Good planning, not perfect, but good

The art of the lifetime savings hypothesis is that you should die around and about when you run out of money. Or, obviously, run out of money around and about when you die:

All Creatures Great and Small star Robert Hardy had only £165,000 in his will.

Good planning there.

A mixture of lifetime gifts to the children, a solid pension or annuity which dies with you, some cash of course for uncertainty. But we pass this way but once, enjoy it while we can but really do try not to run out.

Of course, that lifetime savings hypothesis, along with income smoothing over time, must be wrong for it is neoliberalism associated with Milton Friedman. It’s just remarkable, for something so obviously wrong, how often it works out that way.

33 comments on “Good planning, not perfect, but good

  1. Well, the obvious way to do this is to sell every asset you have when you reach (say) 75 and buy an annuity which dies when you do.

    If you then rented accommodation and a car and spent every penny as the annuity paid out, you’d be pretty much guaranteed to leave nothing behind.

    Other than the truly shyte annuity rates around at the moment, it’s a decent plan.

  2. I’m not sure about good planning Tim.

    His care home fees could have stolen his fortune which must have been massive, or his family hid most of it..

    Who knows?

  3. “All Creatures Great and Small star Robert Hardy had only £165,000 in his will.”

    “Robert was was married twice, with both relationships ending in divorce”

    That can also result in you dying penniless.

  4. I worked with a German in South Africa. One day at lunch, he very dryly declared, in his pronounced German accent, “I have been doing some calculations and I have concluded that, when I retire, I can live for seven years and then I must die”.

  5. Hardy was a successful actor but not a major international star so he probably didn’t have megabucks. 2 divorces and care home fees will put a dent in your wealth – they certainly did for my old man.

    That said, if a care home is the only practical option for your aged parent(s) and you or they have the money; it is better to chuck a load of it into care rather than try to hide the cash and throw yourself on to the “mercy” of the state.

  6. “His care home fees could have stolen his fortune …”: in what sense ‘stolen’? You mean he paid for the service they provided?

    “or his family hid most of it”: are you really accusing them of crime? On what evidence?

  7. Avoiding state care would be worth any amount of money. The only people who think the NHS or local authority care is great are those with very low expectations.

  8. “I worked with a German in South Africa. One day at lunch, he very dryly declared, in his pronounced German accent, “I have been doing some calculations and I have concluded that, when I retire, I can live for seven years and then I must die”.”

    The loose premise of Somerset Maugham’s short story The Lotus Eater.

  9. The savings hypothesis is a wonderful idea if you can pull it off. Too many old folks cling to their cash for fear of finding themselves dependent on charity. Their savings are subsequently bequeathed to family members, whose only wish is that their aged aunt had spent more freely and enjoyed herself while she had the chance. In Robert Hardy’s case he seems to have judged it just about right.

  10. Jim,

    I can assure you my colleague, Eberhart, said it. I cannot say friend, I don’t think he had any. He was a miserable old git who was obsessed with being pure German, e.g. untainted by Polish or Czech as other German colleagues were. He drive a VW Porsche like this one:

    vw porsche

  11. @dearieme When one of the most famous actors in the country dies after 70 years in showbiz and leaves that amount in his estate…I smell a rat.

    His house £1.5 million was downsized 2 years ago and his £100,000 antiques flogged, not to mention his personal fortune.

    A lot of money has vanished in 2 years

    you know it does happen in families…they take steps to protect massive amounts of money.

  12. ‘The art of the lifetime savings hypothesis is that you should die around and about when you run out of money.’

    Rush Limbaugh has stated his goal that the last check he writes bounces. Just past having run out of money.

    In today’s economy, it should be possible to die with substantial debt. An even better way to go.

  13. “Their savings are subsequently bequeathed to family members, whose only wish is that their aged aunt had spent more freely”

    Not what happened to me. My father died at 90, and left me a nice chunk of money, even though it was split 5 ways with my brothers and mother. I was 59 years old. I DIDN’T NEED THE MONEY. It would have been vastly better for me had he spent money on me when I was young, and actually needed money.

  14. So, on this subject, was talking to my investment adviser a while back. He said, “Well, looks like you can retire any time after you’re 65 and have a pretty good life. We generally set these things up so there’s not much left at all in the accounts when you hit 95”

    “Oh, so what happens then?”

