discount rate of savings vs. chance of death

[intently]

Hello!

Do any of you folks discount the value of your savings based on your chance of death?  For example, we can use this death calculator:

http://www.deathriskrankings.com/

From here we can see that a 30-year-old male has a 12.7%  chance of dying in the next 30 years.  So, you just bought a house and can't wait to pay off the mortgage?  Aside from regular inflation, you should consider that there's a 12.7% chance that your dollars will be worth zero to you in 30 years because you'll be dead.

Similarly apply to other kinds of savings and investment.

[BPA]

I suspect folks around here are too optimistic for that...unless, of course, they have some life shortening illness or psychic abilities.

So, no.  I expect to live forever.  ;)

[intently]

I expect to live forever, and so far so good!

But really, there is something to be said for living in the moment.  Sure, some people take that to extremes and end up in debt, fat, and lonely.  But you can't always live in the future.

[matchewed]

I view FIRE as establishing a future, not living in it. I'm just laying a foundation and living life at the same time.

If I die tomorrow I won't have any regrets (I'll be dead).

[intently]

Well it seems self-evident that people make sacrifices in order to retire early.  If you die the day before you retire (at any age) then all the retirement saving was in vain (except for your heirs, of course).

If you're claiming that your saving isn't a sacrifice, then I don't buy it.  If you *knew* that you'd die on the day before your planned retirement I think you'd be living differently.

[BPA]

Well it seems self-evident that people make sacrifices in order to retire early.  If you die the day before you retire (at any age) then all the retirement saving was in vain (except for your heirs, of course).

If you're claiming that your saving isn't a sacrifice, then I don't buy it.  If you *knew* that you'd die on the day before your planned retirement I think you'd be living differently.

I don't feel I'm sacrificing by saving money.  I am quite happy living frugally.  When you have the MMM/ERE mindset, saving isn't deprivation. 

[matchewed]

I already know I'm going to die and so will you. Why does not knowing the when change things? Today or tomorrow I'm still going to try to live my life to my values. Spending more on crap is not amongst them. Here's what I'd probably do differently... be a bit weirder.

[Rural]

I'm already weirder, so I guess I'm all set. :-)

[intently]

I agree that frugality isn't deprivation.  I am frugal as well and quite happy :)

BUT if I knew when I was going to die you can bet that I'd take that into account with my spending and not save as if I expected to be retired for 60 years.

[BPA]

I agree that frugality isn't deprivation.  I am frugal as well and quite happy :)

BUT if I knew when I was going to die you can bet that I'd take that into account with my spending and not save as if I expected to be retired for 60 years.

lol  I might spend more traveling to visit people before I died, but since I have kids any leftovers of mine won't be wasted.

[arebelspy]

Well it seems self-evident that people make sacrifices in order to retire early.  If you die the day before you retire (at any age) then all the retirement saving was in vain (except for your heirs, of course).

If you're claiming that your saving isn't a sacrifice, then I don't buy it.  If you *knew* that you'd die on the day before your planned retirement I think you'd be living differently.

You need to work on your mindset.

I disagree with your post.

[intently]

You need to work on your mindset.

I disagree with your post.

Well, at the very least if you knew your time of death you could calculate more precisely how long you needed to work for before you could retire!

[arebelspy]

You need to work on your mindset.

I disagree with your post.

Well, at the very least if you knew your time of death you could calculate more precisely how long you needed to work for before you could retire!

Sure.  And you could go hog wild and rack up a bunch of debt first.  But would that really make you happy?

I'm very much enjoying my life right now, and plan on enjoying it equally when I hit full FIRE in a few years.  I don't anticipate being any happier (indeed, I don't know how I could be - can life get any better than it is?).

Certainly one doesn't need to deprive themselves.

One does need to have a mindset of "enough," however, and most of us have way more than enough, we just don't recognize it.

Daffodils

I wandered lonely as a cloud
That floats on high o'er vales and hills,
When all at once I saw a crowd,
A host, of golden daffodils;
Beside the lake, beneath the trees,
Fluttering and dancing in the breeze.

Continuous as the stars that shine
And twinkle on the milky way,
They stretched in never-ending line
Along the margin of a bay:
Ten thousand saw I at a glance,
Tossing their heads in sprightly dance.

The waves beside them danced; but they
Out-did the sparkling waves in glee:
A poet could not but be gay,
In such a jocund company:
I gazed--and gazed--but little thought
What wealth the show to me had brought:

For oft, when on my couch I lie
In vacant or in pensive mood,
They flash upon that inward eye
Which is the bliss of solitude;
And then my heart with pleasure fills,
And dances with the daffodils.

