profile if you don't want to leave an inheritance. Is that a correct interpretation? Or are you simply worried about making sure your money gets used up before you die?

For the second question you already have gotten lots of useful answers from charitable donations to ramping up your lifestyle if your portfolio is growing too fast to keep the magic of compounding interest from kicking in too much.

For the first question the short answer is no. The 4% rule is saving enough to protect you from running out of money in some of the worst case scenarios which means usually your portfolio will grow a lot. If you retire with less savings you reduce the "risk" of dying with lots of money left over but increase the very real risk of running out of money before retirement.

Now if you can accept more instability in the amount of money you can spend every year than the 4% rule provides, it might be worth reading up on the variable percentage withdrawal method: https://www.bogleheads.org/wiki/Variable_percentage_withdrawal It certainly decreases the "risk" that you'll still have a lot of money left over if you life into your 70s or 80s. Personally I don't care for it both because of the income fluctuations and because I worry about what happens if there is a breakthrough in human longevity 40 years from now,* but I've been spending down my portfolio based on current life expectancies, but if neither of those concern you it might be a good fit for your situation and could potentially allow you to retire earlier.

*Annuities can effectively insure against individual longevity risk. If there is a significant increase in population-wide longevity, previously purchased annuities are at significant risk of bankruptcy, and new ones have the new increase in longevity prices in, so they're not an effective solution anymore.

netskyblue

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #35 on: February 12, 2018, 09:15:15 AM »
I'm not sure death at X age is something we even CAN reasonably plan for.  I'm in my early 30s, I've had a number of relatives live into their 90s.  My grandma is mid-90s and still living on her own and doing well.  I imagine when she goes, it will probably be a relatively quick thing, an illness that takes a fast downhill turn, etc.

I've got ~60 years left as a conservative maximum, if I stay on par with my relatives and nothing gets me first.  But 60 years is a looooong time in terms of scientific and medical advancement.  Who knows what kind of things will happen in that time frame?  For all I know, 60 years from now, 90 will be the new 50. 

I'm not at all concerned about leaving money unspent.  When I'm dead, I'm not going to care that I left money behind, or worked an extra few years.  My goal is to plan for indefinite drawdown, and then I'll never be disappointed and broke.

Proud Foot

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #36 on: February 12, 2018, 09:35:03 AM »
To the OP: my idea will be to create a foundation that will become my legacy. Iíd love to create something that will provide educational opportunities for disadvantaged kids. That way the money isnít a waste and all the hard effort (and passive growth) will be meaningful. It wonít make sense to spend like mad while Iím around if Iíve already created a life that isnít consumer focused, more money is meaningless. So yes, charity, by your own design, may be the best way.
MTD, as much as I agree with your first thought, I take issue with this one. Foundations cost a fuckton of money to operate. It is virtually guaranteed that there's already one out there that's doing whatever it is you wish to achieve. Help create economies of scale by giving them your money (provided they're doing it well). Starting a small foundation of one's own tends to be more about ego (or actual job avoidance) than altruism.

MTD, I like your idea and agree with Dicey's comments. You could do this with a community foundation and not have to set up your own foundation. Get it all set up so it will fund upon your death and you can specify how you want the money to be spent.

For the OP's question, I would rather have money left over at my death to pass on to my children/grandchildren and charity than have to worry about financial concerns/relying on others to support me when I am older.

MrThatsDifferent

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #37 on: February 12, 2018, 01:38:02 PM »
To the OP: my idea will be to create a foundation that will become my legacy. Iíd love to create something that will provide educational opportunities for disadvantaged kids. That way the money isnít a waste and all the hard effort (and passive growth) will be meaningful. It wonít make sense to spend like mad while Iím around if Iíve already created a life that isnít consumer focused, more money is meaningless. So yes, charity, by your own design, may be the best way.
MTD, as much as I agree with your first thought, I take issue with this one. Foundations cost a fuckton of money to operate. It is virtually guaranteed that there's already one out there that's doing whatever it is you wish to achieve. Help create economies of scale by giving them your money (provided they're doing it well). Starting a small foundation of one's own tends to be more about ego (or actual job avoidance) than altruism.

MTD, I like your idea and agree with Dicey's comments. You could do this with a community foundation and not have to set up your own foundation. Get it all set up so it will fund upon your death and you can specify how you want the money to be spent.

For the OP's question, I would rather have money left over at my death to pass on to my children/grandchildren and charity than have to worry about financial concerns/relying on others to support me when I am older.

