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When it comes to money, they say you can’t take it with you. But some people don’t want to leave much of it behind, either.
For those folks, the goal is to spend while they’re alive rather than die with a sizable nest egg. It’s a philosophy known as “die with zero,” a phrase popularized by hedge fund manager and philanthropist Bill Perkins in his book (you guessed it) “Die With Zero.”
“‘Die with zero’ is about giving yourself permission to have life experiences,” says James Malatos, a certified financial planner (CFP) with Harbor View Private Wealth in Atlanta. It can be scary to watch your savings shrink after decades of building them up, he says — especially when financial apps let you monitor your net worth in real time.
“You can see how much you’re worth on your smartphone,” Malatos says. “To me, it’s created this attitude of ‘I only want to see my accounts go up.’ But what is the money really for?”
Here’s what to know about dying with zero.
Don’t take it literally
The die with zero approach is more philosophy than plan. We don’t generally know when we’re going to die, so spending our last dime at the last moment isn’t practical.
“You can’t literally die with zero unless you’re willing to live off Social Security, a pension if you’re fortunate enough to have one, or perhaps an annuity,” Malatos says.
Instead, the idea is that people use their savings to do things they enjoy and enrich the lives of others while they’re still living, rather than dying with millions in their IRA.
“It’s OK to spend money,” says Michael Espinosa, a CFP with TrueNorth Wealth in Salt Lake City. “You don’t win any prizes for having $5 million in the bank on the day that you hit your deathbed.”
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It’s not for everyone
Although people in different circumstances can try this strategy, it’s best suited for those with substantial retirement savings or dependable retirement income, or both. If you’re not sure your retirement funds will actually last until you die, it’s probably not the approach for you.
“A lot of young folks use die with zero as an excuse to say, ‘I’m going to live in the moment, and as such, I’m not saving anything for retirement,’” Espinosa says.
Meanwhile, he says, they’re putting big vacations on credit cards and acting like they’re following a higher calling by living life to the fullest, when in reality they’re masking “financial irresponsibility.”
Before you can safely plan to spend down your resources, you should have a healthy emergency fund, no high-interest debt, adequate insurance coverage and a solid retirement-income strategy.
“Get your financial foundation in place first, and then you can worry about not dying with too much money at the end of your life,” Espinosa says.
Spend according to your stage of life
Dying with zero involves some joy-based budgeting, which means intentionally spending money on the things you value. But it’s also about spending when it makes sense. That money you’re saving to climb Mount Kilimanjaro is only useful if you can still physically make the trip, so don’t wait.
“What we’re trying to avoid is missing out on those experiences that you can do when you’re younger,” Espinosa says.
Similarly, giving to charity now lets you see the impact of your donation, and your children may benefit from an inheritance received earlier in life.
“We see how hard it is for our kids, so let’s help them while we can,” says Catherine Valega, a CFP and founder of Green Bee Advisory in Burlington, Massachusetts. “I don’t need to give them $3 million when I die — they’re going to be in their 60s. They need the help now in their 30s for the down payment on the home.”
Make sure your plan has wiggle room
Even the best-laid plans change. You or your spouse could get sick, or one of you could unexpectedly lose your job before you planned to retire. Your kids could need more financial help than you think. Your plan shouldn’t be so strict that it can’t stand up to some bumps.
“It’s really looking at and revising your numbers at least annually, and more often if need be,” Valega says, mentioning that one of her clients was diagnosed with early-onset Alzheimer’s disease. “That changes their life,” she says. “You just don’t know.”
If you’re looking to spend down your savings without overshooting, consider working with a financial planner.
“They can help model scenarios and say, based on different market returns, ‘This is the likelihood you would or would not outlive your money,’” Espinosa says. The goal is to “establish as safe a withdrawal rate as possible.”
If you’ve worked out a flexible plan that accounts for a long life, the next challenge is putting it into action. Making the shift from saving to spending can be hard, but also rewarding.
“It’s like, ‘No, I know you’re 75, but let’s do the kitchen renovation,’” Valega says. “Or let’s rent the family a house in Mexico for a week and bring in the kids and the grandkids. It is OK.”
