What is the Die with Zero retirement saving strategy?

Die with Zero is a retirement strategy that means exactly what it says: your goal is to die with zero dollars left in your bank accounts.

If the thought of that made your stomach drop, I don’t blame you. We’re taught that nothing could possibly be worse than having no money, and we spend our entire lifetimes prioritizing accumulating as much wealth as we possibly can. The thought of spending it, let alone spending all of it, seems inherently risky.

Ironically, not spending all your money is actually the riskier option. Why? Because the only thing money is really good for is spending it. Money has no inherent value unless exchanged for a good or service. That becomes even more true when you spend it on life experiences that increase your happiness. Therefore, dying with zero means dying having spent your money on living a rich life.

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Every extra dollar you die with represents a missed life experience

Of course, it’s impossible to know the most important variable to make Die with Zero possible, which is when you will kick the proverbial bucket. This means it’s incredibly unlikely you will pull off dying with zero.

But dying with $100,000 left is still better than dying with $1 million because it implies you had an additional $900,000 worth of life experiences. Maybe this was $900,000 of travel. Maybe you got to buy your dream home and your dream car. In any case, wouldn’t you rather die having lived your dreams rather than filling your bank account with hundreds of thousands of unspent dollars?

This realization led me to reframe the idea of money in my life. Rather than simply letting it pile up, I wanted to convert it into life-enriching experiences.

I began to prioritize spending my money on the things I could only do when I was young over simply accumulating wealth for the sake of it. Not only was I aging much faster than my money was growing in the stock market, but my daughter was also growing up in the blink of an eye. How many years did we really have of mother-daughter trips or raising her in the childhood home I dreamed of?

The utility of money changes over time

Perkins points out in his book that we often overlook how the utility of money changes over our lifetime. We assume the value of a dollar is constant, so money will always have the same impact on our life. But the reality is that there are certain times in your life when money is more useful than others.

For example, the life experiences you can only have at certain times in your life, like traveling or having a family. Whether we care to admit it or not, we will lose both energy and mobility as we age. Our children will also grow up and be less inclined to spend time with us as they pursue their own lives.

Our time on earth is painfully short, and the time we have with our health, finances, family, and friends all aligned is even shorter. Instead of focusing on having the most money possible at the end of our lives, we should focus on experiences that will create what Perkins calls “memory dividends” we can live off of.

Memory dividends are joyous experiences for the duration of our lives and beyond. This might include the enjoyment of researching and planning a dream vacation, the experience of the trip itself, followed by the years of lasting memories that the trip will evoke. In the end, the enjoyment and fulfillment that experiences yield are much higher than the financial cost.

But what about leaving an inheritance?

If you have children, adopting a Die with Zero retirement strategy can seem like you’re doing them a disservice. Is it really fair to leave your kids with no money after you die?

Dying with zero doesn’t mean leaving your kids with no money. In fact, giving your child their inheritance earlier in their life, even if it’s a smaller amount, is likely to set them up better financially than leaving them your entire estate later.

Most people say the period of life when they can most benefit from financial gifts is age 20 to 40, yet the average age of receiving an inheritance is 61. During these two crucial decades, young people are paying off student loans, getting married, starting families, and buying their first homes. Most people in their 60s are merely eyeing retirement. A $10,000 gift at age 25 can be life-changing. A $100,000 gift at age 65 just gets added to the pile of assets already accumulated.

As a parent, it is important to me to set my daughter up financially. But I realized I could likely help her more with large cash gifts in her 30s and 40s rather than leaving her my estate at my death. It’s true that if I left these cash gifts in my investments, they would grow to millions by the time I die. But if my child needs capital to start a business at age 32, what good will making her wait until age 65 do?

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The point isn’t to give my child the most money possible. It’s to give her money when it has the most significant impact on her quality of life. And in most cases, that will be when she is younger. As a bonus, by gifting my child money earlier in life, I’ll get to see her benefit from it, rather than missing out on how my estate helps her after my death.

How do I die with zero?

Dying with zero is as simple as saving less for retirement, retiring earlier, increasing your planned withdrawal from your retirement accounts, or making periodic lump-sum withdrawals for specific experiences at certain points in your life.

The personal finance community typically touts a 4% safe withdrawal rate from your retirement accounts. That means withdrawing only 4% per year in retirement to ensure you never deplete your capital. But if you’re trying to die with zero, you do want to deplete your capital. In this case, a 5% to 6% withdrawal rate may be more appropriate.

Choosing a higher withdrawal rate can also lower your target portfolio balance. Adopting Die With Zero not only increased the cash flow I expected to have in retirement, but it freed up more of my money for spending in the present. I ended up with a richer life now and will in the future.

What if I run out of money when I need expensive long-term care?

One of the main criticisms of Die With Zero is that it’s a risk because it may leave you broke when you most need extra cash at the end of life for long-term care.

While nobody wants to think about how and when they will shuffle off this mortal coil, it’s important to be realistic about how much money you really need. A life expectancy calculator will give you a mathematical prediction of your longevity based on your current age, health, and habits. It’s not a crystal ball, but it might help ground your expectations. Many people believe they will be the exception that lives to 105 years old, but it’s more likely that you won’t see your 90th birthday.

Around 70% of people will need long-term care at the end of their life, but most will need it for less than five years. You should feel confident planning for a maximum of five years of long-term care (with a margin of error if it really makes you nervous).

Actually, running out of money is unlikely, even if you make your best effort to die with zero. For those who retired with more than $500,000, the average retiree still [had 88% of their nest egg 18 years later] (https://www.michaeljamesonmoney.com/2019/07/how-fast-will-your-portfolio-shrink-in.html).

The last word

So should your retirement strategy be to die broke? In short, yes. You should be striving to die with little to no financial assets left. After all, “you can’t take it with you,” as they say.

Dying with zero doesn’t mean dying broke. In fact, it’s about the opposite: dying rich. Your goal is to die rich with memories and life experiences rather than rich with dollars in your bank accounts.

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Bridget Casey is the award-winning entrepreneur behind Money After Graduation, a Canadian financial literacy website aimed at 20 and 30-somethings. She holds a BSc. from the University of Alberta, and an MBA in Finance from the University of Calgary. She has been featured as a millennial financial expert by Yahoo! Finance, TIME Magazine, Business Insider, CBC and BNN. Bridget was recognized as one of Alberta's Top Young Innovators in 2016.


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