The numbers would be even higher if we assumed that her savings earned interest above inflation, and that she would also have income from Social Security. But even under our very conservative assumptions, she would have been better off either retiring earlier or spending more of her money throughout her life.

  You might be saying that Elizabeth is not typical. You’d be right, for example, to point out that some people net a much higher hourly rate during their careers. So for those higher earners, $30,000 does not represent as many hours (or years) of unnecessary labor. That is true. But here’s the thing: Those people end up dying with much more than $130,000. People who are earning a high hourly rate or a high annual salary are sometimes even more tempted to keep on working and earning. Either way, they are squandering their life energy.

  Your own income might be higher or lower than the ones in any of these examples. It doesn’t matter, because the conclusion is still the same: If you don’t want to squander your life energy, you should aim to spend all your money before you die.

  To me, this logic is incontrovertible. Maybe it’s because of my training as an engineer, or maybe it’s why I chose to study engineering in the first place, but I love efficiency and I hate waste. And I can’t think of any worse form of waste than squandering your life energy. So to me it makes perfect sense to want to die with zero. Not to reach zero before you die, which would leave you high and dry, but to have as little as possible left unused for all the time and energy you spent working to earn that money.

  I’m far from the first person to suggest that planning to die with zero is the rational way to live. Back in the 1950s, an economist named Franco Modigliani, who went on to win the Nobel Prize, posited something that came to be known as the Life-Cycle Hypothesis (LCH)—an idea about how people manage their spending and saving to try to get the most from their money across their life span. He basically said that making the most of your money in the course of your life requires that, as another economist put it, “wealth will decline to zero by the date of death.” In other words, if you know when you will die, you must die with zero—because if you don’t, you are not getting maximum enjoyment (utility) from your money. And what about the very real possibility that you don’t know when you’ll die? Modigliani has a simple answer to that: To be safe but still avoid needlessly leaving money behind, just think of the maximum age to which anyone can live. So a rational person, in Modigliani’s view, will spread their wealth across all the years up to the oldest age to which they might live.

  Some people do try to live in this rational, utility-maximizing way, but many do not. Either they save too much or they save too little. Optimizing across your whole life takes a lot of thought and planning; it’s easier to live for short-term rewards (myopia) and to stay on autopilot (inertia) than to do what will be good for you in the long term. These tendencies can affect both the grasshoppers and the ants among us. Myopia is often the problem of the fun-loving, free-spending grasshopper; inertia can strike the responsible ant as well—particularly later in life, when the dutiful saver must suddenly crack open the nest egg they’ve so diligently built up. Behavioral economists understand that just because something is rational to do—in this case, switching from saving to “dissaving”—that doesn’t mean people will do it easily. Inertia is a very powerful force. As economists Hersh Shefrin and Richard Thaler once put it, “It is hard to teach an old household new rules.”

  Dying with zero strikes me as such a clear and important goal that I want to go right to the next step: helping you figure out how to actually achieve that goal. But I’ve discussed these ideas with enough people to know that I can’t jump straight to the how: The same small set of questions and objections come up again and again, and I know I can’t ignore them. So I will first respond to these common “whatabouts”—and if you’re still with me about the value and feasibility of dying with zero, we’ll move on to some tools that can help you make that happen.

  “But I Love My Job!”

  When I say that leaving money behind amounts to a waste of life energy or to working for free, I sometimes hear from people who say that my analysis doesn’t apply to them because they love their jobs. Some people go so far as to say that they would pay to pursue the work they love—something I doubted until I began dating a professional dancer. (Not the stripper kind!) Dance is an extremely competitive field, with many more people auditioning than there are paying gigs to go around—and, unlike in acting or some other competitive fields, you can never get wealthy dancing, no matter how successful you become.

  Nonetheless, just to stay in the game, you have to constantly take dance lessons to stay proficient and you have to live near one of the centers of the dance world, expensive cities like New York and Los Angeles. So most dancers have to take on other jobs that, in effect, subsidize their passion for dance. So, yes, I get that some people love their work and see it as a fulfilling life experience in its own right. And I think that’s wonderful—we should all be so lucky!

  But, all that being said, I still think they would be better off dying with zero, and here’s why. First, let’s look at their side of the argument, which goes something like this: If your job itself is a fun, fulfilling experience, then any money you earn from doing the work is just a by-product—like the pile of ash left after a wood fire. When you lit the fire, creating ash wasn’t your goal; you enjoyed the fire’s warmth and flickering light, and you just happened to get some ash from the process, too. No harm there, and certainly no harm in making money from pursuing the work you love.

  But here’s the thing: Even people who see work as a form of play would be better off if they spent at least some percentage of their time on experiences that don’t involve working for money. Even if dance is your life, chances are you won’t enjoy doing it 24/7. Also, when you’re in your forties, fifties, or sixties, you might want to spend a lower percentage of your week dancing than when you were in your twenties and thirties.

