Canadian Money Forum banner

41 - 60 of 76 Posts

·
Registered
Joined
·
45 Posts
Discussion Starter #41 (Edited)
I do suggest you take a good look at VPW withdrawal methodology.
I'll take a look at it at some point.


Keep in mind that this is a plan. Circumstances change over time. I started planning in my early 50's. Running the numbers on my own program and doing the whatifs and tax scenerios.

We have changed the plan multiple times, even since early retirement. Why? Lifestyle choices, ROR on our assets, spending...whatever. Even some health issues. Like others I took the plan out to 90. Perhaps in five years I might take it to 95 or perhaps drop it down to 75 for one us. One thing for certain...I do not want to be the richest person in the old folks home wishing that we had done this or that in retirement whilst we had the health, the inclination, and the money. Plan your retirement but don't plan it away.

Be flexible and acknowledge that changes in your life will necessitate changes in your financial plan. AltaRed certainly has the right mindset for this. Practical, Flexible, Realistic.
You're right, financial planning isn't static, it's an ongoing process since as you say circumstance or priorities can change. That's a point the planner made at the outset. One can plan without planning one's life away. I meet with the financial planner quarterly now that I've made some major decisions, including where and how to invest. In between those meetings there's no need to discuss it. I have an upcoming meeting, which prompted this question about what age is realistic to plan until ... I put it on the meeting agenda.

So LTA ... you can mock me for "wanting to know when I'm going to die" (which obviously I don't). I'm just exploring a point to discuss with my planner prior to our next meeting.
 

·
Registered
Joined
·
3,058 Posts
I'll take a look at it at some point.




You're right, financial planning isn't static, it's an ongoing process since as you say circumstance or priorities can change. That's a point the planner made at the outset. One can plan without planning one's life away. I meet with the financial planner quarterly now that I've made some major decisions, including where and how to invest. In between those meetings there's no need to discuss it. I have an upcoming meeting, which prompted this question about what age is realistic to plan until ... I put it on the meeting agenda.

So LTA ... you can mock me for "wanting to know when I'm going to die" (which obviously I don't). I'm just exploring a point to discuss with my planner prior to our next meeting.
I have no interest in 'mocking' you Foxx88. I am just trying to introduce a different viewpoint for you to consider.

I believe in learning how to be content with what you have. Contentment is after all the real goal. I can travel on $1000 a day or $100 a day, both will meet my need to travel and spending more doing so will not change the amount of happiness or contentment it brings me. If I happen to have $1000 to spend, that's fine, I can spend all or part of that as I wish. It is when someone only has $100 to spend that it becomes important for them to figure out what it is that actually matters, the travel, not the amount spent doing it.

The basic assumption of drawing down capital is that the person does not have enough without doing that. I disagree with that assumption. They simply haven't figured out how to do it on what they do have. Travel is actually a good example as it is something you can do on almost any amount of money you have and still get the same amount of happiness out of doing it.
 

·
Registered
Joined
·
10,115 Posts
Spending down capital in retirement is what one saved and invested all those years to eventually do.

Whether that spending is drawn strictly from investment income, or investment income plus invested capital, or pension annuity, it is all capital. Whether one has a portfolio that has 0% distribution yield, 3% yield, or 5% yield during withdrawal is not relevant. They are not different things. It is simply an investment decision on how one gets and draws on their Total Return. One still draws on 'capital' at some percentage rate, e.g. VPW, 4% SWR, etc. Financial plans provide guidance.
 

·
Registered
Joined
·
2,898 Posts
Spending down capital in retirement is what one saved and invested all those years to eventually do.

Whether that spending is drawn strictly from investment income, or investment income plus invested capital, or pension annuity, it is all capital. Whether one has a portfolio that has 0% distribution yield, 3% yield, or 5% yield during withdrawal is not relevant. They are not different things. It is simply an investment decision on how one gets and draws on their Total Return. One still draws on 'capital' at some percentage rate, e.g. VPW, 4% SWR, etc. Financial plans provide guidance.
Don't you feel there's merit to the idea that it's better to have money left over upon death (regardless how much or little) than running out of money at an age when you are ill equipped to defend yourself?

