5 ms·

Optionality has value but it decays over time. If you forgo consumption in favor of savings up until the very end then you haven't been better off, you've been

Optionality has value but it decays over time. If you forgo consumption in favor of savings up until the very end then you haven't been better off, you've been worse off. The dead can't benefit from spending money.

djrogers 10y ago
The benefit of leaving my heirs a legacy far outweighs any 'benefit' I'd get from spending money needlessly...
- derefr 10y ago
  Presume you don't have any heirs, either. (Which is likely: when people are intent on "living frugally", having kids is usually seen as an expense they can't afford.)
  - toomuchtodo 10y ago
    The estate typically goes to a charity in that case, pre-selected by the deceased. When done properly, it can be fairly tax efficient.
- bradleyjg 10y ago
  Consider, it's up to you but consider, that you might get more joy out of gifts while you are alive to watch the recipients benefit from them than you do out of imagining how much they'll benefit from bequests you intend to leave when you die.
  - asdfjlkasdf88 10y ago
    That's how my grandpa lived: A life full of fleeting moments now in exchange for shellshock when 65 arrived. Given the reluctance of our culture to show care and concern for people in general, I'm not too psyched about getting to the end and needing a handout.
    - beamatronic 10y ago
      Would you rather have a handout or a heavy heart full of regrets?
  - Erik816 10y ago
    A valid concern. But estate planning lawyers like to remind people that it's quite possible you will get more love and attention from your relatives in your old age while they are still expecting an inheritance than when they know you have already given it to them. A bit cynical, but relevant to consider.
    - zeroer 10y ago
      I sincerely hope that when I'm that old, I'll be above such pettiness.
    - Mz 10y ago
      Sure, if the only good thing you ever give them is money, this may true. But if you are actually good to people, not so much.
- astrodust 10y ago
  There's more benefits you can give than a check and some old junk. Things like enjoying your family while you're still alive, treating them to little things that won't bankrupt you, and appreciating them more directly.
beambot 10y ago
What about peace of mind & financial stability? Those don't decline over time... (Also: Estate tax as a way to fund basic income?)
- eveningcoffee 10y ago
  Taxing property means that owner must have cash to pay for it or is forced to sell it (with all the consequences of forced selling probably). It may sound interesting and promising but is most likely the most unjust way of taxing as it will force people are retired or about to retire out of their homes (that they are not paid for using funds from the basic income).
  - beambot 10y ago
    Estate tax refers to taxing your assets after you're deceased (i.e. inheritance), not realestate (i.e. property): https://en.wikipedia.org/wiki/Estate_tax_in_the_United_States https://en.wikipedia.org/wiki/Estate_tax_in_the_United_State... (I'm afraid this confusion makes your comments about retirement and forced property sales make very little sense... unless I'm missing something?)
  - redahs 10y ago
    A land value tax would be far better than either an estate tax or a real-estate property tax. It is only assessed against the unimproved value of the ground one has enclosed and excluded others from occupying, and not against the value of improvements which have been constructed and maintained. While the consequences of non-payment would also be forced sale, it is possible for residents to petition and sue the to assessor's office in order to reassess the value and obtain deferments, and the owners are still compenseated for the value of any real property located on the site. This is more just than an income tax, as failure to pay could never result in imprisonment. Additionally, it would lead to far lower cost of housing, mortgages, and rent. This means less savings and income would have to be allocated toward acquiring the house in the first place. It would also be more just to those who are not wealthy enough to buy a house outright, and must instead rent or obtain a mortgage. When spending on public services increases the land values and attractiveness of the location for which these services apply, and is financed via taxes on labor rather than taxes on land, this subsidizes land holders and banks invested in mortgages by allowing them to charge higher rent for housing.
toomuchtodo 10y ago
I am absolutely worse off if I run out of money before I die, whereas its only a minor inconvenience if I don't happen to spend down my estate to zero before death (in my case, it will flow to my wife and/or daughter). EDIT: I will live frugally and drastically below my means forever (and I'm only 34!) while putting aside substantial savings; the fear of running out of funds in the last part of my life is terrifying. Seniors have every right to be fearful and hoard their cash. Source/experience: Support my disabled mother who has zero assets and substantial medical expenses. If you're not afraid of saving enough for retirement and unexpected medical expenses, you should be.
- anigbrowl 10y ago
  Fallacy of the excluded middle, nobody suggested that people should be spending themselves into penury. This is a great argument for universal healthcare though.
  - FabHK 10y ago
    And a collective insurance-like pension system, where the people dying early subsidise the people dying late. Then everyone just needs to save to the expected age of death, rather than the maximum age of death.
    - bradleyjg 9y ago
      We have a fairly efficient market in (vanilla) annuities which act as a form of longevity insurance.
      - FabHK 9y ago
        Annuities are great (if administered effectively, which is helped by economies of scale). The UK has an efficient annuities market, it seems to me. My understanding was that in the US, it was to a large extent a tax-avoidance scheme, rather than a risk-mitigation mechanism, but I don't know enough about it.
skybrian 10y ago
Okay, but as long as they're happy, why is this a concern? The article implies with the talk about "training people to spend" that other people should be concerned about this, but doesn't say why. I'm not really seeing it. It's not like the money supply is fixed. There are other ways to grow it if the Fed were willing to do it.
- bradleyjg 10y ago
  Suppose you are a financial planner or whatever they call themselves. You've been in the business a while and you've observed dozens of wealthy peoples' retirements. Isn't it possible you might reasonably have some perspective to share with a wealthy couple just coming into their mid 60s and ready to stop working? Look at this paragraph from the article: One of those irrational reasons may be simple habit. Something strange happens when people retire, Browning says. All of a sudden, they’re not getting a regular paycheck, and that makes them scared to spend. Goals set before retirement are abandoned, along with pre-determined spending plans, because retirees are terrified see the balances on their retirement accounts drop even a tiny bit. What's wrong with someone, like a financial planner, reassuring a couple that yes they can take those vacations they always dreamed of, yes they can pay for their grandkids' college tuition, yes they can make a substantial donation to that museum they love so much -- here's the math showing that it is likely to be okay?
  - ldayley 10y ago
    This is exactly the kind of thing that financial planners are currently making a killing doing as they shift from helping boomers accumulate wealth to helping them spend that nest-egg.
droopyEyelids 10y ago
You're completely missing the fact that consumption doesn't always increase pleasure or well being. It's a gaussian distribution.
mannykannot 10y ago
Spending the last years of your life worrying about how you will make ends meet is not an appealing option. Of course, if you set an end date for your lifetime, you can better plan ahead, but I have only known one person who voluntarily followed through on that plan, and it was a lifestyle choice with its own downsides. There is an inherent asymmetry between living somewhat more frugally and dying in poverty.
- tutufan 9y ago
  What downsides do you have in mind?