  Of course, it’s possible that you won’t want to cut back your hours as you get older—you might really want to keep dancing (or practicing law or psychotherapy or whatever profession you enjoy) full-time as long as you’re able, and earning money doing it. Be my guest! Just be sure to spend the money that you earn on whatever you value: Take more first-class trips, throw better parties, go to see your favorite dancer perform live. Because even if you enjoyed every minute of the work that brought you that money, failing to spend that money is still a waste. To use a metaphor from video games, it’s as if you earned an extra life and then decided to throw that extra life away—you just let Mario jump off a bridge instead of taking the little guy further through the Mushroom Kingdom. Would you do that only because you weren’t counting on that extra life? Why take that easy-come, easy-go attitude? It’s the same with any money you receive. “Maximizing your life” doesn’t care where the money came from. Whether you earn it from a job you love or you inherit it from your great-granddad, whether the money is a by-product of following your passion or of being a member of the lucky-sperm club, once it’s given to you it becomes yours. And once it’s yours, it now represents hours of your life, which you can exchange for whatever will help you live the best life you can. If dance is your life, and you happen to also earn money from dancing, go ahead and spend it on dance-related experiences: Splurge on private lessons with the best dance teachers if that’s what you value, or hire someone to clean your place so you have more time to pursue dance. Just don’t let that money sit and go to waste because of where it came from. The source of your money doesn’t change the calculus on maximizing your life.

  “But . . . But . . .”

  When I say the words “die with zero,” most people’s immediate reaction is fear, quickly followed by the thought that dying with money left isn’t a total waste, because that money will go to your heirs, or maybe to charity. The most common expression of this belief is “What about the kids?”

  The kids question comes up so often, and there is so much to say about it, that it deserves its own chapter—and indeed it gets one, along with my thoughts on charitable giving. But for now, let me just touch on my answer to the kids question.

  First of all, yes, you can certainly leave money to the people and causes you care about—but the truth is that those people and causes would be better off getting your wealth sooner rather than later. Why wait until after you die?

  Second, whatever amount you give to others immediately becomes their money, not yours. But when I talk about dying with zero, I am talking about your money. Whatever you’ve given your kids will remain theirs, so there is no need to plan to have money left over for them. You’ll learn much more about how to deliberately plan what to leave, to whom, and when in a later chapter, “What About the Kids?”

  Now let me address the fear. Many people have told me they’re scared—even terrified—that they’ll run out of money before they die. And I get it. Nobody wants to spend their last years in poverty, so it’s understandable that people save for the future. And I’m not saying you shouldn’t save for the future. What I’m saying is that people who save tend to save too much for too late in their lives. They are depriving themselves now just to care for a much, much older future self—a future self that may never live long enough to enjoy that money.

  People Who Save Too Much

  How do I know that people save too much for too late? I’ve seen the statistics. If you look at data on net worth by age, you find that most people keep accumulating wealth for decades, and most don’t start spending it down until very late in life.

  The Federal Reserve Board tracks how much Americans have built up at various stages of their lives. For example, we know from its most recent Survey of Consumer Finances that the median net worth for U.S. households headed by someone aged 45 to 54 is $124,200. That just means that half of households in this age group have saved up at least $124,200, while half have saved up less than that—some of them have saved much more, and others have saved much less. What’s much more interesting than the median for this one age range is the overall trend. By looking at the net-worth numbers for other ages, you can see a clear pattern: The median net worth continues to rise as people get older.

  Median Net Worth by Age of Householder

  Americans’ median net worth keeps rising at least until their mid-seventies.

  It’s easy to guess why—people’s annual incomes tend to rise with age, and people continue to save what they don’t spend, so their nest egg keeps growing. And that’s great to a point, because there is a sweet spot in everyone’s lifetime during which they can most enjoy the fruits of their wealth. The problem is that people continue to save well past that optimal point. So American heads of household between the ages of 65 and 74 have a median net worth of $224,100, up from the $187,300 saved up by householders between 55 and 64. That’s crazy—people in their seventies are still saving for the future! In fact, even in their mid-seventies, people in this upper half of the population don’t start dipping into their savings. The median net worth for American householders aged 75 or older is the highest of all the age groups: $264,800. So even with rising life expectancies, millions of Americans are on track to have their hard-earned money outlive them. Yes, older people often save in anticipation of healthcare costs—but, as you’ll see shortly, people’s overall expenses decline with age, even counting the cost of healthcare.

  Other data points in the same direction. A 2018 study from the Employee Benefit Research Institute used data on older Americans’ wealth (income and assets) and their spending to see how much people’s assets changed during their first 20 years of retirement. (“Or until death,” the study’s authors added, as if to remind readers that not everyone gets to enjoy a full 20 years of retirement.) In other words, were people spending down their assets, or were they largely preserving them? Here are some of their key findings:

  On the whole, people are very slow to spend down (“decumulate”) their assets.