This is why I feel the age 110 is a wise choice to use in plans to decide how much to spend. You have to pick an age you know hands-down you won't reach. You pick 90 and you live to 95 - that's a bad situation. Pick 110 and you live to 95 - so you have a little left over. Which condition is worse?

ltr
 

·
Registered
Joined
·
10,115 Posts
I don't advocate running out of money by age X in any financial plan. We will all want money at the end, either as insurance against the last 12-24 months of expensive critical care, or a legacy. If I recall the first post correctly, I believe the OP would like to leave a legacy of sorts too, the amount of which is a balance between a wish and how one wants to live their retirement. But since there is only 0.6% chance all those alive in the 70-74 age group today will be alive at 100+, it becomes a stretch for most people to consider anything beyond 100.

If you want that insurance of a large residual sum, and you have a boat load of assets that allows you to live to 125 even, then it is a no brainer to be ultra conservative in your financial plan. The vast majority of people, perhaps 95% of them, don't have the luxury of ultra-conservatism without compromising the enjoyment of their best retirement years. It is going to be a balance of enjoyment vs the 0.6% odds of exceeding 100 years of age.

Each of us will make that decision, but even then, no financial plan is embedded in concrete. Reviews and adjustments every 5 years is not a bad idea for everyone. It may well allow for more luxury spend, or more gifting while alive, or a need to button down the hatches a bit for the next 5 years. Everyone has to run their plan according to their comfort levels.
 

·
Registered
Joined
·
2,199 Posts
Spending down capital and keeping enough capital on hand as end of life approaches are not mutually exclusive.
 

·
Registered
Joined
·
10,115 Posts
Spending down capital and keeping enough capital on hand as end of life approaches are not mutually exclusive.
Further, spending down capital is often misinterpreted. All $$ are capital, whether invested capital or investment income. Some choose to have a very low yielding portfolio while others want high(er) yield. Total return may be exactly the same. I know of people who have portfolio yields <2% and would prefer 0%, while others here probably want 4-5% yield. I prefer something closer to 3% yield. I think broad market yield is likely closer to 2%.
 

·
Registered
Joined
·
562 Posts
I asked a couple of planners what their fees were and decided I didn't want to give them that kind of salary for what I would get. So, I just do my own and do a NW every 6mths or so and see where we are at. It hasn't changed much in the last 4-5yrs so the income I generate from investments, trades etc, although I would like to see a bit more, is holding it's own. At some point, as I lose interest/focus, I can see hiring a planner. Everyone has different ideas and plans etc so there is no cookie cutter plan anyway. Retiring after I turned 55 was a good choice for me, I love being retired.
 

·
Registered
Joined
·
2,898 Posts
I don't advocate running out of money by age X in any financial plan. We will all want money at the end, either as insurance against the last 12-24 months of expensive critical care, or a legacy. If I recall the first post correctly, I believe the OP would like to leave a legacy of sorts too, the amount of which is a balance between a wish and how one wants to live their retirement. But since there is only 0.6% chance all those alive in the 70-74 age group today will be alive at 100+, it becomes a stretch for most people to consider anything beyond 100.

If you want that insurance of a large residual sum, and you have a boat load of assets that allows you to live to 125 even, then it is a no brainer to be ultra conservative in your financial plan. The vast majority of people, perhaps 95% of them, don't have the luxury of ultra-conservatism without compromising the enjoyment of their best retirement years. It is going to be a balance of enjoyment vs the 0.6% odds of exceeding 100 years of age.

Each of us will make that decision, but even then, no financial plan is embedded in concrete. Reviews and adjustments every 5 years is not a bad idea for everyone. It may well allow for more luxury spend, or more gifting while alive, or a need to button down the hatches a bit for the next 5 years. Everyone has to run their plan according to their comfort levels.
Yeah, good thoughts. So I suppose like everything else in investing it's a compromise between risk and return.

People can reduce the risk in this situation to basically zero if an age of 110 is chosen, but then must accept living on less each year.

