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

by Bill Perkins

On the whole, people are very slow to spend down (“decumulate”) their assets.

This means that people’s spending continues to closely track their income—so as people’s incomes decline, their spending does, too.

retirees who had $500,000 or more right before retirement had spent down a median of only 11.8 percent of that money 20 years later or by the time they died. That’s more than 88 percent left over—which means that a person retiring at 65 with half a million dollars still has more than $440,000 left at age 85!

This is so much money to retire with and have at death!!

retirees with less than $200,000 saved up for retirement spent a higher percentage (as you might expect, since they had less to spend overall)—but even this group’s median members had spent down only one-quarter of their assets 18 years after retirement.

people who, back in their working years, would have said they were saving up for retirement are not actually spending those retirement savings once they reach retirement. They are definitely not on track to die with zero. Some of them appear to not even aim to die with zero;

Those "saving for retirement" are not spending down what they have saved. Or just a small percentage

people did have good intentions to spend the money, but once they reached a certain age, they found that their wants and needs changed, or perhaps diminished.

Aging changes spending needs

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.

Go-go, slow-go, no-go

But the next time I visited, all the plastic was back on, and it stayed on for the rest of my grandmother’s life. This never made sense to me: Why spend all this money on furniture that you don’t get to enjoy? The plastic over the couches is a microcosmic example of much of what I’m talking about in this book: the senselessness of indefinitely delayed gratification.

Money is meant to be enjoyed

You might think that as people get older, they spend money more freely out of the sheer desire to make the most of it before it’s truly too late. But the opposite tends to happen. In general, spending among American households declines as people age.

Spending declines with age

And if you’re not aware of this fairly predictable pattern, you’re likely to (incorrectly) expect steady expenditures on experiences from the day you retire until the day you die. That’s one reason you might greatly oversave and underspend.

Assumption that spending does not decline with age leeads to oversaving

To put it bluntly, no amount of savings available to most people will cover the costliest healthcare you might possibly need. For example, cancer treatments can easily cost half a million dollars a year.

Or, if your out-of-pocket medical expenses amount to $50,000 per night (as they did for my father’s hospital stay at the end of his life), does it really matter whether you’ve saved $10,000 or $50,000 or even $250,000? No, it doesn’t, because the extra $50,000 will buy you one extra night, a night that might well have taken you a year’s worth of work to earn!

Insane costs of healthcare

There’s a big difference between living a life and just being kept alive, and I’d much rather spend on the former.

So instead of engaging in “precautionary saving,” as economists call the practice, I’ll let the cards fall where they may.

Logos. Come what may

Besides, it is much smarter to spend your healthcare money on the front end (to maintain your health and try to prevent disease) than to spend it at the end, when you get a lot less bang for every buck you spend.

Upstream spending on preventative health

So how do you make sure you’re covered if you need long-term care, without having to save up massive amounts of money you won’t spend if you don’t need nursing care? The answer: long-term care insurance.

Long-term care insurance

There’s a more general point I want to get across: For every single thing you might be worried about in your future, there is an insurance product to protect you. That doesn’t mean I recommend buying insurance for every single thing; obviously, insurance costs money. But the fact that insurance companies are willing to sell insurance for various risks shows that these risks can be quantified—and removed for those who don’t want to take those risks.

Insurance removes risk for a dollar amount

Rule No. 4: Use all available tools to help you die with zero.

As a result, you will die with much, much more than zero—which means you will have wasted many hours of your life energy earning money that you will never get to enjoy.

The possibility that you will live longer than you expect is called longevity risk. Nobody wants to die early—the possibility of that is called mortality risk—but nobody wants to die after their money runs out either.

Longevity and mortality risk

So that’s life insurance—it helps you deal with mortality risk, and 60 percent of Americans own at least some life insurance.

Life insurance handles mortality risk

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).

Annuties hanndle longevity risk

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.

4% of savings each year of retirement

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, because unlike the insurance agents who work for big insurance companies, you don’t have the ability to pool risk and cancel out errors on both sides.

So by trying to play insurance agent, you are not even close to maximizing your life. Again, this is why you are not a good insurance agent!

You are not a good insurance agent

But I do want you to know that there is a big difference between thinking about your risk tolerance and acting out of blind fear.

whereas we’re solving for your total life enjoyment. Let me say that again: We are solving for your total life enjoyment. That is, the premise of this book is that you should be focusing on maximizing your life enjoyment rather than on maximizing your wealth.

