Die with Zero: Getting All You Can from Your Money and Your Life

by Bill Perkins

For the sake of the cartilage between my knees and for other health reasons, I like to maintain a certain body weight, so when I look at a cookie, I convert it to time on the treadmill. Sometimes, when I see a cookie that looks good, I’ll take a bite to see how good it tastes and then ask myself, Is eating this cookie worth walking an extra hour on the treadmill?

What I’m saying is that our culture tends to overemphasize the virtues of the ant—of hard work and delayed gratification—at the cost of other virtues. As a result, we fail to appreciate that the grasshopper was onto something, too.

Retirees on a pension—meaning that they had a guaranteed source of ongoing income after retirement—spent down much less of their assets (only 4 percent) during the first 18 years after retirement than did non-pensioners (who had spent down 34 percent).

Experts in retirement planning even have some lingo for this consumption pattern: go-go years, slow-go years, and no-go years. The idea is that when you’re first retired, you’re raring to have all those experiences you’ve been putting off until retirement, and you still (for the most part) have the health and energy to pursue those experiences. Those are your go-go years. Later on, typically in your seventies, you begin to slow down as you cross items off your bucket list and your health declines. And later still, in your eighties or beyond, you don’t have a whole lot of “go” left at all, no matter how much money you still have.

general, spending among American households declines as people age.

To put it bluntly, no amount of savings available to most people will cover the costliest healthcare you might possibly need. For example,

Since many people are fearful of running out of money before they pass on, there is one product that they should definitely look into. These products are called income annuities (or simply annuities). Annuities are essentially the opposite of life insurance: When you buy life insurance, you’re spending money to protect your survivors against the risk that you’ll die too young, whereas buying annuities protects you against the risk of dying too old (outliving your savings).

In fact, thinking of annuities as insurance makes them a lot more sensible than thinking of them as investments—because as investments they are not good at all. But that’s not their goal—their goal is to insure you against the risk of outliving your money.

For example, one popular rule of thumb for retirement spending is the “4 percent rule,” whereby you withdraw 4 percent from your savings each year of retirement. Well, with annuities, your annual payouts will probably amount to more than 4 percent of what you put into the annuity—and, unlike the 4 percent withdrawals, those payouts are guaranteed to continue for the rest of your life. The reason the insurance company can give you a rate of return that is both steady and reasonably high is that you are not leaving any money on the table. You relinquish your principal forever. In the extreme case—if you die the day after you buy the annuity—you won’t see any more of the money you put in, and it will instead go to monthly payments to the lucky stranger (another annuity buyer) who lives into her nineties. Without an annuity, on the other hand, you are forced to self-insure—to be your own insurance agent. That’s not a great idea,

a trio of high-powered economists have written, “A substantial amount of spending on futile care is rational when there is no value of leaving wealth behind.”

know it may sound morbid and it might make you uncomfortable, but I’ve actually started using an app called Final Countdown that counts down the days (and years, months, weeks, and so on) before my estimated death date, and I have been urging all my friends to do the same. Yes, I can see how this app could be unnerving, but the reminder of death gives a much-needed urgency to one’s life. By seeing how many weeks I’ve got left, for example, I’m reminded how many (or how few) weekends I’ve got. Seeing the number of years reminds me that I’ve got only so many Christmases to enjoy, or so many summers or autumns. And those in-your-face reminders have changed my thoughts and the things I do—like the people I reach out to, and how often I tell people I love them.

give your children whatever you have allocated for them before you die. Why wait until you’re gone?

For any income group you look at, the age of “inheritance receipt” peaks at around 60.

the data clearly shows many people getting inheritances late in life, and that is suboptimal. The upshot of all this is that if you wait until you die to have your children inherit your money, you’re leaving the outcome to chance. I call it the three Rs—giving random amounts of money at a random time to random people (because who knows which of your heirs will still be alive by the time you die?).

The vast majority—between 80 and 90 percent, depending on the year—of households that received some type of wealth transfer in the years 1989 through 2007 received an inheritance.