Or they can then begin dialing down that age and start adding the risk that they'll outlive their savings, but they will be able to spend more each year.

ltr
 

·
Registered
Joined
·
16,730 Posts
This is an interesting problem about how to manage capital into those very old years. It's just about impossible to run projections like this.

Can insurance / annuities fill this need? It seems like the kind of situation where you want insurance (pooled risk), since it's just a lottery who makes it to those ages.
 

·
Registered
Joined
·
2,898 Posts
This is an interesting problem about how to manage capital into those very old years. It's just about impossible to run projections like this.

Can insurance / annuities fill this need? It seems like the kind of situation where you want insurance (pooled risk), since it's just a lottery who makes it to those ages.
I think a lot of people do purchase annuities just to reduce this risk of guessing when they'll die.

ltr
 

·
Registered
Joined
·
45 Posts
Discussion Starter #52 (Edited)
This is an interesting problem about how to manage capital into those very old years. It's just about impossible to run projections like this.

Can insurance / annuities fill this need? It seems like the kind of situation where you want insurance (pooled risk), since it's just a lottery who makes it to those ages.
Who wants to hand over their capital to an insurance company.? When the owner of the annuity dies and/or their beneficiary dies (depending on the annuity) any remaining capital doesn't go to the estate. You've given control of your capital to an insurance company. It's a strange kind of investment vehicle and one I wouldn't consider, or rather ruled out very quickly.

I don't advocate running out of money by age X in any financial plan. We will all want money at the end, either as insurance against the last 12-24 months of expensive critical care, or a legacy. If I recall the first post correctly, I believe the OP would like to leave a legacy of sorts too, the amount of which is a balance between a wish and how one wants to live their retirement. But since there is only 0.6% chance all those alive in the 70-74 age group today will be alive at 100+, it becomes a stretch for most people to consider anything beyond 100.

If you want that insurance of a large residual sum, and you have a boat load of assets that allows you to live to 125 even, then it is a no brainer to be ultra conservative in your financial plan. The vast majority of people, perhaps 95% of them, don't have the luxury of ultra-conservatism without compromising the enjoyment of their best retirement years. It is going to be a balance of enjoyment vs the 0.6% odds of exceeding 100 years of age.

Each of us will make that decision, but even then, no financial plan is embedded in concrete. Reviews and adjustments every 5 years is not a bad idea for everyone. It may well allow for more luxury spend, or more gifting while alive, or a need to button down the hatches a bit for the next 5 years. Everyone has to run their plan according to their comfort levels.
Your post totally nails it AltaRed. Thanks.

Spending down capital and keeping enough capital on hand as end of life approaches are not mutually exclusive.
Exactly Ian.

Don't you feel there's merit to the idea that it's better to have money left over upon death (regardless how much or little) than running out of money at an age when you are ill equipped to defend yourself?

This is why I feel the age 110 is a wise choice to use in plans to decide how much to spend. You have to pick an age you know hands-down you won't reach. You pick 90 and you live to 95 - that's a bad situation. Pick 110 and you live to 95 - so you have a little left over. Which condition is worse?

ltr
It's hard to have a sensible discussions based on extremes. It's not one or the other, as you seem to suggest above LTR. OF COURSE, I'll be planning to have my investments outlive me. As for LTA and his thoughts on being content with what one has ... I AM content with what I have, I'm just being prudent and exploring the best way to manage it. There seem to be people here who like to misconstrue and extrapolate what others post and put their own spin on it, totally misinterpreting what other people are thinking or saying.
 

·
Registered
Joined
·
10,115 Posts
There is rationale to buying an annuity with all, some, of the house proceeds at age 80. It provides the longevity insurance one fears about outliving one's money.

The actuarial assumption at age 80 probably is about age 93-95 so a minimum 10 year guarantee minimizes leaving not much money on the table dieing early, and living beyond that is a plus. Point being there is time to adjust one's plans at age 80 or so.

Added: You can't have your cake and icing all the time. About age 80 or so, you might feel differently. Don't be so quick to rule things out.
 