The goal is total life ENJOYMENT

tell your fee-only financial adviser that you are trying to get as much enjoyment out of your savings as possible without outliving your savings,

It also means knowing your projected death date and your annual cost of just staying alive, because those two numbers together tell you the bare minimum amount you will need between now and the end of your life. All your savings beyond that amount is money you must aggressively spend down on experiences that you enjoy. I say “aggressively” because your declining health and diminishing interests mean that your list of activities will narrow as you age,

They gave up years of their life while healthy and vibrant to buy a few extra weeks of life when they are sick and immobile. If that’s not irrational, I don’t know what is!

Dont meet the reaper with fistfuls of cash. Be ready to go when the time comes

What I’m saying is that dying with zero is not only about money: It’s also about time. Start thinking more about how you use your limited time, your life energy, and you’ll be well on your way to living the fullest life you possibly can.

Rule No. 5: Give money to your children or to charity when it has the most impact.

“What about the kids?”—I first explain that the money you’re leaving to your kids is not your money. So when I say you should die with zero, I’m not saying: Die with zero and spend all your kids’ money along the way. I’m saying: Spend all your money.

Anything you plan to give away is not really yours to begin with. Think stewardship

This is the problem with inheritances: You’re leaving too much to chance. Remember, life can be extremely fickle. Regardless of the amount you’re passing on, it takes a great deal of luck for it to arrive exactly when each of your recipients needs the money most.

Inheritances and waiting for death is a crap shoot in termms of disbursement to loved ones

For any income group you look at, the age of “inheritance receipt” peaks at around 60. In other words, if you were betting on how old someone will be when they inherit money—assuming you know nothing else except that they stand to inherit—60 is your best bet.

Inheritance at 60 is ludicrous

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?). How can randomness be caring?

Random all the way down

When it comes to the kids, Die with Zero shows thoughtfulness by having you put your kids first, which you do by thinking deliberately about how much to give them and then doing so, before you die.

As Virginia’s story illustrates, timing is key. We’ve already established that waiting until you die is not optimal—so what is the optimal time to give money to your children?

I don’t want to say there’s an age when it’s just too late to give your children money—late, after all, is better than never—but age 60 is worse than 50, and 50 is worse than 40. Why? Because a person’s ability to extract real enjoyment out of the gift declines with their age.

Ability to turn money into joy declines with age

You always get more value out of money before your health begins to inevitably decline. Bottom line? The 26-to-35 age range combines the best of all these considerations—old enough to be trusted with money, yet young enough to fully enjoy its benefits.

26 to 35 is a prime age for receiving money

In short, by giving the money to my kids and other people at a time when it can have the greatest impact on their lives, I’m making it their money, not mine. That’s a clear distinction, and I find it liberating: It frees me to spend to the hilt on myself.

The years of emotional neglect put a lasting strain on the father-son relationship: When the two did finally have time together, they found that they had trouble enjoying each other’s company. There was just no way to make up for all that lost time and attention. Now when my friend thinks of his father’s legacy, material wealth is one of the few things he recalls with any sense of gratitude.

Wow. This is pretty much exactly how i feel

there are ways to think about experiences in a more quantitative way that will help you make better decisions about how to spend your time.

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.

You Can’t Be Generous When You’re Dead

There is nowhere else for the money to go

So you can be generous only when you’re alive, when you have actual choices and their consequences:

Charitable organizations certainly prefer to get your money now. But some charities, particularly foundations and endowed nonprofits, don’t use the money they receive right away, either; instead, they aim to grow their endowments by taking in more than they give away each year. For example, in 1999, foundations took in more than $90 billion but distributed less than $25 billion. That is why one analysis concludes that “donors should ask not just how, but how soon, their gifts will be used.”

Foundations grow endowments by taking in more than they disburse

So spend your money while you’re alive—whether it’s on yourself, your loved ones, or charity. And beyond that, find the optimal times to spend money.

The suffering is happening now, so the time to start relieving it is now, not at some distant date in the future. More and more philanthropists are taking this approach, which billionaire philanthropist Chuck Feeney calls “giving while living.”

Giving while living

Rule No. 6: Don’t live your life on autopilot.