Die With Zero
Getting All You Can from Your Money and Your Life
By Bill Perkins
As children, many of us learned the classic tale of The Ant and the Grasshopper. In Aesop‘s timeless fable, the clever ant toils away all summer long to accumulate food and supplies for the winter, while the carefree grasshopper simply lazes around. Then, when winter comes, the industrious ant is able to survive quite handily. But the happy-go-lucky grasshopper finds himself in dire straits. The moral of the story? There's a time for work, and a time for play.
“Aesop has created a great moral for children to learn,” writes Bill Perkins in the opening pages of his thought-provoking new book, Die With Zero: Getting All You Can From Your Money And Your Life. “But,” he asks, “when does the hard-working ant ever get to play?”
That, in a nutshell, is the entire essence of Die With Zero. We all know what happens to the grasshopper: the poor son-of-a-bitch starves to death. But what happens to the ant? Sure, he’s safe and well-fed. But does he get to have any fun? Does he ever get to truly live?
Former New York City hedge fund manager turned bestselling author Bill Perkins is one of the most successful energy traders in history. He's also a Hollywood film producer, occasional high-stakes poker player, and world traveler. Perkins isn’t a certified financial planner, but from his varied experiences, he knows a thing or two about money. The core idea behind Die With Zero is one he’s been incubating for years now.
For a multi-millionaire, Perkins is remarkably devoid of ego. “There’s nothing special about me,” he writes. “I’m just a guy who wants to live life to the fullest. And I want that for you too.”
So, who exactly did Perkins have in mind as he wrote Die With Zero? It wasn’t necessarily written for jet-setting Hollywood film producers like him, because that’s a bit of a narrow audience. But he did write it for people who have some means. “If you are unfortunately struggling to make ends meet every month, you may not get much out of my book,” admits Perkins. His book is intended for individuals and families who are able to save a sufficient amount of money to retire comfortably on, and who are living with good physical health.
Perkins’ overarching goal is to motivate his readers to think about the arc of their lives in a more purposeful, deliberate manner – instead of simply doing things as they have always done them, as if operating on autopilot. “Yes, I want you to plan for your future,” he writes. “But never in such a way that you forget to enjoy the present. We all get one ride on this roller coaster of life. Let's start thinking about how to make it the most satisfying ride it can be.”
It all starts with investing in experiences, as opposed to investing in things.
Invest In Experiences
When Bill Perkins was in his early twenties, his roommate at the time (a guy named Jason) decided to take three months off from work to go on a backpacking trip to Europe. To make that vision a reality, Jason had to put his income-earning job on hold. And he also had to borrow about ten grand at a high interest rate. This was a lot of money for Jason at the time. Jason urged Perkins to come too, arguing that it would be a “once in a lifetime” opportunity.
Perkins thought his roommate was nuts. The author warned his friend that stepping away from his job at such a young age could negatively impact his career progression at the firm, and possibly even damage his lifetime earning potential. He also warned that he’d regret taking on debt, and that he’d have nothing to show for it in the end.
But Jason was determined to go, no matter what. And when he came back a few months later filled with amazing photos and stories, it caused Perkins to do some honest introspection. First of all, the author came to accept that Jason hadn’t actually done any damage to his career by taking three months off. “There was still no discernible difference between Jason’s income, or his future prospects, and my own,” he admitted sheepishly. “But the pictures and scores of experiences he’d accumulated showed that Jason was much richer for having gone.” (In Germany, Jason saw the horrors of Dachau. In Russia, he learned about life under Communist rule. In Greece, he had sex on a beach for the first time. And so on.)
All in all, Perkins felt rather envious of his roommate, and he was immediately regretful that he hadn’t gone too. He told himself that in a few years, he’d save up, and do the same trip as Jason had done. And that’s what Perkins tried to do. But it wasn’t nearly the same trip.
“When I finally got over to Europe, at age 31, it was a bit too late,” writes Perkins. “I was already too old and ‘too fancy’ to stay in youth hostels and hang out with a bunch of 24-year-olds. Plus, by the time I was 31, I had many more responsibilities than I'd had in my early twenties, which made it that much harder to take months off for travel. Sure, I still had a nice time touring around. But unfortunately, I have to admit that I should have gone with Jason.”
