One of my favorite financial planning clients represents a story that is part success, part sadness. Betty, we’ll call her, married young and became a widow not long after. She never remarried, worked as a legal secretary, and lived in a neighborhood in Baltimore that could only be described as “rough,” where she was robbed multiple times and assaulted once.
She never took a vacation and worked into her 70’s.
She saved more than $3 million dollars, invested very conservatively, and lived off her meager Social Security retirement benefits without dipping into her investment principal.
She died in her 80’s with no heirs, giving a million dollars to three different, worthy, thankful charitable organizations.
Bill Perkins, hedge fund manager and author of the intriguing book, Die With Zero, would suggest Betty got it wrong. And in this particularly stark example, you can probably see why: Betty deferred the utilization of the very resources she worked so hard to save even though they clearly could’ve made her life much easier, if not better.
Die With Zero
But maybe Betty was just charitable, selfless, working hard, and living frugally to help these charities that were near and dear do amazing work. Perkins actually suggests, “You can’t be generous when you’re dead,” once the human element of the act of giving is eliminated.
Indeed, when Perkins implores us to let the last check bounce, he’s not calling for selfish hedonism, nor is he suggesting we should cut the kids out of an inheritance or avoid charitable giving—he just wants us to do most of that giving during life, allowing both the giver and the recipient to benefit more and sooner.
His aim is to help us live more deliberately. “To fully enjoy life instead of just surviving it,” Perkins writes, “you need to stop driving mindlessly and actively steer your life the way you want it to go.”
He encourages us, therefore, to get more out of life by maximizing the number of our positive experiences, introducing us to consider our ROE—Return On Experience—much as we’d consider our ROI—Return On Investment. To optimize our experiences, he recommends “time bucketing.”
For example, if you want to backpack across Europe, staying in hostels for a summer, that is an experience you’re likely to get the most out of when you’re in your 20’s. You don’t have the commitments of mid-life, you have your health and stamina, and because of your ability to maximize the experience to the fullest, it’s likely worth it to wipe out your bank account for the sake of the ROE and the rich “memory dividends” to be reaped.
But what if you’d like to attend all four tennis Grand Slam tournaments in a single year? This might be the perfect memory-creation pursuit to save for later in life, maybe early empty nesthood, when you have the money that it will take to travel to Australia, England, France, and Flushing Meadows, New York. At this stage of life, you don’t require nearly the level of fitness as the on-court participants, but you’re still healthy enough to navigate the trains, planes, and automobiles required for the trip.
Perkins recommends charting out your planned experiences in five-year increments, and he’s even created an online app to help you do it.
But let’s get back to the controversial title and themes. Is Perkins really suggesting that we “Die With Zero”? Well, as close to zero as possible. While acknowledging that there are those of us who truly love our jobs and find inherent meaning and joy in them, he suggests that the primary purpose of our work is to fund our life experiences; therefore, dying with a ton of money represents “life energy” that has effectively been wasted and experiences that could’ve been had that weren’t.
While I’m tempted to say that Perkins is underestimating the inherent value in work and overestimating the value of all other experiences, the point is still well taken, especially considering the quote we’ve all heard: “No one on their deathbed has ever said, ‘I wish I spent more time at the office.’”
But then Perkins takes special aim at two of the sacred cows of personal finance in saving early and “safe” withdrawal rates in retirement.
While we’ve all seen the charts that show the power of compounding investments and, therefore, the benefits of getting started saving and investing early in life, Perkins harkens back to a story when he was lambasted by a superior at work for scrimping and saving when he had virtually no margin making $18,000 a year in his first job.
Yes, Perkins wants us to “start early,” but it is experiences that he wants us to be chasing down in our younger years—especially the experiences that we’ll almost surely never be able to replicate when we’re married with kids or later when we’re retired and aging. Save more when you make more, he’d suggest.
Then, once we have saved up a nest egg, he wants us to spend it down. So, while the financial industry is arguing what a “safe withdrawal rate” is—an amount you can withdraw from your retirement portfolio that will (hopefully) ensure its sustenance—Perkins wants us to deliberately invade the principal of our investments, aiming to get as close to zero as possible, based on a realistic life expectancy, when we leave this earth.
The primary counter he hears from most of his wealthy friends is, “But what about the kids?” Again, Perkins doesn’t want us to forgo giving an inheritance or donating to causes that are important to us—in fact, he believes that everyone benefits more when we give during life.
As a financial planner, I’m tempted to begin responding to some of Perkins suggestions with technical counters—like the tax benefits to be derived from a step-up in the cost basis of capital assets when someone dies. But on a more personal level, I can’t refute any of his logic.
It’s simply true that we grow and protect our savings for the sake of living and giving. Period.
Personal finance gurus, like Dave Ramsey, will hate Perkins’ message because he kills the sacred cow of saving early. The financial industry will hate Die With Zero because it wants to charge fees and commissions on portfolios into perpetuity rather than see them spent down. But there is a great deal of unavoidable truth to this book that is worthy of your consideration, and perhaps your implementation.