I came across a term I’d not heard before in an article from my local newspaper. S.K.I.ing: the act of spending down your retirement portfolio and assets without regard for familiar inheritance. To my mind it’s basically blowing the budget on travel and other indulgent consumption. Apparently it’s a growing “thing” now.
The article in question came with glowing endorsements from practitioners and testimonials from the potentially inheritanceless children, telling their parents not to feel guilty and they never expected an inheritance anyway. Everyone to their own thing, no harm done. But I have to wonder.
One of the traits that caught my eye was the word spontaneous. It seemed to be an underlying creed with the S.K.I.ing crowd interviewed in the article. Spontaneous, high value spending, from a portfolio doesn’t seem like a very sensible idea to me. Could some of the underlying thinking behind the movement be a lack of financial education?
Of course, “spontaneous” is a much prettier word than “unplanned,” and a much prettier word still than “sold to me by someone with a cruise line to keep profitable.” I have a sneaking suspicion that “spontaneity” here is less a personality trait and more a marketing department’s rebrand of what used to be called, less flatteringly, poor impulse control with a six-figure balance behind it.
The testimonials, those cheerful children insisting they never wanted an inheritance anyway, read less like reassurance and more like the world’s sweetest hostage video. Of course they’re saying the sanctioned thing. What’s the alternative, telling a journalist they’re a bit annoyed their parents sold the family silver for a business-class seat to Santorini? I suspect the whole “don’t worry about us” is just putting on a brave face.
So by all means, ski if you must: down the slopes or through the portfolio, it’s your life. I’m just not convinced the second kind is a sustainable pursuit. None of the practitioners in the article seemed to be budgeting for the boring stuff: the hip replacement, the care home, the decade of boring expenses that doesn’t come with a photo opportunity. Future unknown costs really do exist.
Do you know anyone taking this approach? It’s not for me. I’m still travelling and still enjoying retirement, but as a planned expense on a loose budget, not a spontaneous one on a shrinking portfolio.
Call me old-fashioned, but blowing the lot on a few extra experiences still seems like a poor deal for the kids, however politely they insist otherwise. Maybe that just makes me out of step with an increasingly self-centred world. But I can live with that.
Mark,
We fall somewhere between S.K.I. and “save it all for the kids.” We want to enjoy retirement, travel to places like Alaska and Canada, and build a home we’ll love living in. We’ve worked too long to feel guilty about spending money on those things.
At the same time, our adult daughter Allie will need support throughout her life. Funding her special needs trust is a priority, and we also want to leave something for Maddie. So “spend the kids’ inheritance” doesn’t describe us. I’d call our approach S.P.E.N.D.: Spend Purposefully, Enjoy Now, Deliver later—though I may need to work on the acronym!
I do think there’s room for spontaneity within a plan. If we’ve provided for future needs and set aside money for travel, we can say yes to an unexpected trip without treating every purchase as a threat to the kids’ future.
Jeff
Jeff, it makes sense that your priorities are different from most of ours here. It must be some comfort knowing you can fund your daughter’s trust well into the future, even after you’re both gone.
On a lighter note — another acronym? We’ve already got an alphabet soup brewing in the comments, so yours might as well join the party!
Familiar inheritance? Was that meant to be “familial” inheritance?
Guilty as charged, Hall. Typo: 1, Mark: 0. Any thoughts on the actual topic?
With no children to inherit my money, my preference is to support other people’s children. By donating to charities targeting underprivileged youth. Thanks for asking.
Hall, a mighty way to direct to your funds. Well done indeed.
Thanks Mark, a great piece.
I like the moderate approach of spending the inheritance now …. on the people that would eventually get it anyway. Big family trips, help with education costs, assistance with a house deposit. Nothing new in this idea, but I really do think that it’s a lot better than dying with a big pile of money, that then goes to your 60 year old “kids” who longer need it.
Greg, exactly. A helping hand when you’re young and actually trying to get a foothold makes far more sense. If my parents had been in a position to help back then, it would have made a world of difference. Receiving an inheritance today would just be an administrative headache of figuring out where to put the funds!