As he was sitting down to write Die With Zero, Perkins caught up with his former roommate and asked if, in hindsight, he still thought that skipping three months of work and borrowing money at high interest was a smart move. “Whatever I paid, I still feel it was a bargain because of the life experiences I gained,” Jason concluded. “You can never take those away.”
What Jason gained from that trip, in other words, is priceless. The lesson is to start investing in meaningful life experiences early on, even if you can’t entirely afford them. Because those experiences won’t necessarily still be available as you age, as the author’s example shows.
When we spend time or money on experiences instead of physical things, explains Perkins, they are not only enjoyable in the moment; they pay an ongoing dividend. “Experiences live on,” he writes, “because we have our memory. We don't start every day with a blank, wiped brain, like characters in a sci-fi movie. We wake up every morning pre-loaded with a bunch of memories that we can access at any time. They help us get around and navigate the world … They are an investment in our future selves, paying dividends that help us live richer lives.”
In fact, memory dividends are so valuable in some cases that countless tech companies both large and small are busily investing billions of dollars to find new and clever ways to monetize them. Anyone who's used Facebook has seen their “On this day 3 years ago” message, with accompanying photos from that day. Through features like these, tech firms can tap into our memory dividends, sparking warm and fuzzy feelings, and turning us into loyal customers.
Once we start thinking about the concept of a memory dividend as Perkins describes it, something else becomes really clear: It pays to invest early. The earlier we invest in creating great memories, the more time we have to reap those memory dividends. Conversely, the closer we are to death when we start having those experiences, the fewer dividends we’ll get.
But What If I Run Out Of Money?!?
By now you’re probably thinking, “Sure, I get it. I’d love to pack my bags and jet off somewhere tomorrow to create some great memories. But I need to save for my retirement. If I fritter away all of my surplus income now, then I risk running out of money when I’m old.”
Indeed, the most common objection Bill Perkins hears when he speaks about the whole “die with zero concept” is this notion of running out of money prematurely. “So many people have told me they are literally terrified of running out of money before they die,” writes Perkins. “I get that; nobody wants to spend their so-called golden years living in poverty. So, yeah, it’s important to save. What I'm saying is that many people save TOO MUCH for their retirement years. And in so doing they are depriving their current selves to care for their future selves.”
The statistics bear out what Perkins is saying. If we look at data on net worth by age, we find that many people keep accumulating wealth for longer than they should, and then don't start spending it down until very late in life. And then they run out of runway to spend it all.
It's easy to understand why this tends to happen for so many of us. Most people's annual incomes tend to rise with age, and people will continue to save a set target percentage every year, so their nest egg just keeps growing. And that's great up to a point, says the author. The problem is that many people continue to save well past that point, instead of spending.
“Millions of 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 60 and 64,” explains Perkins. “That's crazy when you think about it! Why are people in their 60s and 70s still saving for the future!? We humans don’t live forever. Even with rising life expectancies, we see that millions of Americans are on track to have their hard-earned money outlive them.”
Statistics show that, on the whole, retired people are 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 most people's spending continues to closely track their income throughout retirement. According to Perkins, at the high end, retirees who had $500,000 or more invested in prudent savings vehicles right before retirement had spent down a median of only 50% percent of that principal by the time they died. And at the lower end, retirees with $250,000 saved up for retirement spent a higher percentage (as you might expect, since they had less to spend overall), but even this group on average still tended to die with around 30% of their savings left unspent. The point here is that, for Americans who have at least $250,000 going into retirement at a normal age, the prospect of running out of money is very slim.
These statistics might be surprising for some. One 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 too late.
But according to the author, the opposite tends to happen. In general, spending among American households declines sharply 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 60-to-64-year-olds was $65,000; falling to just $60,000 for those between 65 and 74; and then falling again to a rock-bottom $42,000 for those 75 and older. This decline occurred despite an age-related rise in healthcare expenses (because most other expenses, such as eating out, had become so much lower). By age 75, most people simply lack the desire, or the good health, or both, to venture far from home.
Outliving one’s money is an understandable fear. But it’s probably an irrational one.
What About The Kids?!?
The fear of outliving one’s money is typically the first objection Bill Perkins hears when he talks about his die with zero philosophy. The second objection is about inheritances.
