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☕ DrinkCoffeeAndProfit
Smart money moves before breakfast
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Inspiration Quote for the Day
“The big money is not in the buying and the selling, but in the waiting.”
Charlie Munger
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The Morning Ritual
Walt Planned His Money to Age `83`. That Number Was Never His.
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Walt is `67` and has done more planning than most people ever do. There is a spreadsheet. There is a withdrawal rate. The finish line sits somewhere in his early eighties, because that is roughly what he has always heard American men get.
His arithmetic is careful. That finish line, though, is borrowed from a table he was never on.
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Speaking of numbers measured in decades, our partner has one of their own.
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In One Sip
► The figure in the news is life expectancy at birth. For an American man in the latest official table it is about `75.8` years.
► That number includes everyone who died young. It was never a forecast for somebody who already made it to `67`.
► Read the same table at age `65` and a man has about `18.1` more years, which lands near `83.1`. A woman has more.
► For a couple both aged `65`, the chance that one of them sees `90` is roughly `53%`. Coin flip odds, on the longer of two lives.
► The quiet part. The finish line moves every year you clear. A man who reaches `80` averages `88.5`. One who reaches `90` averages `94.1`. You keep earning years by surviving them.
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Why It Matters for Your Money
Between the birth number and the number for somebody already `65` there is a gap of +`7.3` years. Those are years the headline figure quietly hides from a person planning at the kitchen table.
Put a pot of `$500,000` against it, ignoring growth to keep the arithmetic honest. Spread over `18` years that is `$27,778` a year. Spread over `28` years it is `$17,857`.
Spend at the higher rate on the short horizon and the shortfall in the back half runs about -`$9,921` a year. That gap does not arrive at `83`. It arrives at whatever age the money stops.
And the horizon keeps stretching. Surviving to `80` adds roughly +`8.5` more expected years on top.
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The Wealth Angle
Here is where it gets interesting. An average is not a prediction about you. It marks the middle of a crowd, and half that crowd walks straight past it.
Planners use `90` or `95` as the horizon for exactly that reason. Not because they expect it. Being wrong one way is an inconvenience. Being wrong the other way is a crisis at `88` with no options left.
Two things can be true. Living like a pauper through your sixties to fund a decade you may never see is its own kind of loss. And no plan should rest on a single number measured on people who never got here.
I use two horizons rather than one. A realistic one for the spending plan. A longer one for the question of what happens if I turn out to be the lucky one.
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☕ Key Insight:
The most expensive assumption in a retirement plan is rarely the return. It is the finish line, borrowed from a table that was counting a different group of people.
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Coffee Break Move
Find the age your plan actually ends on. It is in the spreadsheet, in the calculator output, or in whatever your advisor modelled. Most people have never looked at it directly, and it is usually lower than they would choose on purpose.
If you are comfortable: run the same plan again to `95` and read the annual number it spits out. The difference between the two is the real size of the decision.
If you are stretched: the horizon still matters, and it points the other way. It argues for claiming Social Security later if you can. That cheque is one of the few things that never runs out.
Walt's spreadsheet is excellent. One cell in it came from a newspaper.
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