Should we spend it all?

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For the past two months, I’ve been writing in this column about the financial pit that we are digging for ourselves as a country. At least, that’s one way of looking at the trillions of dollars of expanding deficits embedded in our federal and state government budgets.

Our demographic trajectory (rapidly aging population, expanding longevity, dwindling proportion of current workers to retired workers, etc.) suggests this imbalance between revenues and costs will only get worse by the day.

I have tried to make the case for a realistic assessment of the problem, and suggested a wide variety of steps we can take, both as individuals and as government entities, to ameliorate the consequences that will otherwise overtake us in just a few years.

While I have received a number of thoughtful letters from readers (some of which appear below), I also was recently sent a proposed article by a Dr. Stanley Riggs of Florida. He is plugging a book he recently wrote, entitledBuild Wealth & Spend It All, Live the Life You Earned.

He did not send, and I have not read, the book. But I read his article, and the argument he made intrigued me at first.

His premise, based on his family’s experience, is that hard-working savers like his parents scrimped and sacrificed their whole lives, dutifully saving for retirement. But in his mother’s last years, the entire sum was “completely drained by the nursing home in less than 18 months.”

I was with him that far. I knew many older adults (including my own mother) who spent their last dollars in a matter of months, or a couple of years at most, paying for nursing home care.

But Riggs’ epiphany was not that his parents should have tried to save more if they could, but rather, that they should have spent all their savings much earlier in their lives (or given it away to family or charities), when they could have enjoyed its benefits more. He suggests his mother would have been better off had she entered the nursing home eligible for Medicaid and died poor.

He seems to be saying that since her last years were destined to be unpleasant anyway, and since having lots of money in a nursing home doesn’t get you service any better than that provided fellow residents who have no assets, what was the point to following all that “save for retirement” advice?

Furthermore, he points out that, in general, the current advice of estate planning professionals is to allocate your investments among cash, stocks and bonds, and to spend about 4 percent of the total each year, adjusted for inflation.

In most cases (assuming continued earnings, and no significant losses, in your investments), that should enable you to gradually deplete your savings over 25 or 30 years. The goal is to preserve your financial independence for as long as possible.

But he finds this, too, to be foolish, in that “traditional estate planning seeks to preserve your net worth up to, and usually beyond, your life, with the remainder being distributed to your heirs, attorneys and the taxman.”

Instead, Riggs advocates the “I’m spending it all” approach, as his book title suggests. Since no one knows the date of his or her (natural) death, this requires a “tolerance for being almost broke” at the end, as he says.

But then he asks, “Do I want to be the patient in the nursing home with the most money, or the one with the greatest memories? Would I rather be rich and have broken dreams, or be broke but have rich memories?”

From a purely selfish perspective, I suppose his approach makes sense. Like the bumper sticker, “I’m spending my children’s inheritance,” it glorifies the Greedy Geezer stereotype.

I tell you about this approach not to praise it, but to bury it, if possible. For I do consider it to be purely selfish, and despicably so.

I am not saying we need to continuously deprive ourselves of pleasures throughout life. Far from it. When we have reasonable incomes, after setting aside reasonable portions for savings, we are entitled to enjoy the fruits of our labors.

And if we are confident there will be money left over after we are gone, I think it makes sense to give at least some of it as gifts to our children and grandchildren while we are still alive to watch them enjoy it.

Both of those behaviors are not only normative, but they teach important lessons to our families and to others: that there are rewards for a life well-lived and that planning ahead has benefits.

But to encourage people of means to spend themselves into poverty, with the expectation that their fellow taxpayers will foot the bill for their last years, is not only irresponsible, it holds the potential to impoverish our entire country.

Currently, mandated spending on Social Security, Medicare, Medicaid, welfare programs and interest on the federal debt consumes two-thirds of the federal budget. Medicaid, an entitlement that is typically half-funded by state governments, is a rapidly growing share of every state’s budget.

Considering the more than 75 million mostly affluent baby boomers now heading into retirement, what it would cost state and federal governments (i.e., us taxpayers) to cover all of that generation’s long-term care costs would no doubt crowd out most discretionary funding, leaving little or nothing for healthcare, education, social services, you name it.

That might bring pleasure to one generation of fortunate, well-off Americans, but could well put an end to the American dream for everyone else for decades.

I’d like to know what you think. Please share your opinion with us via letter, fax, email or website comment.