So am I telling you to go plunk down all your savings in an annuity? No, of course not. But what I am saying is that there exist solutions to the problem of how to die with zero without running out of money, and you’d be doing yourself a disservice if you didn’t at least look into them.

  Again, remember that the goal is to eliminate as much waste as possible. How close you get to that goal depends on your own risk tolerance. If you have a very low tolerance for risk—meaning you will not accept even a tiny chance of outliving your money—you will either buy an annuity or you will self-insure by leaving a huge cushion. The odds that you will live to be 123 are currently very low. (The oldest person on record died when she was 122 years and 164 days.) But if you are extremely risk averse, then you will leave a cushion big enough to last you through your 123rd year.

  On the flip side, if you are comfortable living on the edge, you don’t need this book, because you are probably already on track to die with zero. Well, not really—you still need this book, because when you live perilously close to the edge, you risk outliving your money. In general, though, the higher your tolerance for longevity risk, the less of a cushion you will need. So the more risk you are willing to take, the less of your life energy you’re likely to waste working for money you won’t ever get to spend.

  For example, suppose your life expectancy is 85, but you want to allow for an error of 5 to 6 percent. If so, you might decide to save for a few extra years—in this case, enough to last you until you’re 90. But if you don’t want to have wasted five years’ worth of savings in case you do die as expected at 85, you can eliminate that waste (and live a little better between now and then) by saving a little less—as long as you’re okay with the risk.

  I am not telling you which way is right: Risk tolerance is a singular and personal preference. But I do want you to know that there is a big difference between thinking about your risk tolerance and acting out of blind fear. So it’s fine to look at your life expectancy, to consider your risk tolerance, and to do the math to figure out how many years you need to save for. But that’s not the same as being so frightened of outliving your money—or of the thought of death—that you avoid even looking at the numbers. If you live your life with fear and avoidance, my bet is you will either fritter your money away or play it so safe that you will leave many, many years of your hard-earned money behind—so you’ll be working many years as a slave to your own fears.

  What Problem Are You Solving?

  A caution: Annuities can be very complicated—entire books have been written about them. For starters, there are several different types. Also, depending on a whole host of factors—such as your age and health, your total savings, and your tolerance for risk—you might be better off bypassing annuities completely or using a mix of retirement investments, of which annuities are just one.

  Financial advisers can help you sort these things out—I don’t blame you for not wanting to read a book about annuities! But you can’t be totally ignorant. And you have to be clear about what you want the adviser to do. First you need to understand that some financial advisers don’t particularly want to bring up annuities: If your adviser gets paid a percentage of what financial professionals call your “assets under management,” their incentive is to accumulate assets under management. The last thing they want is for you to take all your money out of the portfolio they are managing for you. After all, for them, annuities are the competition.

  But let’s assume you are working with a fee-only adviser, someone you pay a flat fee for giving you financial advice. This kind of adviser doesn’t have an incentive to avoid annuities and also doesn’t get paid commissions for selling annuities. Great—no conflicts of interest in either direction. Your adviser can do the mental gymnastics to come up with a plan for you. But you first have to tell them clearly what your goal is, what problem you are trying to solve. If you’ve got a roofing problem, don’t call the plumber. The best plumber in the world won’t fix your leaky roof. Likewise, your financial adviser might be a great stock picker, but that’s helpful only if the problem they are solving is for you to be as rich as possible—whereas we’re solving for your total life enjoyment.

  Let me say that again: We are solving for your total life enjoyment.

  That is, the premise of this book is that you should be focusing on maximizing your life enjoyment rather than on maximizing your wealth. Those are two very different goals. Money is just a means to an end: Having money helps you to achieve the more important goal of enjoying your life. But trying to maximize money actually gets in the way of achieving the more important goal.

  So always keep this end goal in mind. Make “maximize total life enjoyment” your mantra, using it to guide every decision—including what to focus on with your financial adviser. If you tell your fee-only financial adviser that you are trying to get as much enjoyment out of your savings as possible without outliving your savings, they can help you create a plan for making that happen.

  The part of that plan that I’ve been focusing on in this chapter is how to avoid running out of money—how not to outspend your savings. But of course that’s just one half of the question of how to die with zero; the other half is how not to waste your life energy by underspending. So what’s the plan for spending down your money so you don’t die with leftover assets and a pile of regrets? In the language of financial advisers, how should you plan to “decumulate” the money you’ve been accumulating over the years? My full answer to that question comes in chapter 8, “Know Your Peak,” but let me just give you a brief preview here. It starts with tracking your health so you know when to start spending more than you are earning (when to crack open your nest egg). It also means knowing your projected death date and your annual cost of just staying alive, because those two numbers together tell you the bare minimum amount you will need between now and the end of your life.

