Someone who is too frugal might die with a lot of money leftover unspent, they didn't live their fullest life possible the argument would go. The other side of that is people who spend a lot, too much really and maybe they turn out ok financially or maybe they run out of money with the ultimate goal being that the check to the undertaker bounces (very old joke).
Bill Bernstein and Edward McQuarrie wrote about this, breaking people down into two groups. One is the richest person in the graveyard which is a phrase attributed to Steve Jobs. The argument against spending too little is that it is not a "rational" choice. The other group is people who are willing to live with the fear of running out of money. I'd use the word stress more than fear; willing to live with the stress they might run out of money.
Any advisory practice will have both types of clients with most of them in the middle I believe, taking a relatively safe to slightly generous amount out.
The Bernstein/McQuarrie article gives permission to be the richest person in the graveyard, RPIG as they call it. I can understand the idea of dying with $5 million in the bank after years of living a $100,000 lifestyle would cause some form of regret but if we assume there aren't too many of those out there, Bernstein/McQuarrie validate the utility that could go with having a relatively high number in the bank.
I've made this same point slightly differently, I usually say there is value in never having to worry about money. That doesn't have to mean having millions in the bank. Being able to cover your desired, retirement lifestyle with Social Security and maybe one or two other income streams but not needing your $800,000-$1.2 million IRA seems like a pretty comfortable spot to be in.
It's very important to figure out what type you are in this context. Although I am very unlikely to accumulate anywhere near $5 million in today's dollars, I am closer to to being RPIG. Not worrying about money is very high on my priority list, it goes hand in hand with independence which is the real priority for me. It's not about being rich, it's about being comfortable; financially independent.
I'm not saying anyone else should view this the way I do, I am saying figure out where you are on this issue so you're not sitting on a mountain of money at 93 if that would cause regret or so you don't spend 1/4 of your life stressing every up and down of the stock market if that would make your life less enjoyable.
A quick pivot to something that isn't completely true but might be in the future. I saw a post on one of the socials that Nvidia will pay people $2000/mo to house/host a small server. The idea is that with all the pushback against big data centers, servers about the size of a generator could help alleviate the problem. My first reaction was it can't be true.
So there's something to it, still in a trial phase. They aren't paying $2000/mo but covering internet and utility bills and providing battery backup for your house? There might be 100 reasons not do this if it ever goes mainstream, I don't know, but it would be worth learning about if it ever was available in your area. What if it does evolve into Nvdia, or some other company, paying you for this setup? Getting even $1000/mo toward a $5000 or $6000 lifestyle seems like a lot, especially given how under saved we collectively are for retirement.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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