Stop Living Like There’s No Tomorrow

Here’s a slap for the kids out there with all the answers – kids of all ages.

Boomers are under attack… again. It’s something called “you only live once” (YOLO), and it reminds me of so many ideas from our youth that made so much sense. (That is, before I had 50 years of paying my bills and 30 years of watching this crazy market under my belt.)

YOLO and its proponents maintain that boomers are not spending enough once they reach retirement. We focus too much on possible future costs and potential rough spots, and we are too fearful of running out of money.

Worse, our fear is being described as irrational and hurtful to our lifestyle and the economy.

One piece of evidence presented to support this criticism is an analysis of the 4% rule – withdrawing a maximum of 4% per year in retirement from our savings – for a retirement nest egg of $1 million.

If you run this million-dollar, 60-40 stock-bond portfolio over multiple 30-year periods, according to the YOLO folks, it is rare to have less than $1 million when we finish this race. In two out of three cases, we finish with more money than we started.

And the YOLO proponents report that most of us never touch our principal until our 80s.

As I read this cheerful analysis of our money situation – compliments of, you guessed it, a millennial concept of money – some other ideas from my own early years came into focus.

Do you remember Turn On, Tune In, Drop Out? It turns out Timothy Leary, the creator of that piece of work, had a stake in the production and sale of the LSD he was promoting.

Or how about this gem of wisdom: “Never trust anyone over 30.” That one caught up to us in a hurry.

How about Country Joe and the Fish and its creative effort from Woodstock? “Give me an F!”

A lot of thought went into that little ditty.

Or Mick Jagger’s moment of clarity in his 30s: “I’d rather die than be 45 and still singing ‘Satisfaction.’” Oops!

Yes, we too had our days of untested, youthful wisdom that were all but totally devoid of life experience. And it cost many of us dearly.

So when the YOLO idea of spending more in retirement came across my desk, I had to chuckle at its youthful exuberance and monetary optimism.

We may not touch our nest egg until our 80s, but, hello, that’s when our medical expenses – $500,000 per couple on average – go through the roof.

The 60-40 stock-bond portfolio thinking is full of holes. It is too aggressive for most of us. At best, it’s a financial planner’s fallback position if he hasn’t yet awoken to the life of no more paychecks.

And how many boomers have $1 million saved for retirement to begin with? We have lived a life of YOLO… and it has finally caught up to us.

Do we spend enough? Based on most of our financial states, the answer is that we spend too much before we retire.

The longevity bonus alone throws enough uncertainty into the equation that it makes this newest “live for today” thing for retirees as well thought out as “The Times They Are A-Changin’.”

Not so much as it turned out.

Frankie Valli said it best: “Let’s hang on to what we’ve got.” Ah, the wisdom of our youth!

Good investing,

Steve

P.S. You don’t have to live like a pauper to be able to afford the retirement of your dreams. Just follow the strategies from my colleague Marc Lichtenfeld in his new book, You Don’t Have to Drive an Uber in Retirement: How to Maintain Your Lifestyle without Getting a Job or Cutting Corners.

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