-William Wordsworth

[BPA]

I'll enjoy mine more when I retire because I will set my own schedule and won't require an alarm clock, but materially...I'm good.  I've got all I need and want.

[Self-employed-swami]

I have a pretty sweet life right now, actually.  I live in an awesome house, in a good neighbourhood, in a decent city.  I work about 180 days/year, and I make what most people would consider to be a very good living. 

I just dropped $100 on cheese, meat, and vegetables at the grocery store that will last my husband and I 2 weeks of meals, and we make our own home brew beer/wine/cider/mead.  I worked while he went to school, and now that he's working, we've been able to hammer away at his student loans (paid about $7,000 on them in the last 6 months), bought $20,000 worth of TFSAs (stocks), and about $8,000 worth of RRSPs, and I haven't worked since February myself.  We have $16,800 in our various savings accounts (hello Ireland next year, and new furnace next month, hardwood floor s next year) and I drive a 1995 Toyota Tercel (7.3L per 100km gas milage).  My husband drives a totally swanky 2005 Yaris, and I also own an awesome work truck (2005 Tundra) that barely leaves the parking spot, as I only use it for work.

I have a luxurious life, way better than most anyone else I know.  Please point out what exactly I am sacrificing? We live like KINGS, Damn hell ass KINGS on $500/week, before we pay heating, insurance, electrical, city taxes, phones, groceries and probably too much beer.

If I died tomorrow, I'd have lived the last day as a happy camper!

*edited because I forgot to account for my weekly own RRSP contributions, in the amount that we actually need to spent to heat, eat and transport ourselves weekly*

[limeandpepper]

I expect to live forever, and so far so good!

But really, there is something to be said for living in the moment.  Sure, some people take that to extremes and end up in debt, fat, and lonely.  But you can't always live in the future.

I agree, I definitely see where you're coming from. I know someone who passed from cancer earlier this year. I'm glad she got to travel and enjoy her hobbies before it happened.

Sure, I can cut out ALL travel, and eat only the most basic food, with the aim of retiring years earlier. But I'm not going to do that. I suspect the detractors in this thread haven't reduced everything in their lives down to only the bare minimum required for survival, either. So really it proves the point, balance is important. Having said that, I'm not going to use that calculator to guide my life choices. Probability averages mean nothing to do the individual.

[intently]

Having said that, I'm not going to use that calculator to guide my life choices. Probability verages mean nothing to do the individual.

I'd only suggest you let it "guide" your choices to an extent relative to the numerical values.  We don't know what inflation, interest rates, or stock returns will be in 30 years either, but we incorporate the trends and averages into our calculations.

[Jamesqf]

I agree with most of the posters here: I already have pretty much everything I want that could be purchased with reasonable amounts of money.  Sure, if I knew for absolute certain that I was going to drop dead soon, I might blow the investment account on renting a harem, or hiring a squad of hit men to make sure that certain people don't outlive me, but that's not the sort of thing I'd do on a 12.7% chance.

[arebelspy]

Though we've ragged on the idea a little, I have enjoyed thinking about the possibilities and implications of it, so thank you for posting the thought, intently.

[intently]

Haha no worries, it was interesting to think about.  Unfortunately the only way to "hedge" against death-inflation is to spend your money now, which is exactly contrary to MMM philosophy.  That's why I thought it would be an interesting topic.

Or is there another way to hedge against death? 

[Joet]

Yes, it's a variant of lifetime consumption smoothing.

The variables you control are lifetime expected earnings and spending. What you dont really know is expected lifetime.

So, IMO, just like we hedge our bets against employment, market performance, real estate, bonds, human capital, etc one must also hedge their bets against an untimely death. How you choose to do so is entirely up to you.

Buddy of mine died on his motorcycle on Saturday. Sad, unfortunate, and untimely. Yet he practiced hedonism and didn't have a ton of savings. Probably most here would consider that a failed plan. The truth is probably somewhere in the middle.

[gdborton]

I do think that saving just to die is a waste, and I know for a fact that I'm depriving myself now for a better retirement in the future.  At the very least most people on this board are depriving themselves of time now so that they can enjoy more of it later.  If you don't see your time spent working as deprivation, then there wouldn't be much sense in seeing retirement as a better option.

Or is there another way to hedge against death?

Sure, don't give up so much now that you aren't content with your life, and give your money away at death to family, friends, or a charity. Ultimately it isn't wasted, and can continue to work for your goals in death.

[Johnny Aloha]

For some reason I couldn't open the link, but a 12.7% chance of a 30yr old dying by 60 seems high to me.

I'm doubtful of that stat because term life insurance is SO ridiculously cheap.  And insurance actuaries aren't often wrong.