    “The bank sends someone out to kill you. All part of the service”

    I’m sure it was a joke……

  15. His house £1.5 million was downsized 2 years ago and his £100,000 antiques flogged, not to mention his personal fortune.

    A lot of money has vanished in 2 years

    a lot of supposition going on there. You seem to have the analytical capabilities of Snippa

  16. Gamecock. Perhaps, but there was an observation recently that 90% of Warren Buffett’s wealth has come since he turned 60. Don’t know about your dad, of course, but there are a lot of old folks whose accounts just keep growing, but who simply didn’t have those funds when their kids were younger.

  17. I suppose Rickie thinks that people should maximise the amount of IHT their estate has to pay on their death. As it is, substantial tax might still be payable if any gifts were made within 7 years of death. Accusing a family of deception or fraud without evidence is a bit shitty really

  18. It’s something that’s been in my mind recently. As my mortgage approaches its end, and I have no dependents, I’m starting to look at the next 40-50 years of life and pondering why “the system” expects me to die with loads of assets that I’ve spent my life paying for, instead of me being able to spend that money on myself.

    I’ve spent the last 30 years getting to the point of having no debts and getting rid of need to pay to have a roof over my head and having the prospect of the rest of my life safe in having a paid-for roof over my head (other than running costs), but it niggles that I’ll die with (say) £200,000 of assets. Why can’t *I* spend that?

  19. @Diogenes…are you too lazy to to find out for yourself?…2 mins googling tha’ts all….try being analytical.

    I’m saying a lot of money has gone from his estate from the age of 89 till his death aged 91.

    His final weeks in a care home suggests it might have been just that, even at £1500 a week there is up to a couple of million gone somewhere!

    Rickie supposes that folk do everything in their power to avoid losing a substantial fortune and that may involve some clever footwork.

  20. “Why can’t *I* spend that?” Take out an equity release mortgage and you’ll be able to spend part of it, easy-peasy.

  21. Tommydog… Correctamudo on the post-60. Most of us haven’t a pot to piss in till well into our 40s, when at long last we begin to accumulate a stake in the game.

  22. “Perhaps, but there was an observation recently that 90% of Warren Buffett’s wealth has come since he turned 60.”

    I could have used 10% of what I got much more effectively in 1975.

    I should point out that my experience has me spending way more on my son than others think I should. I put constraints on what I’ll spend 3 years ago, so that I didn’t get too low in assets for my old age. I expect him to be out and on his own in April. In good shape and me in good shape. Not as rich as I could be, but still comfortable.

  23. There is also the attitude of the heirs – I have a reasonably comfortable pension (DB from 22 years n an n/60ths scheme plus state deferred and rolled-up at 10% pa until it made sense – on the erroneous data supplied by DWP – to start drawing it) so when Osborne exempted DC plans from IHT if left to children I promptly changed my nominated beneficiary to #1 son. It would be enough to buy himself a decent house up north if I drop before I’m 75. He was and remains very unkeen on this bit of financial planning.

  24. jgh,

    The question should be, why aren’t you expected to spend your assets on yourself in old age? This idea that the State should look after the old and infirm so that their children can inherit their house and other assets is, at best, ruinous.

  25. @BiND. Quite right. Mind you, the IHT laws could do with a bit of sense imposed. End the special treatment of houses and of agricultural property, end most other dodges, make the nil rate band £100k apiece, and reduce the tax rate to 10% of the excess.

    Result: less damage and (my guess) a bigger tax take. Nobody would be daft enough to give away a million to avoid a mere 10% tax.

  26. Rickie, you are the one who claimed that money had gone missing. As it is, the state will claim a lot of money that could have been better used

  27. @dearime: “Result: less damage and (my guess) a bigger tax take. Nobody would be daft enough to give away a million to avoid a mere 10% tax.”

    Other result: less money going to solicitors.

  28. Our youngest daughter finishes uni next year, the year I turn 60. 2020 will see us with an extra AU$30k in our pockets. If we hadn’t sent the four kids to uni and saved the money instead, we’d probably be more than AU$500k to the good and I could probably retire 4 or 5 years earlier than I will.

Leave a Reply

Name and email are required. Your email address will not be published.