Thanks. Iíll be honest, I have no idea what it takes to set up a foundation, but Iíd happily give me to an organization that awarded scholarships. I love Kiva, maybe something like that?

GuitarStv

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #38 on: February 12, 2018, 01:43:17 PM »
Pick a date to die, and kill yourself on it.  Massively simplifies retirement planning and drawing down on savings.

CNM

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #39 on: February 12, 2018, 01:57:31 PM »
When you feel that the end is nigh, start making gifts to charities, relatives, friends or random people.

Cpa Cat

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #40 on: February 12, 2018, 04:41:13 PM »
A charitable remainder trust may work well. They can be set up to provide income for X years or until death and then the remainder converts to a foundation. You can basically annuitize your own income inside the CRT.

It works great with appreciated securities, but can also work with cash and real estate. You get an immediate charitable deduction, too.

Villanelle

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #41 on: February 13, 2018, 05:50:36 AM »
Iím disappointed with the cruel and flippant suicide responses.  I would expect better from people on this forum.

To the OP: my idea will be to create a foundation that will become my legacy. Iíd love to create something that will provide educational opportunities for disadvantaged kids. That way the money isnít a waste and all the hard effort (and passive growth) will be meaningful. It wonít make sense to spend like mad while Iím around if Iíve already created a life that isnít consumer focused, more money is meaningless. So yes, charity, by your own design, may be the best way.
Are you disappointed at the flippancy of the suicide remarks or is it the thought of suicide as part of "retirement planning"? I think a lot of people believe they will commit suicide in.their old age if they are faced with a painful and debilitating terminal illness or even a long stay in a nursing home for something like dementia. That's probably especially true for people who don't have family or outlived family and friends or are estranged from them. From a "leaving a legacy" or inheritence standpoint, choosing to commit suicide rather than spend hundreds of thousands toward care in a hopeless or painful state of existence might be a better option for some people. I would consider some form of the Smith and Wesson Plan myself in certain circumstances.

Yes. 

I don't think it's flippant at all.  To some people, life isn't some sacrosanct thing, meant to be protected at all costs--financial, emotional, etc.  I'm not arrogant enough to say with any certainty what I'll be prepared to do if and when this isn't just a theoretical question, but I don't have kids and I'm not religious (with the complications that creates about ending a life) and I can easily see why I might reach a point where the suffering isn't worth what meager quality of life I might have left.  I took care of my grandmother at the end of her life.  She was pretty much desperate to go, and she was miserable.  Her life had no real meaning.  She laid in bed, waiting to die.  She was uncomfortable at best, in pain at worst.  Her husband had been dead several years.  She just wanted to be gone.  In that situation, I may well choose suicide.  That's not flippant.

partgypsy

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #42 on: February 13, 2018, 06:58:05 AM »
Iím disappointed with the cruel and flippant suicide responses.  I would expect better from people on this forum.

To the OP: my idea will be to create a foundation that will become my legacy. Iíd love to create something that will provide educational opportunities for disadvantaged kids. That way the money isnít a waste and all the hard effort (and passive growth) will be meaningful. It wonít make sense to spend like mad while Iím around if Iíve already created a life that isnít consumer focused, more money is meaningless. So yes, charity, by your own design, may be the best way.
Are you disappointed at the flippancy of the suicide remarks or is it the thought of suicide as part of "retirement planning"? I think a lot of people believe they will commit suicide in.their old age if they are faced with a painful and debilitating terminal illness or even a long stay in a nursing home for something like dementia. That's probably especially true for people who don't have family or outlived family and friends or are estranged from them. From a "leaving a legacy" or inheritence standpoint, choosing to commit suicide rather than spend hundreds of thousands toward care in a hopeless or painful state of existence might be a better option for some people. I would consider some form of the Smith and Wesson Plan myself in certain circumstances.

Yes. 

I don't think it's flippant at all.  To some people, life isn't some sacrosanct thing, meant to be protected at all costs--financial, emotional, etc.  I'm not arrogant enough to say with any certainty what I'll be prepared to do if and when this isn't just a theoretical question, but I don't have kids and I'm not religious (with the complications that creates about ending a life) and I can easily see why I might reach a point where the suffering isn't worth what meager quality of life I might have left.  I took care of my grandmother at the end of her life.  She was pretty much desperate to go, and she was miserable.  Her life had no real meaning.  She laid in bed, waiting to die.  She was uncomfortable at best, in pain at worst.  Her husband had been dead several years.  She just wanted to be gone.  In that situation, I may well choose suicide.  That's not flippant.