djrogers 10y ago

The benefit of leaving my heirs a legacy far outweighs any 'benefit' I'd get from spending money needlessly...

derefr 10y ago
Presume you don't have any heirs, either. (Which is likely: when people are intent on "living frugally", having kids is usually seen as an expense they can't afford.)
- toomuchtodo 10y ago
  The estate typically goes to a charity in that case, pre-selected by the deceased. When done properly, it can be fairly tax efficient.
bradleyjg 10y ago
Consider, it's up to you but consider, that you might get more joy out of gifts while you are alive to watch the recipients benefit from them than you do out of imagining how much they'll benefit from bequests you intend to leave when you die.
- asdfjlkasdf88 10y ago
  That's how my grandpa lived: A life full of fleeting moments now in exchange for shellshock when 65 arrived. Given the reluctance of our culture to show care and concern for people in general, I'm not too psyched about getting to the end and needing a handout.
  - beamatronic 10y ago
    Would you rather have a handout or a heavy heart full of regrets?
- Erik816 10y ago
  A valid concern. But estate planning lawyers like to remind people that it's quite possible you will get more love and attention from your relatives in your old age while they are still expecting an inheritance than when they know you have already given it to them. A bit cynical, but relevant to consider.
  - zeroer 10y ago
    I sincerely hope that when I'm that old, I'll be above such pettiness.
  - Mz 10y ago
    Sure, if the only good thing you ever give them is money, this may true. But if you are actually good to people, not so much.
astrodust 10y ago
There's more benefits you can give than a check and some old junk. Things like enjoying your family while you're still alive, treating them to little things that won't bankrupt you, and appreciating them more directly.

beambot 10y ago

What about peace of mind & financial stability? Those don't decline over time... (Also: Estate tax as a way to fund basic income?)