My wife and I spent years saving for our retirement. We were good at it and retired with a nice nest egg. The problem, of course, is that its hard to break a lifetime of habit. Changing from being a saver to a spender over night is not likely. It takes time, and as my wife and I approach 80, we still have plenty and realize that there are probably not enough years left in which to spend what we have. As a result, we have been more generous to our son and been able to spend more freely on ourselves. We don’t need more things, but travel while we still can, meals out, gifts to charity, theater subscriptions, etc. – all things we would have scrimped on in years past, now seem more “affordable.” Its not exactly “SKing,” but its not hoarding, either.
UofODuck, I must admit, retirement has let me spend more freely. Maybe it’s a function of running my own business — you never knew how profitable it would be from one year to the next. That uncertainty seemed to put a natural brake on my spending, even when the business was doing very well. In retirement, I know exactly what I have going forward, and that certainty has let me loosen the purse strings.
Here’s the deal (ie decision matrix) –
Extreme 1 – Save every dime, don’t spend on anything except food, clothing and shelter and spend the minimum on that– ie, live like a pauper & leave a large inheritance (ie to a cat shelter)
Extreme 2 – SKI uR butt off aka Die w/ Nothing
SomeWhere In the Middle (SWIM <— New coined term. Send royalties to charity. J) — The challenge for each of us is figuring out where that “middle” is.
IMHO- SKIing & Die w/ Nothing is beyond silly. The typical person does not know how long they will live. Guess wrong then ur a burden to ur kids, or homeless, etc.
I’m a SWIM guy, ie, Moderation
Racer X, I like your framing — I’m definitely in the SWIM camp. I’ve always had it in the back of my mind that even if we run our portfolio down close to zero, the kids will still inherit the two properties. That’s definitely some type of balance… even if the balance only appears in their checking accounts.
I’ve been on the SKI trip for all of my retirement. But that does not mean I have neglected my kids inheritance or been a spendthrift. Yes, I have indulged at times, I have donated to my chosen charities, and each of my kids will still have a substantial inheritance. The concept of “enough” is what apply to my spending, donations and inheritance.
One of the notable things Warren Buffett plans to do is donating his fortune, while he has provided his children with enough. The point is that when done with intention, SKIing works.
Mark, I’m not convinced you’re actually “SKIing.” I think what you’re practicing is more like Racer X’s SWIM philosophy. From what I understood in the article I read, hardcore SKIing means intentionally spending down your assets to ensure there’s no inheritance left.
Just bought a new Nissan Z and we’re going on an African safari in a couple of months. Offspring will inherit a nice house, 5 acres, and a fast car.
John, maybe you’re short-changing yourself. It’s always possible you’ll put enough extra miles on yourself — and on that nice car — that your kids will end up having to make do with just the house and land.
Can’t talk right now Mark, I’m buying a new Cadillac!
Mike, please tell me you got a killer deal on the Cadillac before you blew the kids’ inheritance on it!
PS. For those who are like me and didn’t have any idea what the acronym Mark mentioned is, I asked Mother Google and she said “spending kids’ inheritance, no good”. LOL! Chris
I have begun using the term SKI frequently with friends and with my adult kids! Most of our spending in this category is actually for things that directly benefit our kids and grandkids. As I’ve mentioned here before, we have been paying for summer camps for our grandkids so that they have great times and make awesome memories like our daughters had growing up during their summers. Their parents also benefit by enjoying their summer with less stress and more free time (3 will be at sleepaway camps next summer). We joke about the fact that this will decrease their inheritance someday (and use SKI to describe it) but they all gladly welcome the current use of these assets for this purpose.
Many of our friends have adopted the use of SKI for the way they travel (if we don’t fly first class our kids will) and spend money.
Yes, we are all for SKI-ing in the way that works for us and our families!
Luvtoride, I don’t think you’re SKI-ing I would suggest your SKIP-ing: Spending Kids Inheritance Presently 😉
🤣
It is in the same class as FIRE which now is pretty much debunked and called something else. Those children are saying what they think the interviewers want to hear. Old fashioned is good as is common sense.