Economists who study data on bequests say that when people leave money to their children and grandchildren, their motives appear to be some mix of intentional and unintentional. The intentional part is what you give because you want your kids to have a certain amount of money. The unintentional part is just a random by-product of precautionary saving—someone was saving money for unexpected medical expenses, for example, but ends up dying without spending all those savings, and the kids get those financial leftovers.

if that’s the main reason you feel compelled to keep saving and saving, remember that you can buy long-term care insurance, which costs far less than self-insuring by saving massive amounts of money for a crisis that may never come.

So, for example, if the peak utility of money (the time when it can bring optimal usefulness or enjoyment) occurs at age 30, then at age 30 every dollar buys you one dollar’s worth of enjoyment. By age 50, the utility of money has declined considerably: Either you would get a lot less enjoyment out of that same dollar or you would need more money (say, $1.50) to obtain the same amount of enjoyment as you got out of $1 back when you were a healthy, vibrant 30-year-old.

adults who had memories of higher parental affection ended up with better health and lower levels of depression.

am making a big deal about quantifying the value of experiences with your children because doing so forces you to pause and think about what’s really best for your kids: Sometimes it is earning more money, and sometimes it is spending more time with them. So many people tell themselves that they are working for their kids—they just blindly assume that earning more money will benefit their kids. But until you stop to think about the numbers, you can’t know whether sacrificing your time to earn more money will result in a net benefit for your children.

The idea that it’s rational for young people to be freer with their money is shared by many economists, even though it runs counter to the advice most of us grow up hearing.

“Your salary will only go up, your earning power will only go up,” Levitt recalls his older colleague telling him, in almost a perfect echo of what Joe Farrell told me. “And so you shouldn’t be saving now, you should be borrowing. You should be living today in much the way that you’ll be living in 10 or 15 years, and it’s crazy to actually be scrimping and saving, which is what at least someone like me who was brought up in a middle-class family was taught to do.”

Let’s look at the 20 percent recommendation, which comes from a popular budgeting formula called the 50-30-20 rule. 50-30-20 comes from Elizabeth Warren—yes, that same Elizabeth Warren. Before she entered politics, Warren had been a law professor with special expertise in bankruptcy and also co-wrote books about why middle-class Americans go broke and how to avoid that dismal fate. She suggested the 50-30-20 rule, which she called the Balanced Money Formula, as a way to help people maintain financial stability.

If you take out the must-haves, meaning that the only spending you count is on wants (more or less what I call “experiences”), the ratio of spending to saving is 30 to 20.

When I say it makes sense to borrow money when you’re young, I’m not saying you should be racking up credit card debt—such high-interest loans are a bad idea for almost everyone. Borrow modestly and responsibly. And when you have many years of rising income ahead of you, it really doesn’t make sense to save 20 percent of your income. That would mean forgoing memorable life experiences you could be having, and it also means working to pay for a richer future self—a suboptimal use of your life energy, that’s for sure.

Some researchers asked people of different ages what prevented them from taking a trip. They found that people under age 60 are most constrained by time and money, whereas people 75 and older are most constrained by health problems. In other words, when time and money are no longer a problem, health is. And it’s not as if there comes one age at which people

As you get older, your health declines and your interests gradually narrow, just as your sex drive diminishes. Your creativity usually declines, too. And when you’re extremely old and frail, no matter what your level of interest is, just about all you can do is sit and eat tapioca pudding. At that point, money is useless to you, because all you need or want is to lie in bed and watch Jeopardy. This was my conclusion: The utility, or usefulness, of money declines with age.

Whenever you shift in order to spend money, you are necessarily also shifting when you save. So, for example, instead of saving 20 percent of your income throughout your working years, some people would be better off saving almost nothing in their early twenties (as we’ve discussed), then gradually ramping up their saving rate during their late twenties and thirties as their income begins to rise. Then they should save even more than 20 percent in their forties—and then slow down their savings so that eventually (as I explain in the next chapter) they actually start outspending their earnings.

