One of my favorite financial planning clients tells a story of both triumph and grief. I will call you Betty. She married young and soon became a widow. She never remarried, she works as a legal secretary, and she lives in what can only be described as a “rough” area of Baltimore, where she has been robbed numerous times and assaulted once.
She never took a vacation and worked until she was in her 70s.
She saved over $3 million, invested very conservatively, and lived on a meager Social Security retirement without drowning in her original investment.
She died in her 80s with no heirs and donated $1 million to three different, worthy and grateful charities.
Bill Perkins, hedge fund manager and author of an interesting book, die at zero, it is suspected that Betty got it wrong. And in this particularly harsh example, you can probably see why. Betty deferred utilization of the very resources she had worked so hard to save, even though she could have made her life much easier, if not better.
But maybe Betty was a philanthropist, selfless, working hard and living frugally to help some important charity nearby do great work. In fact, Perkins suggests that if the human element of giving is removed, we cannot be generous when we die.
Indeed, when Perkins pleads with us to bounce his last check, he is neither seeking selfish hedonism, nor is he seeking to cut off his children from his inheritance, or avoid charitable donations. I’m not even suggesting that. in the meantime Givers and receivers alike will be able to reap more benefits sooner.
His purpose is to help us live more carefully. “In order to fully enjoy life, not just survive it, we need to stop driving recklessly and actively steer life in the direction we want it to go,” Perkins wrote.
Therefore, he encouraged us to get more out of life by maximizing the number of positive experiences, thinking of ROE (return on experience) just as we think of ROI (return on investment). We also recommend that you consider To optimize our experience, he recommends “time bucketing.”
For example, if you want to stay in a hostel during the summer and backpack around Europe, that’s probably the best experience you’ll have in your twenties. You have no obligations like middle age, you have the health and stamina, and the ability to make the most of that experience, which gives you an ROE and a rich “memory dividend”.
But what if you want to attend all four of tennis’ Grand Slam tournaments in one year? It might be the perfect memory-making pursuit to set aside for the second half of, perhaps the early fledgling. At this stage in life, they don’t need as much physical strength as on-court participants, but they’re still fit enough to handle the trains, planes, and cars they need to travel.
Perkins recommends planning your planned experience in five-year increments, and has even created an online app to help you do that.
But back to the controversial title and theme. Is Perkins really proposing to “die to zero”? Well, as close to zero as possible. Acknowledging that there are people who truly love their work and find essential meaning and joy in it, he suggests that the primary purpose of our work is to fund life experiences. increase. Therefore, dying with a large amount of money means effectively wasted “life energy” and not having the experience that could have been gained.
It’s tempting to say that Perkins underestimates the inherent value of work and overestimates the value of all other experiences, but this point makes sense, especially considering the familiar phrase: still well understood. “I wish I had spent more time in the office,” he said. “
But Perkins takes special aim at two hallowed elements of personal finance: early retirement savings and “safe” withdrawal rates.
We’ve all seen charts that show the power of compounding investments — the benefits of starting to save and invest early in life — but Perkins said when he was lashed out at work by his boss about saving and saving, I remembered the story of when he could barely afford to earn $18,000 a year at his first job.
Yes, Mr. Perkins wants us to “start early,” but that’s the reality. experience He wants us to keep chasing when we are young. Especially when you’re married and have kids, or when you’re retired and old, an experience you almost certainly won’t be able to replicate. Earn more, save more, he suggests.
And when we stocked up the nest eggs, he wanted us to use them up. So while the financial industry debates what a “safe withdrawal rate” is — the amount that can be withdrawn to (hopefully) ensure the maintenance of a retirement portfolio — Perkins says we wants to intentionally undermine the principal invested, and as close to zero as possible based on realistic life expectancies when we leave Earth.
The main objection he hears from most of his wealthy friends is, “But what about the children?” Again, Mr. Perkins does not wish to withhold inheritance or donations to causes that are important to us. In fact, we believe that everyone can benefit more if they donate while we are alive.
As a financial planner, I’m tempted to start responding to some of Perkins’ suggestions with technical counters. For example, tax incentives for raising the cost base of capital assets when someone dies. But on a more personal level, I cannot refute his logic.
It is simply true that we are saving and protecting to live and give. period.
Personal finance professionals like Dave Ramsey will hate Perkins’ message because it prematurely kills the sacred cow of savings.the financial industry will hate die at zero Because we want to charge perpetually instead of using up portfolio fees and commissions. But there are many unavoidable truths in this book that are worth your consideration and perhaps practice.
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