“Every 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,” writes Perkins. “Many variations of this question even have a moralizing tone,” he continues. “Some people have actually said to me: ‘Well, that's what somebody would think who doesn’t have any kids.’ And even when I tell them I have children, some people will still call me selfish.”
The author knows these can be emotional topics for people. After all, most people with children (or nieces and nephews, for example) want to pass along a legacy of some sort. Perkins has zero quarrel with that notion. But for him, it’s all a question of timing. The author is all about giving money to children (or to nephews, or to charity) when it will have the most impact on the recipient. And that means giving to the next generation when they are younger, not older (or donating funds to that special charity you believe in sooner rather than later).
Again, Perkins relies on data to make his point. He leverages statistics that show that, with traditional inheritances, on average Americans are 61 years old when they inherit money from their parents. In his view, that money is arriving far too late for it to have a meaningful impact on the children’s lives. Wouldn’t the kids be better off getting an inheritance earlier?
To drive home his point, Perkins tells the story of a woman he knew named Virginia who was fairly old by the time she received an inheritance. After her husband abandoned her at age 28, she was left to raise three children on her own. It was a real financial struggle in those early years, but they made it through. Then, when Virginia was in her mid-70s, she inherited $170,000 from her mother. She told Perkins that she couldn’t help but wonder what even a fraction of that money might have been able to do for her and her kids if it’d come earlier on.
For his part, Perkins reveals that he’s planning to front-end load his children’s inheritance by helping his two daughters with their college expenses. He’s also set up a trust for each of them that they will have full access to at age 29. Perkins recognizes that gifting large sums of money to people who are still a bit young and immature can backfire. So, he wouldn’t necessarily support accelerating an inheritance at a much earlier age than that. But by age 29, Perkins reasons that most people will make sensible decisions, such as buying a house or starting a family. What an advantage it would be for someone in that position to have an extra hundred thousand dollars, for example. It could set them up for the rest of their lives.
Know Your Peak (Hint: It's a Date, Not a Number)
Most of us have been trained to think that planning for retirement is all about hitting a certain dollar threshold of savings, after which we can then retire and start living off those funds. And, of course, there's no shortage of advice out there on what that magic number should be. (The most simplistic advice is for everyone to aim for a single number, such as $1.5 million, no matter who you are or where you live. But how can $1.5 million be the right number for both a socialite living in San Francisco and a homebody living in Kalamazoo, wonders Perkins.)
Perkins isn’t a big fan of fixed retirement savings targets. Mainly because, psychologically, for many middle class and upper income people the target savings number never feels like quite enough. So, they end up blowing well past it before they finally decide to quit working.
“If you are approaching your sixties, and are in good health, and doing work you largely still enjoy, then it’s quite easy to justify working a bit longer than you really need to,” writes Perkins. “But then where does it end?” asks Perkins. “That's the problem with a numerical financial target – it keeps moving because you have the opportunity to earn more income if you just stay in the workforce. You go on autopilot and end up postponing everything else.”
That’s why, fundamentally, the author urges his readers to think in terms of a retirement age or date, not a financial target. So, what is that date? Well, Perkins isn’t about to be overly prescriptive here. Instead, he invites his readers to ask themselves whether they expect to have great longevity, or just the opposite. If one is being honest with oneself, if one doesn’t have a good reason to expect to have longevity, then retirement shouldn’t wait.
Of course, there are never any guarantees. “None of us has a crystal ball, of course, and some overweight chain-smokers do occasionally end up living to 100. But let’s face it, if you smoke, are obese and have a family history of cancer, then the odds of you outliving a fit person of the same age with no health challenges are not great. So, wouldn’t it make sense for you to plan for an earlier retirement age vs. the other person?” (After all, who wants to be that guy who works like a dog until he’s 65, retires, and then drops dead two years later?)
To take some of the guesswork out of the whole “when will I die?” question, the author recommends using a longevity calculator. There are plenty of free ones online. (Perkins does not to endorse any one calculator over another, saying they all do the same job.) Each calculator will ask a similar set of questions about your current age, your gender, height, and weight (how high is your BMI?), smoking and drinking patterns, and other standard predictors of overall health. These calculators will typically also ask about your family history, as well as about risky behaviours such as whether you use a seat belt. “After you've answered all the questions, the calculator will spit out a number: you'll live to be 94! (Or maybe just 66 if you don't stop drinking like a fish and smoking a pack a day …).” The number the calculator ultimately reveals to you should factor heavily into your retirement planning, says Perkins.