So people in these middle years—neither very young nor very old—typically have a different problem: They face a time crunch, especially if they have children at home. This time crunch is their biggest obstacle to having positive life experiences. Not

Every group already does this to some extent, though I believe they often get the magnitude wrong. Specifically, young people exchange their abundant time for money, sometimes to a fault—they should prize their free time more than most do. Old people spend a lot of their money trying to improve their health or to at least fight disease. People in the middle years sometimes trade money for time—and the more money they have, the more of it they should be using to buy time.

Let’s say you are 10 pounds overweight. That doesn’t seem so bad at first, but each pound of excess weight means four extra pounds of force on your knees.

one you’ve doubtless heard before: People of all ages should be spending more time and money on their health. No age group spends more on health than the elderly, whose healthcare spending aims to treat degenerative diseases, manage pain, and prolong life. But earlier investments in health would actually yield greater lifetime fulfillment. Preventive steps like eating right and strengthening muscles helps you keep your health as high as possible for as long as possible—and makes every experience more enjoyable.

Better health doesn’t just give you a better retirement years from now—investing in your health is investing in every single subsequent experience!

Research in psychology backs me up: People who spend money on time-saving purchases experience greater life satisfaction, regardless of their income.

researchers could begin to explain why people who spend money to save time are happier: Using time-saving services reduced time pressure, they found, and reduced time pressure improved the day’s mood.

Well, the corollary to that is that the older you are, the more someone should have to pay you to delay an experience. How much they should pay you is what I call your personal interest rate—which rises with your age.

The real interest rate varies, but let’s take the example of 8 percent annual growth. (That is a little more than the average stock market return since its inception—again, after adjusting for inflation.) At that rate, your $100 becomes $147 in five years. In ten years, it becomes $216—more than enough to buy two of whatever experience you thought about buying now. The question is: Should you wait nine to ten years to get two of the experiences you could have today?

Think of one way in which you can invest your time or your money to improve your health and thereby improve all of your future life experiences. Learn about how to improve your eating habits to improve your health. Of the many books on this subject, the one I know well and always recommend is Eat to Live, by Joel Fuhrman, M.D.

If your ability to enjoy experiences is more constrained by time than by money or by health, think of one or two ways you can spend some money now to free up more of your time.

We all die a multitude of deaths throughout our lives.

I realize that by attempting to raise awareness of what you will eventually lose forever, I am handing you a kind of anticipatory grief.

you can imagine, the students in the first group were happier by the end of the 30 days than the second group. Whether they did more or just managed to squeeze more enjoyment out of whatever they did on a daily basis, the mere act of deliberately thinking about their time as limited definitely helped. What’s the takeaway here? Being aware that your time is limited can clearly motivate you to make the most of the time you do have.

In short, when something feels abundant and endless, the truth is, we don’t always value it. But the reality, of course, is that the time you get to spend in each phase in your life is not that abundant, and it’s certainly not unlimited.

Draw a timeline of your life from now to the grave, then divide it into intervals of five or ten years. Each of those intervals—say, from age 30 to 40, or from 70 to 75—is a time bucket, which is just a random grouping of years. Then think about what key experiences—activities or events—you definitely want to have during your lifetime. We all have dreams in life, but I have found that it’s extremely helpful to actually write them all down in a list.

Key point: As you’re making your list, don’t worry about money; money at this point is just a distraction from the overall goal, which is to envision what you want your life to be like.

By contrast, by dividing goals into time buckets, you are taking a much more proactive approach to your life. In effect, you’re looking ahead over several coming decades of your life and trying to plan out all the various activities, events, and experiences you’d like to have. Time buckets are proactive and let you plan your life; a bucket list, on the other hand, is a much more reactive effort in a sudden race against time. Now, you might

If you have children, think about your own version of the Heffalump movie: What one experience do you want to have more of with them in the next year or two, before that phase of their life and your life is over?

This is why you need only a portion of the annual cost of survival times the number of years: Interest will earn you the rest. So what is that fraction? As a simple rule of thumb, I suggest 70 percent.

survival threshold = 0.7 × (cost to live one year) × (years left to live)

But a number should not be most people’s main goal. One reason is that, psychologically, no number will ever feel like enough. For example, let’s say the number you come up with (based on calculations like the kind financial advisers recommend) is $2 million.