Posted on 02/01/2018 7:31:07 AM PST by SeekAndFind
Rich people — really rich people — have an inside joke about spending in retirement: They call it “skiing.”
Not skiing as in snow skiing, but “spending our kids’ inheritance.” They use it in reference to splurges, such as pricey wines, cruises through Europe, second homes, or whatever strikes their fancy.
They don’t feel bad about spending, because there’s little chance that they’ll spend so much that their own retirement is put at risk. It is truly their kids’ money, so why not?
Here’s the crazy thing. A recent Washington Post story details how ordinary savers, folks who are comfortable, perhaps, but not rich, are starting to think the same way.
Read: People are bragging about becoming 401(k) millionaires and posting their balances on social media
This comes on the heels of the recent stock market boom SPX, -0.13% A lot of folks have crossed a threshold they once thought impossible — $1 million in their retirement plan while still working.
Fidelity Investments reports that the number of their clients with $1 million 401(k) accounts rose to 133,000 in the third quarter, up from 89,000 at the same time last year.
Overall, total retirement assets have hit $27.2 trillion, up from $11.6 trillion in 2000, according to industry data. That’s retirement plans, pension funds, everything.
Merely well-off
The surge in investment value has financial advisers answering calls day and night from clients who want to cash out some of that stock wealth to spend now — to buy vacation homes, take once-in-a-lifetime trips and so on.
Sounds a bit like skiing, doesn’t it?
Here’s the thing about acting wealthy when you’re merely well-off. It ends in tears, just about every time.
(Excerpt) Read more at marketwatch.com ...
It works both ways - you can spend too little, or too much.
I am retired, and me and all my friends have substantial amounts of money. We can spend some to have a good time, but how much?
My own personal view is that you can’t go wrong if your total value of your financial assets increases every year.
One analysis I read said that $1 million in a retirement account at age 65 is equivalent to a pension of $40,000/year.
Can you live on $40K per year? If so, you’re fine, so long as you aren’t spending more than that.
Need $80K per year? Then you need $2 million.
A million sounds like a lot of money until you calculate how long it’s going to last.
RE: One analysis I read said that $1 million in a retirement account at age 65 is equivalent to a pension of $40,000/year.
Does this include Social Security? If not, add another $25,000 to $30,000 to that. That should make for a comfortable retirement.
Right up until another 2008 hits. Most financial advisors recommend to move your assets into stable vehicles such as bonds once you retire and are counting on that money for your income.
If you assume the worse that SS won't be there, and you also follow the above strategy, $1 million will let you live on $50K/year for 20 years. And that includes nursing home care if you don't have that specific insurance.
if you take up smoking you’ll have more money per year of retirement. Never too late
Someone needs to tell the author that buying a second home is not spending as in pi$$ing it away on wine and trips. Second homes are usually vacation homes that have been known to increase in value sharply. A 100K waterfront home in Florida the 1980’s is worth in excess of 500K today. A 400% increase is a pretty good investment.
I don’t think that includes SS. But I am not counting on any “promises” made to me by the government. I think SS is in danger of being yanked away from most of us who haven’t started collecting it yet, especially if we have scrimped and saved for our own retirement. The people who are going to collect it will be the “needy” who, instead of saving for retirement spent irresponsibly.
That assumes Socialist Insecurity will still exist ...
I have been an investor in individual stocks for more than 30 years, and I have far more than just $1 million. I cleaned up in 2008-9, but it looks like I’ll never get an opportunity to buy stocks that cheap again - although you never know!
Sounds like a very poor investment.
Over a period of, say, 35 years, even if you're achieving a return of only, say, 7% per annum, $100K will double every decade, thus becoming approx. $1m. (I personally have maintained an average of 10% p.a. since 2002.)
Of course, you can't live in stocks and bonds. But then neither do they ever require a new water heater, resurfacing of the driveways, or suffer hurricane damage.
Regards,
I amassed considerable real estate holdings by age 30 (1980) and continued to grow it til 2008. (got my A$$kicked bad)
Was able to hold all the properties but am selling many now and DIVERSIFYING my investments. And I've learned to live moderately
I’ve encouraged my parents to spend without regard for us, their adult children. They earned their money. They sacrificed their comfort for us in our childhood. I don’t expect them to sacrifice their comfort in retirement. The best thing they can do with their own money is, by assuring their own comfort and care, they are buying their children more days with them.
Here's something that I don't understand or can't get my head around. How did my retirement money become my kids' money? I raised my kids to be self-sufficient people. I didn't give them anything except knowledge and a hard work ethic. They are doing well all by themselves.
But, I get the feeling that some people think that I am a piggy bank for my kids and enjoying my retirement is robbing my kids and their future. Bah! As I told my parents, "I want nothing, I expect nothing. Enjoy every penny of your retirement." I intend to do the same. If my kids are expecting windfall from me then they will be sorely disappointed.
Even if you do get inherited money, you’re likely to be in your 60s yourself by the time you get it.
When my father set up his estate trust, he made the ultimate beneficiaries both his children and grandchildren in equal shares. His thinking was that a good sum of money, but not a fortune, can be very useful when you’re in your 30s and have a house and kids. He wasn’t wrong.
Or had huge medical bills
The other option, if you’re younger than 59 1/2 and would get the big tax penalty, is to make a minimal down payment on a long term loan. Then pay the monthly mortgage payments until you CAN withdraw it without penalty at that magic age.
The other option, if you’re younger than 59 1/2 and would get the big tax penalty, is to make a minimal down payment on a long term loan. Then pay the monthly mortgage payments until you CAN withdraw it without penalty at that magic age.
Read it. Awful lot of words to say, “Don’t spend more money than you have.”
The big mistake? Hmm, well one of them is reading anything by Market Watch, or listening to the ass clown Jim Cramer.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.