  All your savings beyond that amount is money you must aggressively spend down on experiences that you enjoy. I say “aggressively” because your declining health and diminishing interests mean that your list of activities will narrow as you age, which means that your spending rate won’t remain constant: If you want to die with zero and make the most of whatever health you have at every point in your lifetime, you will need to spend more in your fifties than in your sixties, and more in your sixties than in your seventies, let alone your eighties and nineties! Chapter 8 further explains these ideas and gives you tools for implementing them, by yourself or with the help of a financial adviser.

  Final Countdown

  Like all living creatures, humans have evolved to survive. Of course, we want to do more than just survive; for example, I’m sure if I asked you if you want to survive or really thrive, you’d choose thriving. But our biology is such that efforts to live the best life we can often don’t come as naturally or as strongly as the basic instinct to survive. Avoiding death is our number one priority, and that single goal dwarfs everything else. My friend Cooper Richey put it well when he said, “The human brain is wired to be irrational about death.” People avoid the subject of death, they behave as if it’s never coming, and too many don’t plan for it. It’s just some sort of mystery date in one’s future when we expire.

  This kind of blanket denial explains why so many people are willing to spend tens or even hundreds of thousands of dollars to prolong life for just a few more weeks. Think about it: That’s money that they spent years or decades working hard for. They gave up years of their life while healthy and vibrant to buy a few extra weeks of life when they are sick and immobile. If that’s not irrational, I don’t know what is!

  Granted, money has absolutely no value to you when you’re dead—that’s why I say you should die with zero. Because of that, it’s not irrational once you’re near the end to spend all of your remaining money to prolong life even a little bit. At that point, it’s use-it-or-lose-it. As a trio of high-powered economists have written, “A substantial amount of spending on futile care is rational when there is no value of leaving wealth behind.”

  But that statement is true only if you failed to plan and are therefore now finding yourself trying to make the best of a bad situation. And why would you get into this bad situation? Not on purpose, that’s for sure. You would never get to that point if you thought rationally ahead of time and made plans when your health was good—because a plan to spend a huge portion of your wealth during the last few weeks of life makes no sense. It’s totally irrational.

  But here’s the problem: People are irrational about death even when they are not close to death. That’s why they have outsize fears of running out of money before they die—big enough to compel many people to oversave for the distant future and, as a result, fail to enjoy their present as much as they could.

  But death and deterioration are real for everyone, so the date of your death in the future should affect what your behavior is now. Think of it one step at a time, starting with the most extreme case: If you knew that you were going to die tomorrow, your behavior and activities today would obviously change, maybe even taking a 180-degree turn. Now take it down just a notch: If you were two days away from death, your behavior and activities would change a little differently, but they’d still be dramatically different than if you had 50 or 75 more years to live. Now think about how your behavior would change if you knew you had three days until your death. What if you had 365 days? Now imagine iterating through this loop until you get to 14,000 days or 25,000 days or whatever actual number of days you probably have. Note how this line of thinking extends to your actual death date and changes your plans.

  Also notice that I’m not saying you should live today as if it’s your last day. We always have to balance living in the present with planning for the future, and the balance tilts gradually as you shift your death date out: The closer your death date is, the more urgency you need to have, and the further away it is, the more you can and should plan for the future. But if we fail to look at our death date at all, we act as if we will live forever—and then there’s no way are we going to get the balance anywhere close to right.

  At the same time, thinking about death can be distressing, so we tend to avoid thinking about it, and we behave as if it is never going to happen. We keep putting off wonderful experiences, as if in our final month we can easily squeeze in all those experiences that we had put off all our lives. Needless to say, that’s not possible—so it’s totally irrational.

  I know it may sound morbid and it might make you uncomfortable, but I’ve actually started using an app called Final Countdown that counts down the days (and years, months, weeks, and so on) before my estimated death date, and I have been urging all my friends to do the same. Yes, I can see how this app could be unnerving, but the reminder of death gives a much-needed urgency to one’s life.

  By seeing how many weeks I’ve got left, for example, I’m reminded how many (or how few) weekends I’ve got. Seeing the number of years reminds me that I’ve got only so many Christmases to enjoy, or so many summers or autumns. And those in-your-face reminders have changed my thoughts and the things I do—like the people I reach out to, and how often I tell people I love them. Final Countdown makes me a better match against the autopilot instincts that would have me act as if death didn’t exist. Death, of course, does exist. In fact, as I explain in a later chapter, we all die a thousand deaths before our one final death. And Final Countdown is one tool that can help us live a life more mindful of that reality.

  What I’m saying is that dying with zero is not only about money: It’s also about time. Start thinking more about how you use your limited time, your life energy, and you’ll be well on your way to living the fullest life you possibly can.

  Recommendation

  If you’re nervous about someday running out of money before you die, then spend some time looking to annuities as a possible solution.