It's actually kind of old-school. My grandmother when she was in her last 6 months of life was in a nursing home, repeatedly asked for a gun so she could take care of herself. She was extremely independent, strong willed person, and she didn't want to be there. My other grandmother hated hospitals HATED them. My father explained in the old country, the older parents lived with the children; they were a part of the family. But some even up until he was a kid, if they felt they were too much of a burden to the family, would take a walk in the mountains and "not come back". He has made it clear when his natural life span is over he does not want anything to prolong his life, and has given us copies of his advanced directives. I love him and would rather have the option to keep him with us, if there was any chance. But we will respect his wishes.
« Last Edit: February 13, 2018, 07:00:56 AM by partgypsy »

Dicey

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #43 on: February 13, 2018, 07:23:52 AM »
Iím disappointed with the cruel and flippant suicide responses.  I would expect better from people on this forum.

To the OP: my idea will be to create a foundation that will become my legacy. Iíd love to create something that will provide educational opportunities for disadvantaged kids. That way the money isnít a waste and all the hard effort (and passive growth) will be meaningful. It wonít make sense to spend like mad while Iím around if Iíve already created a life that isnít consumer focused, more money is meaningless. So yes, charity, by your own design, may be the best way.
Are you disappointed at the flippancy of the suicide remarks or is it the thought of suicide as part of "retirement planning"? I think a lot of people believe they will commit suicide in.their old age if they are faced with a painful and debilitating terminal illness or even a long stay in a nursing home for something like dementia. That's probably especially true for people who don't have family or outlived family and friends or are estranged from them. From a "leaving a legacy" or inheritence standpoint, choosing to commit suicide rather than spend hundreds of thousands toward care in a hopeless or painful state of existence might be a better option for some people. I would consider some form of the Smith and Wesson Plan myself in certain circumstances.

Yes. 

I don't think it's flippant at all.  To some people, life isn't some sacrosanct thing, meant to be protected at all costs--financial, emotional, etc.  I'm not arrogant enough to say with any certainty what I'll be prepared to do if and when this isn't just a theoretical question, but I don't have kids and I'm not religious (with the complications that creates about ending a life) and I can easily see why I might reach a point where the suffering isn't worth what meager quality of life I might have left.  I took care of my grandmother at the end of her life.  She was pretty much desperate to go, and she was miserable.  Her life had no real meaning.  She laid in bed, waiting to die.  She was uncomfortable at best, in pain at worst.  Her husband had been dead several years.  She just wanted to be gone.  In that situation, I may well choose suicide.  That's not flippant.

It's actually kind of old-school. My grandmother when she was in her last 6 months of life was in a nursing home, repeatedly asked for a gun so she could take care of herself. She was extremely independent, strong willed person, and she didn't want to be there. My other grandmother hated hospitals HATED them. My father explained in the old country, the older parents lived with the children; they were a part of the family. But some even up until he was a kid, if they felt they were too much of a burden to the family, would take a walk in the mountains and "not come back". He has made it clear when his natural life span is over he does not want anything to prolong his life, and has given us copies of his advanced directives. I love him and would rather have the option to keep him with us, if there was any chance. But we will respect his wishes.
I completely understand what you're saying. However, in these examples their decision was based more on ability to utilize one's body to enjoy life, not on the availability of funds to buy groceries, housing, or medical care. Huge difference.

Prairie Stash

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #44 on: February 13, 2018, 07:51:27 AM »
Outside of health care, a large random factor, most retirees spend less as they get older. Less travel, less furniture purchases, less transportation, less in all categories. This is an unspoken bonus of aging, for a time before illness a stash should grow as you tend to under spend.

Planning to optimize spending requires you to factor in spending patterns that change as we age and health care which is random. Where one person get s cancer, the next doesn't. While some have heart attacks, some don't. No one knows what will kill them, it could be expensive to prolong life or cheap.

GuitarStv

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #45 on: February 13, 2018, 08:46:27 AM »
Iím disappointed with the cruel and flippant suicide responses.  I would expect better from people on this forum.