[cbr shadow]

I understand and agree with most of the posts here saying that an optimistic attitude goes a long way, and that if you're feeling totally deprived then you're doing something wrong....BUT  if things are so good right now and you truely can't imaging being any happier with more money or more spending or more of anything, then why retire early ?   Donate that stash to starving people who need it.
I guess my point is just that I agree that being happy with what you have now is the correct attitude to have, but lets be honest we're all doing this for something better in the future (even if that "better" is more time) right?

[intently]

I understand and agree with most of the posts here saying that an optimistic attitude goes a long way, and that if you're feeling totally deprived then you're doing something wrong....BUT  if things are so good right now and you truely can't imaging being any happier with more money or more spending or more of anything, then why retire early ?   Donate that stash to starving people who need it.
I guess my point is just that I agree that being happy with what you have now is the correct attitude to have, but lets be honest we're all doing this for something better in the future (even if that "better" is more time) right?

This.

[arebelspy]

I understand and agree with most of the posts here saying that an optimistic attitude goes a long way, and that if you're feeling totally deprived then you're doing something wrong....BUT  if things are so good right now and you truely can't imaging being any happier with more money or more spending or more of anything, then why retire early ?   Donate that stash to starving people who need it.
I guess my point is just that I agree that being happy with what you have now is the correct attitude to have, but lets be honest we're all doing this for something better in the future (even if that "better" is more time) right?

Being just as happy now, and looking forward to new adventures where you will also be happy is not an incompatible state of mind.

I saw a thread earlier that said "what are you looking forward to getting rid of when you retire" or something like that (EDIT: link to thread), and I couldn't think of a thing.  That doesn't mean I won't enjoy doing new things, however.

[Jamesqf]

  Donate that stash to starving people who need it.

Why?  With few exceptions, I don't like people all that much.

I guess my point is just that I agree that being happy with what you have now is the correct attitude to have, but lets be honest we're all doing this for something better in the future (even if that "better" is more time) right?

Wrong.  Unless in that "better" you include a degree of security.  Realistically, if things go bad (and I've been there) it's even less likely that people are going to give me money.

[matchewed]

BUT  if things are so good right now and you truely can't imaging being any happier with more money or more spending or more of anything, then why retire early ?   Donate that stash to starving people who need it.

Essentially just a reiteration of Arebelspy's point, but why can I not be happy now and plan for a different future than what I have now?

Just because I plan for a future doesn't mean that future is driven by discontent. In fact I would argue it is driven by security and that security providing more opportunities.

[intently]

It's interesting to me that this thread has waxed so philosophical.  Is it axiomatic for Mustachians that living frugally isn't a sacrifice of any kind?

[arebelspy]

It's interesting to me that this thread has waxed so philosophical.  Is it axiomatic for Mustachians that living frugally isn't a sacrifice of any kind?

I think lots of us agree with the stoicism part of Mustachianism.

Certainly one could sacrifice.  I don't.  I spend lavishly.  I could easily cut 10 or 15 grand from my budget. (My wife is an Epicurian hedonist, but I think she'd be up for it, because honestly, what more do you need to take pleasure than a simple glass of cool water? What a ridiculous luxury.)

I think most of us are of the mindset that we get pleasure out of optimizing, so it isn't a sacrifice.  Though I would agree that one can sacrifice. 

But just living frugally?  No, that's not a sacrifice, it leads to happiness, in general.

[grantmeaname]

It's interesting to me that this thread has waxed so philosophical.  Is it axiomatic for Mustachians that living frugally isn't a sacrifice of any kind?

Do it for six months and you won't even notice it anymore. It's a sacrifice for two weeks, and then it's just the new way you're living your life, and then it's just what you do.

[intently]

Hm, so maybe the axiom is related to the definition of "frugality".  E.g., "frugal living means to spend as little as possible without sacrificing".  Therefore, by definition one isn't sacrificing by living frugally.

I don't think this connotation is inherent in the dictionary definition of frugal.

Presumably everyone would agree that it would be possible to spend so little that it would be a sacrifice, but you wouldn't call that "frugal".

[matchewed]

I think you're missing the forest from the trees by focusing so intently on one word. Whatever you happen to call it, it is not considered sacrifice to the individual(s) you are talking to. To go further into your definition game, what is the definition of sacrifice?

Am I sacrificing the driving of my car to the grocery store when I walk instead? Or is that just a frugal decision because the grocery store is just down the street? If frugal decisions are considered sacrificial, then so are normal decisions. You sacrificed the tuna fish sandwich when you decided to bring a salad to work instead. I sacrificed McDonalds when I walked by it instead of stopping by for a deliciously awful double quarter pounder (secret shame).

Maybe trade-off or just plain making a decision would be a better way to put it. I made a conscious decision to live my life in a way which I considered the security of my future as well as my current happiness while trying to maximize both.

