Yahoo Finance I’m Planning To Run Out of Money in Retirement — Here’s Why
The concept of running out of money intentionally in retirement might initially seem a bit strange. After all, we’re so often taught the importance of saving, investing and preparing ourselves for retirement that the idea of not having some extra money can be stressful, to say the least.
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But there’s a valid argument to be made for someone planning to run out of money in retirement. At the very least, there are some reasons someone might be OK with running out right at the end — but certainly not at the beginning.
GOBankingRates spoke with two individuals — Jay Zigmont and Chris Gleason — about their thoughts on why someone might want to run out of money in retirement and their own perspectives on the matter. Here’s what they said.
And here is what other people are planning to do with their generational wealth.
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There’s Such a Thing as Excess
There’s a difference between not having enough funds to get you through retirement and having far more than you need.
“The vast majority of my Childfree clients, meaning people who will never have kids, aim to die with zero. My wife and I are child free, and our nephews get what is left over,” said Zigmont, Ph.D., CFP and founder of Childfree Wealth. “We consider it fine if they get $10,000 or $100,000. If they get $1 million or more after we die, we made a mistake.
“If they are getting a million or more, we probably should have given them that money earlier in their life, or spent it, or given it to charities,” he continued. “If we live to 90, our nephews will be in their 60s, and chances are they won’t need the money then as much as they might earlier in their life.”
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Winding Down, With a Safety Net
When you retire, it’s important to consider your long-term goals — not just for yourself but for any potential heirs. But if you don’t plan to have kids or leave behind a massive sum of money after you’re gone, you might be better off prioritizing your own needs and well-being. At a certain point, that might just mean spending rather than building your wealth.
“For child-free people who want to wind down their wealth, there is a point in life where every dollar you save goes to your estate, which is not a priority,” Zigmont said. “That means they can either retire earlier, cut back on work, enjoy more travel, give more or focus on whatever brings them joy.”
The important thing is to have a safety net.
“To die safely with zero, we create a plan for our clients that includes a safety net,” Zigmont said. “The safety net includes a plan for long-term care, either insurance or self-insurance, putting off claiming Social Security until 70, and a small cash cushion.
“In this way, they are protected against common end-of-life expenses and issues and can spend the remainder of their savings. It isn’t a YOLO thing. It is a planned effort to wind down their wealth.”
Much of It Is About Worldview
There are quite a few other reasons someone might plan to run out of money in retirement, one of which simply comes down to their worldview.
“I see life as this really intriguing, connected web where we all play a very tiny role in a much bigger story,” said Gleason, founder and CEO at Simplicite Tax Loans. “There are finite resources on this planet, and money is really just an allocation of those resources. I can’t help but ask myself the question, ‘What kind of character do I want to be in that story? And how does the way that I manage my own allocation of money speak to what I believe about everybody else on this planet?’
“So, when I think about having money left over when my retirement is done — i.e., I’m dead — my brain processes that as ‘excess.’ As it will turn out, in the most technical way, I did not need it. Somebody else probably actually did.
“Of course, it’s more complicated than that. But if I had the ability to choose and to write my life’s story exactly the way that I want, I would have what I need while I’m here and I would leave without anything left over.”
People Often Save More Than They Need
When asked whether he thinks people tend to save more than they need, Gleason said: “I do, but my opinion is based on the idea that our view of what ‘need’ is has become skewed. I believe things that are actually luxuries have slowly crept into and have become part of the definition of the word ‘need.'”
He gave the following example to illustrate this:
“I’ve seen countless examples of people ‘moving up’ in retirement. Couples that lived their whole working lives in 1,800 square feet are suddenly out looking around at 4,000-square-foot houses in other states just for the two of them to live in. Oh, and that house also has a full-size basketball court and movie theater in it. [They’re] starting to have grandchildren, so they ‘need’ more space for them when they come to visit.
“It seems like our operative question in retirement isn’t, ‘What do I need?’ The operative question is, ‘How do I get everything that I’ve always wanted?'”
There’s Always the Concern of Not Having Enough
No matter how prepared you are or how much you end up actually having, chances are you’re still going to worry about not having enough. This is true whether you plan to run out of money in retirement or not.
“I’m human, and therefore I worry about my own well-being,” Gleason said. “Having ‘extra’ seems like a really comforting way to account for that possibility. … At the end of the day, I know that whether I have or I don’t have, I succeed or [I] don’t succeed, I enjoy or I don’t enjoy, our little role in this big story will come to an end.
“For me, whenever that time is near, I want to be able to talk about my time on this Earth the same way that anybody would talk about time spent working on something meaningful. I want to be confident that I did everything that I could to leave this place in a little bit better condition than when I first found it.”
Whether that means intentionally running out of money in retirement or having a little bit extra, that’s OK, too.
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This article originally appeared on GOBankingRates.com: I’m Planning To Run Out of Money in Retirement — Here’s Why