I think FIRE is still alive and kicking. I recently read an in-depth interview with a guy who retired at 34 after making his fortune in sports betting. I don’t know — I retired at 57, and even that felt early enough. I think I’d have missed working if I’d stopped at 34. His life seemed pretty boring, with hardly any daytime social interaction, since all his peers are still working. Each to their own, I guess.
I agree. If retiring at 34 meant continuing the frugal lifestyle that got me there, I’d have probably died of boredom by 40.
Sounds like S.K.I.ing crowd is the new FIRE crowd. Maybe considering the environmental temperatures necessary could nullify each other and they both will both disappear.
Ha, good one — FIRE and SKI cancelling each other out, thermodynamics of retirement philosophies. Maybe the real answer is somewhere in between: burn a little, save a little, keep the kids guessing.
Many articles urge us to enjoy as much of our money as we can while we are alive and able to enjoy it. The message can be seductive. On the other hand, there is the risk that we outlive our money. So we must balance the risks of spending too little and spending too much.
The residual portfolio value is the amount remaining after the distribution period has ended. If the residual value is zero after fully funding a 30 years long retirement using the “4% method”,it counts as a success.
Once retired and taking withdrawals, Bernstein says burn rate and time horizon are the most important determinants of success. I have introduced a margin of safety by choosing a withdrawal rate which will allow for a residual portfolio value of 25% (inflation adjusted) if we live to age 103. Leaving an inheritance behind was not the purpose, but the consequence of such conservative planning. We cannot risk pool the way insurance companies can, so using conservative assumptions is our best bet.
Reading about Pascal’s wager can help one better evaluate the risks of such strategies as “Dying with Zero”. In other words, when considering the probabilities of an outcome, remember to consider the consequence of even a very low probability outcomes.
My plan is based on living to 100, and if that happens that is a lot of blessings. I do not concern myself with SKI or FIRE, just live a kind life with your family. My plan is to find a good way to give our children and grandchildren something you can share together while we are alive. Maybe someone can write an article about that.
Jack, my wife and I will be in the minority with our long-term decumulation plan. Once our State Pension payments start, and my wife’s traditional government pension (with full COLA and survivor benefit) kicks in, we plan to use a portion of our portfolio to buy single-premium immediate annuities with a 3% annual increase — enough to cover all our remaining cash flow needs. From that point on, worrying about market swings or the risk of the well running dry won’t be on our radar — the rest of the portfolio is just icing on the cake, to use for whatever we choose down the road.
Or Jack you can use the IRS Uniform Lifetimes Table to determine the facto used to calculate your annual RMDs.
The IRS assumes that every account owner is married to a hypothetical spouse who is exactly ten years younger than you.
They also use something called a recalculation method for dertermining the factor, ie Instead of subtracting 1 from your life expectancy factor every year, the table looks at your exact age each year and recalculates your remaining lifespan. Actuarially, the longer you survive, the older your projected age of death becomes. This guarantees that your life expectancy factor will never hit zero, meaning you can never legally “outlive” the RMD.
Also, the factors continue to drop incrementally for ages past 100, down to 2.0 for age 120. Sooooo I theoretically guess I guess that even if you are planning to live forever the nice people at the IRS believe they will never force you into bankruptcy on their account.
I’d say we’re taking a middle path. I agree with Marilyn that I want to make sure we have enough of a cushion to care for ourselves for the duration, and I’d like to leave an inheritance.
We’ve already made our “big” financial move (our recent home purchase), we have two nice, paid-off, low-mileage cars, and we take nice trips and treat ourselves to the occasional really nice meal. I can’t see any need to ramp up our spending. We already have a nice life.
But I’m also not interested in pinching pennies to make sure our inheritance is larger when we pass. My husband is semi-retiring (going to 50% time) nine days from now, so our income will drop. I asked him which of my self-care line items I should drop (Pilates studio, massages, nail salon, etc.) given a tighter budget, and he said, “None of them.” In the big scheme of things, it’s not that much money. If we have to dip modestly into savings to supplement our monthly income, isn’t that what it’s there for?
Dana, my impression from the article was that many of the people interviewed had struggled financially throughout their working lives. In retirement, once they got easy access to their savings, they suddenly found themselves holding a large sum of capital for the first time ever. That may be driving some unexpected spending choices — an attempt to make up for those earlier struggles. The real question is whether those choices are the right ones for the long term.