  5

  What About the Kids?

  Rule No. 5:

  Give money to your children or to charity when it has the most impact.

  Every single time I talk about dying with zero, I get some version of the same question: What about the kids? This question always comes up, without fail, no matter who I talk to.

  A couple of variations of this question even have a moralizing, self-sacrificial tone. Some people have actually said to me, “Well, that’s what somebody would say who doesn’t have kids.” And even when they know I have children—two daughters—some people will still imply that dying with zero is the ultimate act of selfishness. No matter how they put it, what most people who ask about the kids mean is this: Planning to die with zero might be good for someone thinking only about themselves, but shouldn’t you care about the well-being of your children, too? Because if you cared about someone other than yourself, you wouldn’t die with zero. You would make sure to leave money for the kids. Their implication: If dying with zero is a philosophy only for selfish bastards, then it can’t possibly be the right philosophy for decent, caring people like themselves.

  That’s the holier-than-thou attitude I hear from so many people, and I have no patience for it, because it’s so hypocritical. Too often, people who make comments about the kids to argue against the Die with Zero way aren’t actually putting their children first but instead are treating their kids as an afterthought. Why do I say that? Well, let me give you an example from a typical conversation with my closest friends.

  When one of these good friends poses this inevitable question—“What about the kids?”—I first explain that the money you’re leaving to your kids is not your money. So when I say you should die with zero, I’m not saying: Die with zero and spend all your kids’ money along the way. I’m saying: Spend all your money.

  That is, give your children whatever you have allocated for them before you die. Why wait until you’re gone?

  Remember, these are conversations I’m having with my closest friends, and we always call each other out on our BS. So I tell them straight out, “You’re full of BS! Where’s your trust fund for your kids? How much is it set to? When is it going to distribute? Have you even thought about these things, or are you just parroting what you’ve heard?”

  Do you see what I’m saying? If you’re really putting your kids first, as you claim you are, don’t wait until you’re dead to show your generosity. (I like to say that dead people can’t give money away—they can’t do anything.) Putting your kids first means you give to them much earlier, and you make a deliberate plan to make sure that what you have for your children reaches them when it will make the most impact. A real plan for dying with zero includes the kids, if you have kids. That way, you’ve already separated out their money (which becomes untouchable by you) from your money, which is what you must spend down to zero. That’s my short answer to the question about the kids. The rest of this chapter provides the full version.

  Dying to Give the Money Away: The Problem with Inheritances

  When people bring up the kids, they’re saying that anyone planning to die with zero won’t leave a bequest—the kids won’t get an inheritance, and what a terrible outcome for the children that is. The crazy thing is that these are often the same people who say you should save as much as you can for your retirement because you don’t know when you’ll die. Well, if you don’t know when you’ll die, and you care so much about your kids, why do you want to wait until that random date for your offspring to get what you want them to have? In fact, what makes you so sure that all of your kids will even be alive by the time you die?

  This is the problem with inheritances: You’re leaving too much to chance. Remember, life can be extremely fickle. Regardless of the amount you’re passing on, it takes a great deal of luck for it to arrive exactly when each of your recipients needs the money most. Much more likely, the money will arrive too late for it to have maximum impact on the recipient’s quality of life.

  What would you guess is the most common age for people to get an inheritance? Well, people at the Federal Reserve Board track such things, and here’s what they find: For any income group you look at, the age of “inheritance receipt” peaks at around 60. In other words, if you were betting on how old someone will be when they inherit money—assuming you know nothing else except that they stand to inherit—60 is your best bet. (That’s a natural result of the fact that the most common life span is 80 and the most common age gap between parents and children is 20, the report points out.)

  Of course, there’s a spread around that peak of age 60—many people who get an inheritance get it earlier than that, and many get it later. Overall, the data falls into more or less a normal (bell-shaped) distribution. So for every 100 people who inherit at around age 40 (which is 20 years before the age of peak inheritances), there are 100 people who inherit around age 80! It’s true that some people may be getting inheritances from people other than their parents—the older the recipients are, the more likely that is to be the case. But it doesn’t matter—whether people are getting inheritances from their parents or from someone else, the data clearly shows many people getting inheritances late in life, and that is suboptimal.

  The upshot of all this is that if you wait until you die to have your children inherit your money, you’re leaving the outcome to chance. I call it the three Rs—giving random amounts of money at a random time to random people (because who knows which of your heirs will still be alive by the time you die?). How can randomness be caring? It’s the opposite of caring: Being okay with leaving all these outcomes to chance means you evidently don’t care if you spend years of your life working for future random people, and it means you may not care how much the people closest to you will actually get, or when. In fact, by leaving all these things to chance, you’re even increasing the odds that whatever you’ve got to give will arrive too late to do much good in your kids’ lives.