·
Registered
Joined
·
2,898 Posts
Who wants to hand over their capital to an insurance company.? When the owner of the annuity dies and/or their beneficiary dies (depending on the annuity) any remaining capital doesn't go to the estate. You've given control of your capital to an insurance company..
Well sure, it's a gamble just like anything else in investing. You die the day after starting the annuity and you lose. You live way longer than expected, and you're the winner. Simple as that.

No one puts all their money in an annuity, but they certainly have their place for those that would be in trouble of outliving their capital. It's a way of hedging your bets. Keep an open mind. Look at every possibility.

ltr
 

·
Registered
Joined
·
45 Posts
Discussion Starter #55
Well sure, it's a gamble just like anything else in investing. You die the day after starting the annuity and you lose. You live way longer than expected, and you're the winner. Simple as that.

No one puts all their money in an annuity, but they certainly have their place for those that would be in trouble of outliving their capital. It's a way of hedging your bets. Keep an open mind. Look at every possibility.

ltr
I'd rather leave any money left to my children rather than an insurance company. There must be a lot of cases the insurance company is laughing all the way to the bank.
 

·
Super Moderator
Joined
·
3,186 Posts
I'd rather leave any money left to my children rather than an insurance company.
That's another safety net that almost everyone doesn't want to use ... their kids. I pretty sure all of us don't want to burden out kids with these financial matters, heck they might be burdered already with our failing health related issues and/or finding a home or care for us.
 

·
Registered
Joined
·
45 Posts
Discussion Starter #57 (Edited)
I'd rather leave any money left to my children rather than an insurance company. There must be a lot of cases the insurance company is laughing all the way to the bank.
That's another safety net that almost everyone doesn't want to use ... their kids. I pretty sure all of us don't want to burden out kids with these financial matters, heck they might be burdered already with our failing health related issues and/or finding a home or care for us.
Saying I'd rather leave money to my children than an insurance company is the opposite end of the spectrum than "burdening" ones children. Not sure how you got from what I said to that. If I leave money to my children, that's not burdening them.

As for the statement: "heck they might be burdered already with our failing health related issues and/or finding a home or care for us."

It's a fact of life that when one's parents age, more time and energy is required of the younger generation ... I've been there. You do whatever is necessary to ensure they have the best care they can have and to make the most of time left. You sit by their bed more (in hospital, long-term care, or assisted living), you miss more work, you drive long-distances or take a train or fly if necessary, you drop things and rush off when there's a crisis ... whatever is necessary and whatever you're capable of doing for them, you do it. And when they're gone, you have no regrets.
 

·
Super Moderator
Joined
·
3,186 Posts
Saying I'd rather leave money to my children than an insurance company is the opposite end of the spectrum than "burdening" ones children. Not sure how you got from what I said to that. If I leave money to my children, that's not burdening them.
I was just adding another point since you mentioned one's children ... nothing more than that.

And yup, I would imagine many of us close to retirement have been "care givers" for our parents.
 

·
Registered
Joined
·
938 Posts
Spending down capital and keeping enough capital on hand as end of life approaches are not mutually exclusive.
Exactly! I said upthread that I had spreadsheeted the drawdown of my RIF investments to run out at age 90. There still should be plenty in non-registered accounts after that.

Income does not equal wealth; one can have income in lowest tax bracket and still have lots of money on hand to spend.
 

·
Registered
Joined
·
2,898 Posts
I'm just trying to decide what's a realistic age to plan to. LTA is basically mocking me for considering reducing the outer age limit for the financial plan, yet most people think planning to age 110 is "ridiculous"
Saying I'd rather leave money to my children than an insurance company is the opposite end of the spectrum than "burdening" ones children. Not sure how you got from what I said to that. If I leave money to my children, that's not burdening them.

As for the statement: "heck they might be burdered already with our failing health related issues and/or finding a home or care for us."............
Makes me wonder why you would ask for opinions on a forum when every opinion on this thread that doesn't agree with you seems to be an affront.

You sure seem to have it all worked out, and so for myself, I'll leave no further comments. You've got this already. Go Foxx88...........

ltr
 
41 - 60 of 76 Posts
Top