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I've had this discussion several times....how to die poor. I'm 10 years from retirement, have a good income and being a professor, time off. I want to travel and improve the quality of life NOW. I have no children and no one really needs my money when i die. So the question is how much should i spend and how much should i save in case of emergencies and health issues? If I get sick I'll have only my poor husband to look after me and when I'm old will have to pay for in home care. I'm healthy now and want to enjoy life and stop counting pennies. We never know what awaits us around the corner. I don't wan to have regrets like " I should've ordered the better wine, or gone to a better hotel. Anyone else have this dilemma?
 

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I cannot see that it is at all possible to answer that kind of question.

Since you plan to die broke, what happens when you live 5 years longer than planned? What happens to your husband if he outlives you? What happens when medical costs increase above what you expected?

The only way to do what you want is to buy an inflation adjusted annuity, and also buy a whole whack of insurance to cover long-term care and critical illness, etc. You get those prices from an insurance agent.
 

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As leslie notes, it's really not feasible to set up a plan where you die broke unless you use all your money to buy an annuity and some high-quality long-term-care insurance. It's simply not possible to predict the date you'll die.

If you have a solid income, no kids, and ample time off from work, you should easily be able to have a very high standard of living now and in the future.

I think the problem is that you're equating quality of life and standard of living. The latter is a pure measure of how much money you have, whereas the former measures broader well-being. You can have a very high quality of life despite not having much money - many retired people have little money for jet-setting travel, but are quite happy to pursue cheap hobbies and spend time with friends and family.

Thinking back on past vacations, I don't think I was happier when I stayed in a nicer hotel. I don't think I've enjoyed the company of others more if we were drinking expensive wine versus cheap wine. Happiness comes from the true enjoyment of life, not from how much money you spend on 'stuff'.
 

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It's simply not possible to predict the date you'll die.
Well, sure there is; if you mean that there is no way to know if you will live longer than your plan assumed. Not sure how many people would have 'what ever it takes' to do it though. ;)

I'm joking around here.
 

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I suggest a 'die-broke' age of 95 as a default (and it can go up to 140 if you wish), however I see the odd plan which changes that to 85 and some as high as 105, but most use 95.

I build life expectancy tables (male/female/smoker/non) in the program, unfortunately I have never run across life expectancy standard deviations. It would be a nice extra if I could find SDs of life expectancy, and then you could set a die-broke age as LE plus 2 stdevs.

Anyone?
 

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Probably you have a pension plan, being a teacher. The pension and OAS should provide you with enough income to cover the cost of long-term care when you'll get one of the aging illnesses.
Probably you should plan doing all the active living before the age 80. The quality of life usually starts to decline after that and probably the pension/OAS will cover your needs after that.
Lets assume you are now 45 and will retire in 10 years at 55. Your investments will need to cover 25 years. Let's assume you will need to spend $100,000/year (you need to actually compute how much you'll need). Apply the present value formula to determine how much money you need at 55 so that the future value in 25 years is $0 (the simplest way to do this is with a spreadsheet). The result is $1,067,477. If you already have more than that, you are good, no other saving is required and you can start spending all your paychecks and also consider increasing the standard of living beyond $100,000/year. If you don't have that, you need to compute how much do you need to save over the next 10 years (before retirement) to achieve that. Again you can use the future value formula. For example, if you already have saved $400,000, you'll need to save an additional $14,075/year to reach the above mentioned goal.
The rate of return used was 8%, which is the expected return anyone can get with minimal risks from a diversified portfolio in the long run. Inflation was not considered, so to be able to actually spend $100,000 after inflation your rate of return will have to be about 10% (or you'll need more investments).

I also have assumed that no effective aging cure will be developed in the next 35 years. If you think that aging may be cured during your lifetime, or that the healthy life span will become longer that the current 75, then you'll need to adjust the number of years you need your savings to last. The best bet in that case will be to have the spending covered only by investments' return (adjusted for inflation). For example, to spend $100,000/year adjusted for an inflation of 2%/year, you'll need investments of $2,011,340 at 8% return.
 

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Oy. Current lifespan (at birth) is beyond 75 for both men and women. Also, longevity increases as you age: a 75-year-old woman has a longer life expectancy than a 55-year-old woman.

This answer is a perfect example of Financial Planning in Fantasyland. You can't just use a PV or FV formula, with an assumption of constant returns and known future inflation, and add "average life expectancy" and get any good results...you need to account for randomness on both the longevity and investment dimensions. In addition, you haven't accounted for sequence of return risk, beyond random investment returns. :confused:
 

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Oy. Current lifespan (at birth) is beyond 75 for both men and women. Also, longevity increases as you age: a 75-year-old woman has a longer life expectancy than a 55-year-old woman.
Healthy lifespan is significantly shorter than the raw lifespan and will probably decrease considering the toxic lifestyle of most Canadians. Only revolutionary improvements in health-care may change that.

This answer is a perfect example of Financial Planning in Fantasyland. You can't just use a PV or FV formula, with an assumption of constant returns and known future inflation, and add "average life expectancy" and get any good results...you need to account for randomness on both the longevity and investment dimensions. In addition, you haven't accounted for sequence of return risk, beyond random investment returns. :confused:
So why don't you give a more accurate reply taking all those variables into account instead of just trolling?
 

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This thread reminds me of the inheritance one a while back. Simply put you can run simulations with the most advanced (or a simple spreadsheet) program around and at best it will be an educated guess.

My advice enjoy life while you can... and don't plan to die rich. If you have heirs that might affect your desire to blow your cash. Of course it would be wise to have a nice safety net in place... but there is already a basic one built in to our welfare state. How much potential misery in old age can you tolerate for a good time now? And what if you don't reach old age? Missed opportunity...
 

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Trolling?

Healthy lifespan is not the issue; total lifespan is. You could argue that the lifespan beyond the healthy lifespan is the most problematic and costly part of life. Why would you exclude it from a financial plan?

How I would analyse the problem of a desire to die with no expected bequest would be to take into account randomness of lifespan and investment returns, plus sequence of returns; and I'd use inflation-adjusted expected returns. I as much said that in my response. :)
 

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Healthy lifespan is significantly shorter than the raw lifespan and will probably decrease considering the toxic lifestyle of most Canadians. Only revolutionary improvements in health-care may change that.


So why don't you give a more accurate reply taking all those variables into account instead of just trolling?
Would you like someone to tie your shoes for you too? :rolleyes:
 

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Well I want to die rich, filthy filthy rich. I want to be able to take baths in Dom Perignon every day if I want.

It is so unbearable to worry about money the only thing that could make it worse is to be old and worried about money.

So you want to die old and broke? Send me a check.:cool: I will help you.
 

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DB pension plans are not classic tontines. The mortality credits in DB plans (and life annuities) are tontine-like; but the plans themselves, and annuities, are not actual tontines.
 
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