eveningcoffee 10y ago
Taxing property means that owner must have cash to pay for it or is forced to sell it (with all the consequences of forced selling probably). It may sound interesting and promising but is most likely the most unjust way of taxing as it will force people are retired or about to retire out of their homes (that they are not paid for using funds from the basic income).
- beambot 10y ago
  Estate tax refers to taxing your assets after you're deceased (i.e. inheritance), not realestate (i.e. property): https://en.wikipedia.org/wiki/Estate_tax_in_the_United_States https://en.wikipedia.org/wiki/Estate_tax_in_the_United_State... (I'm afraid this confusion makes your comments about retirement and forced property sales make very little sense... unless I'm missing something?)
- redahs 10y ago
  A land value tax would be far better than either an estate tax or a real-estate property tax. It is only assessed against the unimproved value of the ground one has enclosed and excluded others from occupying, and not against the value of improvements which have been constructed and maintained. While the consequences of non-payment would also be forced sale, it is possible for residents to petition and sue the to assessor's office in order to reassess the value and obtain deferments, and the owners are still compenseated for the value of any real property located on the site. This is more just than an income tax, as failure to pay could never result in imprisonment. Additionally, it would lead to far lower cost of housing, mortgages, and rent. This means less savings and income would have to be allocated toward acquiring the house in the first place. It would also be more just to those who are not wealthy enough to buy a house outright, and must instead rent or obtain a mortgage. When spending on public services increases the land values and attractiveness of the location for which these services apply, and is financed via taxes on labor rather than taxes on land, this subsidizes land holders and banks invested in mortgages by allowing them to charge higher rent for housing.

toomuchtodo 10y ago

I am absolutely worse off if I run out of money before I die, whereas its only a minor inconvenience if I don't happen to spend down my estate to zero before death (in my case, it will flow to my wife and/or daughter). EDIT: I will live frugally and drastically below my means forever (and I'm only 34!) while putting aside substantial savings; the fear of running out of funds in the last part of my life is terrifying. Seniors have every right to be fearful and hoard their cash. Source/experience: Support my disabled mother who has zero assets and substantial medical expenses. If you're not afraid of saving enough for retirement and unexpected medical expenses, you should be.

anigbrowl 10y ago
Fallacy of the excluded middle, nobody suggested that people should be spending themselves into penury. This is a great argument for universal healthcare though.
- FabHK 10y ago
  And a collective insurance-like pension system, where the people dying early subsidise the people dying late. Then everyone just needs to save to the expected age of death, rather than the maximum age of death.
  - bradleyjg 9y ago
    We have a fairly efficient market in (vanilla) annuities which act as a form of longevity insurance.
    - FabHK 9y ago
      Annuities are great (if administered effectively, which is helped by economies of scale). The UK has an efficient annuities market, it seems to me. My understanding was that in the US, it was to a large extent a tax-avoidance scheme, rather than a risk-mitigation mechanism, but I don't know enough about it.

skybrian 10y ago

Okay, but as long as they're happy, why is this a concern? The article implies with the talk about "training people to spend" that other people should be concerned about this, but doesn't say why. I'm not really seeing it. It's not like the money supply is fixed. There are other ways to grow it if the Fed were willing to do it.

bradleyjg 10y ago
Suppose you are a financial planner or whatever they call themselves. You've been in the business a while and you've observed dozens of wealthy peoples' retirements. Isn't it possible you might reasonably have some perspective to share with a wealthy couple just coming into their mid 60s and ready to stop working? Look at this paragraph from the article: One of those irrational reasons may be simple habit. Something strange happens when people retire, Browning says. All of a sudden, they’re not getting a regular paycheck, and that makes them scared to spend. Goals set before retirement are abandoned, along with pre-determined spending plans, because retirees are terrified see the balances on their retirement accounts drop even a tiny bit. What's wrong with someone, like a financial planner, reassuring a couple that yes they can take those vacations they always dreamed of, yes they can pay for their grandkids' college tuition, yes they can make a substantial donation to that museum they love so much -- here's the math showing that it is likely to be okay?
- ldayley 10y ago
  This is exactly the kind of thing that financial planners are currently making a killing doing as they shift from helping boomers accumulate wealth to helping them spend that nest-egg.

droopyEyelids 10y ago

You're completely missing the fact that consumption doesn't always increase pleasure or well being. It's a gaussian distribution.

mannykannot 10y ago

Spending the last years of your life worrying about how you will make ends meet is not an appealing option. Of course, if you set an end date for your lifetime, you can better plan ahead, but I have only known one person who voluntarily followed through on that plan, and it was a lifestyle choice with its own downsides. There is an inherent asymmetry between living somewhat more frugally and dying in poverty.

tutufan 9y ago
What downsides do you have in mind?