The concept of running out of money on purpose in retirement may seem a little strange at first. After all, we’re so often taught the importance of saving, investing, and preparing ourselves for retirement that the idea of not having a few extra bucks can be stressful, to say the least.
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But there is a valid argument to be made for someone planning to run out of money in retirement. At the very least, there are some reasons one might be okay with the proper ending 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 perspectives on the matter. Here’s what they said.
And here’s what other people are planning to do with their generational wealth.
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There is such a thing as redundancy
There is a difference between not having enough funds to see you through to retirement and having far more than you need.
“The vast majority of my Childfree clients, meaning people who will never have children, aim to die with nothing. My wife and I are childless, and our grandchildren get what’s left,” said Zigmont, Ph.D., CFP and founder of Childfree Wealth. “We consider it good if they get $10,000 or $100,000. If they get $1 million or more after we die, we’ve made a mistake.
“If they’re getting a million or more, we probably should have given them the money earlier in their lives, or spent it or given it to charity,” he continued. “If we live into our 90s, our grandchildren will be in their 60s, and chances are they won’t need money as much as they might have earlier in their lives.”
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Finally, 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 unless you plan to have children or leave a large sum of money behind after you’re gone, it may be best to prioritize your needs and well-being. At a certain point, this may just mean spending instead of building your wealth.
“For people without children who want to reduce their wealth, there’s a point in life where every dollar you save goes into your wealth, 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 main thing is to have a safety net.
“To die safe with zero, we create a plan for our clients that includes a safety net,” Zigmont said. “The safety net includes a long-term care plan, either insurance or self-insured, deferment of claiming Social Security until age 70, and a small cash cushion.
“This way, they are protected from common end-of-life expenses and problems and can spend the rest of their savings. It’s not a YOLO thing. It is a planned attempt to diminish their wealth.”
Much of it has to do with worldview
There are plenty of other reasons someone might plan to run out of money in retirement, one of which simply depends on their worldview.
“I see life as a really intriguing, interconnected web where we all play a very small part in a much bigger story,” said Gleason, founder and CEO at Simplicite Tax Loans. “There are limited resources on this planet and money is really just a distribution of those resources. I can’t help but ask myself the question: ‘What character do I want to be in that story? And how does the way I manage my sharing of money speak to what I believe about everyone else on this planet?’
“So when I think about the money left over when the pension runs out—ie, I’m dead—my brain processes that as ‘surplus.'” As it turns out, technically, I didn’t need it. Someone else probably did. made.
“Of course, it’s more complicated than that. But if I had the chance to choose and write my life story exactly the way I want, I would have what I need while I’m here and leave with nothing left.”
People often save more than they need
When asked if he thinks people tend to save more than they need, Gleason said, “Yes, but my opinion is based on the idea that our view of what ‘need’ is has become skewed. I believe that things that are actually luxuries have slowly crept in and become part of the definition of the word ‘need’.”
He gave the following example to illustrate this:
“I’ve seen countless examples of people ‘thriving’ in retirement. Couples who lived their entire working lives in 1,800 square feet are suddenly looking around at 4,000 square foot homes in other states just for the two of them to live in. Oh, and that house also has a full-sized 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 operating question in retirement is not, ‘What do I need?’ The operative question is, ‘How can I get everything I’ve always wanted?'”
There is always the worry of not having enough
No matter how prepared you are or how much you’ll actually have, chances are you’ll still 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 ‘extras’ seems like a really comforting way to account for this possibility. … At the end of the day, I know that whether I have or not, I succeed or [I] don’t make it, enjoy or not, our small part in this great 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 anyone would talk about time spent working on something meaningful. I want to make sure I did everything I could to leave this place in a slightly better state than when I first found it.”
If that means intentionally running out of money in retirement or having a little extra, that’s okay 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
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