  Across ages, whether looking at retirees in their sixties or those in their nineties, the median ratio of household spending to household income hovers around 1:1. This means that people’s spending continues to closely track their income—so as people’s incomes decline, their spending does, too. This is another way of seeing that retirees aren’t really drawing down all the money they’ve saved up.

  At the high end, retirees who had $500,000 or more right before retirement had spent down a median of only 11.8 percent of that money 20 years later or by the time they died. That’s more than 88 percent left over—which means that a person retiring at 65 with half a million dollars still has more than $440,000 left at age 85!

  At the lower end, retirees with less than $200,000 saved up for retirement spent a higher percentage (as you might expect, since they had less to spend overall)—but even this group’s median members had spent down only one-quarter of their assets 18 years after retirement.

  One-third of all retirees actually increased their assets after retirement! Instead of slowly or quickly decumulating, they continued to accumulate wealth.

  Retirees on a pension—meaning that they had a guaranteed source of ongoing income after retirement—spent down much less of their assets (only 4 percent) during the first 18 years after retirement than did non-pensioners (who had spent down 34 percent).

  So, clearly, people who, back in their working years, would have said they were saving up for retirement are not actually spending those retirement savings once they reach retirement. They are definitely not on track to die with zero. Some of them appear to not even aim to die with zero; this is especially clear when you look at people with pensions. Pensioners could dip more deeply into their savings than anyone, since their guaranteed income for life assures them they will never starve. But, interestingly, pensioners spend down the lowest percentage of their wealth, probably because, as the data shows, that they had more wealth to begin with.

  So the question remains: Why didn’t retirees spend more of their money when they were young enough to enjoy it more fully? What were they waiting for?!

  There are a couple of answers to that question. The first is that people did have good intentions to spend the money, but once they reached a certain age, they found that their wants and needs changed, or perhaps diminished. Experts in retirement planning even have some lingo for this consumption pattern: go-go years, slow-go years, and no-go years. The idea is that when you’re first retired, you’re raring to have all those experiences you’ve been putting off until retirement, and you still (for the most part) have the health and energy to pursue those experiences. Those are your go-go years. Later on, typically in your seventies, you begin to slow down as you cross items off your bucket list and your health declines. And later still, in your eighties or beyond, you don’t have a whole lot of “go” left at all, no matter how much money you still have. As one retirement-planning adviser put it, “My dad is 86 and he doesn’t want to go anywhere, just stay close to home.”

  I saw something like this firsthand with my grandma when she was in her late seventies and I was in my late twenties. I was just starting to make it as a trader and was excited to share my new wealth with the people I love, and my grandma was one of those people. So I gave her a $10,000 check. It feels like a dumb gift now, and if I knew then what I know now, I would have given her an actual memorable experience instead, such as a trip to visit relatives in another state. But back then, I was of the mind that people know best what to give themselves. I would have wanted someone to just give me the money, so that’s exactly what I did for my grandma.

  My grandma was living with my mom in those days, so once in a while I’d ask my mom what Grandma had spent the money on. And it turned out that Grandma wasn’t spending it at all. It’s not that she was poor and needed it to pay the bills. She just didn’t have a lot of “go” left. When Christmas rolled around that year, Grandma presented me with a gift: a sweater. To this day, as far as I know, that sweater (which I would guess cost about $50) was the only thing that ever came of my $10,000 gift. There was no incremental joy she got from that transfer of $10,000, aside from whatever joy she got from getting me that sweater, or from knowing that her grandson wanted to give her money.

  But for whatever reason, she just could not spend the money. She was just too thrifty for her own good—someone who actually kept every couch, love seat, and easy chair covered in plastic to protect the upholstery from wear and tear. Unfortunately, of course, the plastic also made the furniture uncomfortable and unattractive. One day I came into my grandmother’s house for somebody’s funeral and sat on a colorful, comfy couch—she had taken the plastic off for this special occasion. But the next time I visited, all the plastic was back on, and it stayed on for the rest of my grandmother’s life. This never made sense to me: Why spend all this money on furniture that you don’t get to enjoy? The plastic over the couches is a microcosmic example of much of what I’m talking about in this book: the senselessness of indefinitely delayed gratification.

  You might think that as people get older, they spend money more freely out of the sheer desire to make the most of it before it’s truly too late. But the opposite tends to happen. In general, spending among American households declines as people age. For example, the Consumer Expenditure Survey, conducted by the Bureau of Labor Statistics, found that in 2017, average annual spending for households headed by 55-to-64-year-olds was $65,000; average spending fell to $55,000 for those between 65 and 74; and spending fell again to $42,000 for those 75 and older. This overall decline occurred despite a rise in healthcare expenses, because most other expenses, such as clothing and entertainment, were much lower. The decline in spending over time was even more acute for retirees with more than $1 million in assets, according to separate research conducted by J.P. Morgan Asset Management, which analyzed data from more than half a million of its customers.