Of course, there’s the odd person who dreads the idea of retirement and wants nothing more than to keep working until their dying breath. That person will get no judgment from Perkins; provided he’s good with his money in his golden years. Meaning that he actually spends it.
“Look, if you absolutely LOVE your job and can’t imagine ever leaving it, then you’d better start aggressively spending every penny you earn after a certain age,” he writes. “Unless your goal is to have a very impressive net worth figure etched into your tomb stone, that is.”
How Not To Outlive Your Money
Now, let’s say you use a longevity calculator, and you agree with the number it spits out at you. But you still have a nagging concern around under-saving for retirement and outliving your money. That’s to be expected. Thankfully, it’s a problem with a very simple solution.
It’s called a life annuity.
While less popular, and less well-known, life annuities are in the same general family of financial products as life insurance. “Most Americans know about life insurance,” notes Perkins. “Life insurance helps us deal with what’s called ‘mortality risk.’ Meaning if we die much earlier than we are supposed to, our spouses and/or children are not left hanging.”
Smartly, over 60 percent of Americans own at least some life insurance. But what fewer Americans realize is that there are also excellent financial products designed to deal with the opposite problem, which is called “longevity risk” (i.e., the prospect of outliving one’s savings.)
How do life annuities work? Well, basically, when you buy one of these products, you’re giving the insurance company a lump sum right up front (say, $500,000), and in return you get a guaranteed monthly payout (for example, $2,400 each month beginning at age 60 for the rest of your life, however long that happens to be. Even if you live to be 110 years old!)
Is there a catch? “Well, yes and no,” says Perkins. Like all other forms of insurance, annuities aren't free. Insurance companies have to be able to guarantee themselves a profit. So, they’re counting on a certain percentage of people to die early (and frankly, you or I could be one of them), which allows them to pocket the difference. So, from that perspective, annuities aren’t necessarily the best investment from a dollars and cents perspective. But if your goal is to maximize your life experiences without worrying about longevity risk (i.e., die with zero), then they're a very sensible solution. Because you wouldn’t outlive your money.
Now, Perkins cautions he’s not a financial advisor, and he recommends you speak to a real one about life annuities before you rush out and purchase one. “But when you do speak with an advisor, you have to be crystal clear with her or him about what you are aiming to do, which is to die with zero.” And you may encounter some resistance because most advisors really hate selling people annuities. “You need to understand that most financial advisers don't necessarily want to sell you an annuity. Because if the adviser gets paid as a percentage of total assets under management, then their incentive is to accumulate more assets under management. The last thing they want is for you to remove assets from under their control by purchasing an annuity. Annuities are their competition.”
Tying It All Together
We’ve covered a lot in this summary, from the benefits of investing in experiences, to how to structure inheritances, to protecting against so-called longevity risk. All of it adds up to an air-tight “die with zero” philosophy. But if we’re being honest about it, Bill Perkins doesn’t really expect us to die with exactly zero dollars to our names. The author knows perfectly well that even if we follow every rule in his book to the letter, and even if we obsessively track and adjust our life expectancy and recalculate our financials on a weekly basis, we’re likely still not going to hit zero on the nose when that fateful final day comes.
But that’s okay. Because even if his readers don’t follow every letter of advice served up by Bill Perkins in Die With Zero, the odds are pretty good that at least some of the ideas he offers will have hit home. By aiming to die with zero, even if we never achieve that on paper, we may have meaningfully shifted our default “autopilot focus” from all work and no play to something better – a philosophy that involves saving and living with our eyes wide open.
“Take my advice,” says Perkins. “Don’t wait until you’re so-called golden years to begin doing the things you want to do. Don’t delay living until you health and energy have begun to fade. Rather than saving up a big pot of money that you will most likely not be able to spend in your lifetime, live your life to the fullest now: Chase memorable experiences, give money to your kids when they can best use it, and donate money to charity while you're still alive.”
Then, when your time finally comes, you can gracefully exit stage left with no regrets. You can securely, comfortably and contentedly die with zero.