I’d find all that spending very boring. I’m willing to spend for nice trips— right now. I’m trying to work up the courage to pull the trigger on business class seats to Greece in the spring. We have a vacation home and a rental apartment near our granddaughter’s family. We do what seems interesting— and also the unglamorous stuff like ongoing home maintenance. I expect our pensions and long term care insurance will cover time in The Home. But I’d be VERY uncomfortable running through our investments and other savings. Nobody knows what the future will bring, and while our kids protest the idea of inheritance, I feel more comfortable knowing they’ll have one.
I’m with you on that spending approach — I prefer keeping foreign travel a treat rather than a constant routine. This year’s been an exception for us: three overseas trips already, with a fourth coming up in November. I’m feeling travel-fatigued, and my wife and I have decided to stay closer to home next year. Constant travel as a lifestyle just doesn’t appeal to us.
In our families the care homes have gotten it all in the end anyway and our mothers are still living. Expecting the care homes will get in the end for them too. My mom has been in 5 years now after her stroke. Spouse’s mom almost a year….. Chris
Chris, not sure if this exists in the US, but in the UK we have “immediate needs” annuities for nursing home care. It’s essentially a bet: you pay a large premium — often a big chunk of the portfolio — and if the person only needs care for a few years before passing, you’ve lost that bet. But if care runs longer, the rest of the portfolio stays protected rather than being eaten up by care costs.
Mark, I wish. Our grandmas never had portfolios, they ended up in Medicaid nursing homes. Our moms have some, but it is hundreds of thousands, not a million. The only thing I know about here in the US is irrevocable trusts, and I don’t know a lot about those. Chris
Chris, that’s a lousy way to blow the kids’ inheritance. Here’s to hoping that we die in our sleep before it comes to that.
Dan, if we don’t have to depend on them financially and can pay our own way, I would consider that a success. Chris
Amen to that, Chris.
“Spontanious”, like Guinness, is only okay in moderation. And even if your kids don’t need the money, your surviving spouse or your grandkids might.
Dan, unfortunately a Guinness in good company has a habit of “spontaneously” turning into three, an occupational hazard of living in the land of the black stuff. Luckily, the cost is modest and won’t put a dent in the children’s future inheritance
Mark, three pints isn’t even one if converted into dog beers.
The “dying with zero” idea has always lacked appeal for me. Do I really want to trust a mortality table when projecting a budget to keep me fed until my last breath? I suspect the notion is born from a writer grasping for a topic. Still, there is value in searching for balance between enjoying the fruit of our life’s work and running through our savings with a “spontaneous” spending spree.
Edmund, 2,700 years ago the Greek poet Hesiod wrote: “Observe due measure; moderation is best in all things.” Your comment on balance echoes that idea beautifully — it seems humanity has been chasing this same equilibrium since ancient times.
Amen. Balance and moderation are King.
“Moderation is best in all things.”
To which I’d add: including moderation (!)
Occasionally we have unbudgeted (aka spontaneous) expenditures of some size. We were shopping for a new sofa and my wife saw a dining set that spoke to her. We ended up with both. I decided to take up a new hobby that required a sizable capital purchase to pursue.
If we only stick to our budget there’s a very high likelihood we’ll outlive our savings. My only child and her husband both have great careers and earn enough to be comfortable, send their kids to private schools, fund their 529s, and use up their annual vacation allotment. They’ll be fine with our without anything left over from us.
I expect that as I get into my 80s I’ll be in a better position to ‘give with warm hands’. Until then, it’s about living the life we worked for.
To me, the appeal of the “dying with zero” concept is that giving money away while you’re still living is more satisfying than keeping it all until you’re dead. Your family, the charities you care about–they can use the money now, rather than (maybe decades) later.
Of course, the devil is in the details, and figuring out how much is “enough” for your own future needs is not an exact science. (Die with Zero doesn’t suggest that you should shortchange your own future needs.)
I can see that, Dana. When Jonathan wrote of the things that might bring us happiness, he would include the joy that comes from giving–balanced by the comfort of a nice cushion in our retirement accounts!
Jonathan had it right, period.
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