All of those bromides about inflation and other stuff ignore a fundamental truth that even some of the financial-planner types have never understood. Only recently have Scott Burns and a few others been able to definitively prove that people who have accumulated some dough tend to spend and need less (and in some cases
a lot less) than the post-retirement costs that were assumed using the historic models.
Numerous reasons for the change in spending habits, all common-sense stuff that most of the retirees have known for years but didn't mention since none of the hot-shot financial guys bothered to ask them.
Among the changes in need for income are:
1.
Everything is paid for. Houses, cars, airplanes, toys, college educations, weddings, furniture, consumer goods, whatever. So no payments, no credit restrictions, no banker offering friendly advice, and no reason to dilly-dally when a good deal presents itself.
2.
Cash on hand, and usually more than necessary. If the price is right and we want it, the money is either in the bank or under the mattress.
3.
No peer pressure. We already got what we want and need, don't feel any urge to replace or upgrade without good reason. If some guy thinks he needs a Bentley, more power to him. For the crap I haul around every day, a Suburban or Yukon XL is the right truck for me, so no pangs of envy with somebody's new ride. And even when we decide to buy something, then, we've been around long enough to know somebody who knows somebody.
4.
BTDT. Many people have already done a lot of the things they want to do, so the magic of a winter home in the desert or a boat in St. Martin or a place in the country isn't something they need or want to do again. We've traveled the world more than once (or at least the parts we want to see) and are less tempted to go back.
5.
Houses shrink. Many have dumped the big place (and expense) where they raised their kids and now live in houses that are more appropriate for empty nesters. In our case, the square footage numbers flipped from 6.2k to 2.6k when we moved to town. Still too big, but she's not downsizing more--at least not yet. And we still have the damn pool.
4.
Uncle Sam kicks in. After 50-some years of paying in, the checks start to show up. Nobody is going to get rich on the $2,500/mo they send me (at least for as long as you guys keep working) but it pays for green fees, avgas and a couple of months out of town when weather here is crap.
5.
Needs/wants decline. Many things that might have been somewhat enticing (and probably a bit expensive) in the past no longer sound like fun. Clothes, dining out, electronics, entertainment, other such stuff are curtailed.
6.
Costs are capped. Our property taxes are (partially) capped, and seniors get good deals at restaurants, recreation and entertainment venues. For $27, I get a breakfast buffet, lunch buffet, green fees, golf cart, practice balls and two beers/sodas at a nice club. With a deal like that, I can't afford to stay home.
7.
Carry-over jobs. Opportunities for consulting and/or project work often arise. It's not unusual to hear about a job that somebody wants done, and are willing to pay a decent number to get it done right. Hasn't happened as much since 4Q2008, but more stuff showing up now.
8.
Counting years not money. At some point
everybody does the math. The end game is nothing more than a race to determine whether you'll run out of air before you run out of money. Once you know how that will most likely shake out, everything else is just details.
PS: I'll be in Palm Desert, CA for the month of Feb if anybody is around and wants to drop in for golf and good food. One of our regulars is a hell of a cook. We'll have a bed for you.
No mil here!
Was just pointing out that "being a millionaire" isn't what it used to be.
It won't even keep up with inflation once that rears its ugly head again. $10 million might.