Honestly I'm not even sure of the direction this thread is going anymore. But thanks for the entertainment. :)

[Jamesqf]

Am I sacrificing the driving of my car to the grocery store when I walk instead?

You need to look at it from the other direction.  By (hypothetically, you understand) not riding my bike to the store, I am sacrificing cardiovascular health, a trim waistline, muscular legs & a tight butt, all producing the sort of sex appeal that would lead to wild weekends with the fantastically hot person(s) of the opposite sexual persuasion I meet while biking...

[Hamster]

...all producing the sort of sex appeal that would lead to wild weekends with the fantastically hot person(s) of the opposite sexual persuasion I meet while biking...

Opposite sexual persuasion? Does this mean you want to have heterosexual sex with a homosexual bicyclist or homosexual sex with a heterosexual cyclist? Or.... monogamous sex with a polygamist? live relations with a necrophiliac? The possibilities are disturbing, yet intriguing.  Please help me here... :-)

[grantmeaname]

Here is a relevant MMM article, intently.

[BPA]

Just curious to know what you would be sacrificing, intently.

In my life, I find it no sacrifice at all not to own a car.  I live near work and cycle or walk or take transit, and whenever my friends have huge car related expenses or have to take it into a shop or have it stolen, I'm always glad I don't have to deal with that pain in the ass.  Also, I was sick a few years ago and had no energy.  It is a joy to me now to get places by cycling because having no stamina sucked.  I'm excited that I have the strength again.

Also, my house is smallish which means that I don't have as much to clean, but it's comfortable and I like it.  And I really hate cleaning.  In fact, I may downsize just so that I don't have to clean as much as I do or mow the lawn.

And I can prepare a meal and eat it on my deck amongst my lovely relatively low maintenance backyard (only the lawn is stupid) and have relative privacy and nice scenery whereas I know people for whom eating at a restaurant with the "patio" that juts into a hot, stinky, unattractive parking lot is the best thing about their day.  WTF?  I have never understood how that is pleasurable compared to eating at home.

My brother rents a room from me.  We have a lot of fun together.  It gives him cheap rent and it gives me enough cash to pay for his utility use and most of my property taxes.  Win for him and win for me!

See.  No sense of sacrifice here.  I love cycling, hate cleaning, enjoy living with my brother, and love my deck. 

[Zikoris]

If you're claiming that your saving isn't a sacrifice, then I don't buy it.  If you *knew* that you'd die on the day before your planned retirement I think you'd be living differently.

Another vote for "wouldn't change a thing". I have a great life now - growing up I always thought it would be great to have a downtown Vancouver apartment, a cat, a cushy, easy, well-paying office job, and extensive international travel. I have all that now, and happen to save 60-80% of my income on top of that. I don't have a taste for extravagance and greatly prefer home-cooked meals to restaurants, enough that my boyfriend and I together spend around $200/year on eating out, generally when we're stuck in airports while travelling. I'm naturally anti-consumer and don't get any enjoyment from buying things(quite the opposite actually - I needed to pick up a couple pieces of clothing for work yesterday and was ready to kill someone by the time I left the store).

I'm looking forward to retirement so I can travel full-time and set up shop in various countries for months or years at a time. Just because I enjoy my life now doesn't mean I don't want to try something different in the future.

[intently]

Honestly I'm not even sure of the direction this thread is going anymore. But thanks for the entertainment. :)

This :)

[RetiredAt63]

Interesting take on things.

For Canadians I found this calculator
http://bodyandhealth.canada.com/health_tools.asp?t=10&text_id=2974&channel_id=10&relation_id=10864

It  thinks I will live to 95.5 - since I am aiming to copy my grandmother (died at 92 in her sleep) it is nice to see it comes out close.

Would I change how I live now?  Well, I will be retiring in 2.5 months, so life will change.  But basic lifestyle is good - I like my house, I love my yard, I am in the country so my dog has lots of space and I see lots of stars at night - so things won't change a lot.  I will have more time for interests and socializing - job was great but not a lot of free time.

I do want to travel more while I am (relatively) young and active.  New Zealand and Australia again, Ireland, Scotland, Caribbean, the Galapagos Islands if I can get there before they are closed to ecotourism.

Yes I know I could get hit by a truck - considering the commuting I have done over the years, that was always my most likely cause of death.  But accidents happen, we just have to plan life to minimize stupid risks and go for the ones that give greater benefits. Oops, is that sentence an example of why most Darwin Awards go to men?  ;-)  Or is it brainwashing from being on the Health and Safety committee at work?

Dum vivimus, vivamus.

[SnackDog]

Dying early is not the problem.  Outliving your savings if you choose to stop working is the problem.