To the OP: my idea will be to create a foundation that will become my legacy. Iíd love to create something that will provide educational opportunities for disadvantaged kids. That way the money isnít a waste and all the hard effort (and passive growth) will be meaningful. It wonít make sense to spend like mad while Iím around if Iíve already created a life that isnít consumer focused, more money is meaningless. So yes, charity, by your own design, may be the best way.
Are you disappointed at the flippancy of the suicide remarks or is it the thought of suicide as part of "retirement planning"? I think a lot of people believe they will commit suicide in.their old age if they are faced with a painful and debilitating terminal illness or even a long stay in a nursing home for something like dementia. That's probably especially true for people who don't have family or outlived family and friends or are estranged from them. From a "leaving a legacy" or inheritence standpoint, choosing to commit suicide rather than spend hundreds of thousands toward care in a hopeless or painful state of existence might be a better option for some people. I would consider some form of the Smith and Wesson Plan myself in certain circumstances.

Yes. 

I don't think it's flippant at all.  To some people, life isn't some sacrosanct thing, meant to be protected at all costs--financial, emotional, etc.  I'm not arrogant enough to say with any certainty what I'll be prepared to do if and when this isn't just a theoretical question, but I don't have kids and I'm not religious (with the complications that creates about ending a life) and I can easily see why I might reach a point where the suffering isn't worth what meager quality of life I might have left.  I took care of my grandmother at the end of her life.  She was pretty much desperate to go, and she was miserable.  Her life had no real meaning.  She laid in bed, waiting to die.  She was uncomfortable at best, in pain at worst.  Her husband had been dead several years.  She just wanted to be gone.  In that situation, I may well choose suicide.  That's not flippant.

It's actually kind of old-school. My grandmother when she was in her last 6 months of life was in a nursing home, repeatedly asked for a gun so she could take care of herself. She was extremely independent, strong willed person, and she didn't want to be there. My other grandmother hated hospitals HATED them. My father explained in the old country, the older parents lived with the children; they were a part of the family. But some even up until he was a kid, if they felt they were too much of a burden to the family, would take a walk in the mountains and "not come back". He has made it clear when his natural life span is over he does not want anything to prolong his life, and has given us copies of his advanced directives. I love him and would rather have the option to keep him with us, if there was any chance. But we will respect his wishes.
I completely understand what you're saying. However, in these examples their decision was based more on ability to utilize one's body to enjoy life, not on the availability of funds to buy groceries, housing, or medical care. Huge difference.

What if someone just doesn't want to keep living?  What if someone feels that they've had enough time on the Earth, have enjoyed their stay, and doesn't want to wait until crippling pain and diminishing faculties rob them of all dignity?  Consciously planning a date to kill yourself well in advance is not an act of desperation as you appear to be trying to paint it.

Acastus

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #46 on: February 13, 2018, 09:46:58 AM »
If you want to be certain you will have some money until the end, you need to over save and under spend compared to the average case so you will have enough money for the worst case. If your retirement planner says you have a 90% chance of success, then 90% of scenarios leave money on the table, and probably 50% leave more than you started with.

An annuity just shifts the risk. If you die young, you gave the insurance company too much money.

I liken this situation to our legal system. If you want to ensure all innocent people are not convicted, you have to let a few probably guilty people go free.

Padonak

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #47 on: February 14, 2018, 07:05:04 PM »
What is a reasonable amount you should set aside for healthcare expenses after you have reached age 65 and are eligible for Medicare?

Mr. Green

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #48 on: February 14, 2018, 08:15:20 PM »
I don't even know why that's a concern.  If you've got nobody you want to leave the money to, and you want to make sure you don't run out, yeah, you're likely to have an excess.  Why would you even care?  Once you are dead it doesn't matter...

Because, for example, if you leave $1M behind, two people could have retired on your 'stache, or you could have retired years earlier. I understand this is in hindsight. What is the best way, if any, to prevent it?
You're asking to know the future. You can't know how much to spend without also knowing exactly what you'd have over the course of your life. Even if you could know exactly how much money you'd have, would you really want to? You're talking about taking the mystery out of life.

Life is a game and the only thing you can do is to play that game the best way you know how. Every day brings new data, and a chance to adjust your plans if your circumstances have changed. If life throws you a curve ball you remember that the future is unknown, adjust your plan, and take solace in the fact that you played the game the best way you knew how. What else can you do?

Valhalla

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Re: How do you make sure you don't leave money on the table after you die?
« Reply #49 on: February 14, 2018, 09:25:05 PM »
If I'm lucky enough to live over 120 yo with tons of money in the bank... there are 2 solutions - hookers and blow.