The book “Die With Zero” by Bill Perkins is fast becoming a FIRE classic – for a good reason.
Many in the community have adopted a Die With Zero mindset, which goes against many of the core pillars of the standard approach to Financial Independence like delayed gratification and frugality.
Instead, Die With Zero is all about getting the most out of our money and investing in experiences (which, in turn, create memory dividends for us). The book emphasises that time is a lot more valuable than money because we can always earn more money (which is not the case for time, obviously).
Bill Perkins advocated saving “enough” for retirement but not a cent more. Ideally, he wants us to “die with zero”, because having money left over means that we’ve worked for free and wasted valuable time at work that we could have spent doing things we enjoy more.
Long-term readers of the blog probably know that I’m a fan of the book – it’s very aligned with the messages about FI, money and life I try to spread in my little corner of the internet. My copy of Die With Zero lives on my desk (along with a few other classics) and I’ve re-read it several times. I regularly recommend it to readers, friends and clients who struggle to get over their ultra-strong accumulation mindset.
However, one thing I’m not so convinced about is the formula Bill suggests we use to calculate what “enough” means in monetary terms.
In this article, we’ll explore the math behind the book and discuss how to actually die with zero.
I’ll also share a little Die With Zero calculator I’ve created to explore how we could adjust our FIRE plan if we decided to go down the “die with zero” path (something we are actively considering).
Let’s get started!
The Die With Zero Formula
In the book, Bill offers a basic formula that calculates what he calls the “survival threshold”. This number is how much he believes we need to save “as a bare minimum”. Here is the formula:
Survival threshold = 0.7 x (cost to live one year) x (years left to live)
Hmmm… Ok, let’s look at an example.
Lucy is 45. She is hoping to live to age 100, so she has 55 years of life left. Lucy spends $70,000 per year.
Lucy’s survival threshold: 0.7 x $70,000 x 55 = $2,695,000
That’s quite a high number considering this is supposed to be Lucy’s bare-basics “survival threshold”.
Die With Zero vs FIRE
So, how does the Die With Zero formula compare to some basic FIRE math?
Withdrawing $70,000 per year from her $2,695,000 nest egg actually equates to a 2.6% withdrawal rate – much lower than the withdrawal rates commonly used by members of the FIRE community.
If Lucy opted for the standard FIRE method instead and used a plain-vanilla 4% withdrawal rate, the math would look like this:
Lucy’s FIRE number: $70,000 x 25 = $1,750,000
Almost $1,000,000 lower than the Die With Zero survival threshold number!
So, where does that leave us?
Is the Die With Zero Formula Wrong?
Is the Die With Zero Formula wrong? I don’t know. No one knows. Bill makes it clear in the book that he just wanted to come up with a “nice, simple number”.
All projections we make about how much we need to live, how long we’ll be alive, how high inflation will be over the long term, and how much our investments will return each year are really just educated guesses (somewhat backed by history, but still…). This applies to Die With Zero, FIRE and standard retirement withdrawal plans alike.
We can all just make assumptions we feel comfortable with, stay flexible (this one is important!), and hope for the best.
So no, I don’t think the Die With Zero Formula is wrong. But it’s conservative. Especially compared to the kind of math commonly used in FIRE circles.
Die With Zero = Adding a Little YOLO to Our Lives
In the FIRE Community, we usually make the assumption that by reaching our FI number, we are set for life. We assume that we’ve built a nest egg that will be able to cover our living expenses for the rest of our lives and beyond.
Usually, the plan is to leave our investments to our kids when we die. While you can argue about whether the math behind the 4% rule was designed for very long retirements or not, this is how most of us approach things.
The premise of Die With Zero is that we should only save enough to cover our costs until we die, ideally leaving no money behind.
So it is a little ironic that the actual math behind the Die With Zero philosophy is more conservative than standard FIRE math.
Most Die With Zero fans in the FI community like the concept because they assume that dying with zero means that they’ll have to save less and get to spend more, sooner – not the opposite.
How to Die With Zero
Lately, I’ve been exploring what a Die With Zero plan could look like for my family and how it would change our FIRE path.
I wanted to figure out how much we actually need to die with zero – as in having no money left when we die (hopefully at the ripe old age of 100).
One simple way to figure out how much you need to have $0 when you die (well, if you die when you think you’ll die…) is to use a standard retirement drawdown calculator – like this excellent one on Noel Whittaker’s website.
However, I wanted to go a bit deeper. I also wanted to know how different lifestyles along the journey impact the Die With Zero equation:
- Future contributions to our FIRE portfolio
- Coasting periods (basically semi-retirement without withdrawals from the nest egg)
- Barista FI (semi-retirement with partial withdrawals)
I ended up building a Die With Zero calculator/spreadsheet that allows us to test withdrawal strategies and different contribution/withdrawal models against our assumptions (life expectancy, investment returns, etc.).
If you are also exploring what a Die With Zero plan could look like for you and would like a copy of my spreadsheet, just enter your details in the form at the bottom of the article.
Now let’s put some more (realistic) numbers around the Die With Zero concept. To do this, we’ll explore some scenarios for our friend Lucy from the example above.
Four Possible “Die With Zero” Scenarios
In addition to the basic data discussed above, we’ll also assume the following about Lucy’s situation:
Lucy has an $800,000 investment portfolio and expects 5% inflation-adjusted returns over the long term. She currently works full-time and adds $50,000 per year to her investments.
This is the data I entered in the input fields of my “Die with Zero” calculator:
Please note that all numbers in these calculations and the spreadsheet are inflation-adjusted (investment returns and annual spending). This allows us to use 2023 numbers for simplicity.
Scenario 1: Immediate Retirement
In this scenario, Lucy decides to “retire” immediately and starts withdrawing $70,000 per year from her portfolio.
This is what this looks like in action (based on Lucy’s assumptions):
In this scenario, Lucy runs out of money pretty quickly – by age 60 to be exact. Fail!
Scenario 2: Five More Years
Lucy decides to keep working and adding the $50,000 per year to her portfolio. She then retires at age 50 and starts withdrawing $70,000 per year.
Isn’t it amazing what a difference five years can make? In this scenario, Lucy runs out of money at age 94. Her five years of extra work and contributions have afforded her almost 25 extra years of retirement. Crazy!
Scenario 3: Semi-Retirement (Coast FI)
In the next scenario, Lucy decides to semi-retire immediately and coast for a while so her nest egg has time to compound. She moves to part-time work, stops investing and takes it easy for 10 years. At age 55, she retires and starts withdrawing $70,000 per year from her portfolio.
With this option, Lucy doesn’t run out of money until age 98 – not too bad at all!
Scenario 4: Semi-Retirment (Barista FI)
In this final scenario, Lucy decides to semi-retire and cover some of her expenses by making withdrawals from her portfolio. From age 45 to 65, she withdraws $25,000 per year and then increases the withdrawals to the full $70,000 from age 65.
In this scenario, Lucy doesn’t run out of money and would leave a small inheritance behind.
Scenarios 5 – ∞
As you can see, the scenarios we could explore are endless. I could spend all day updating the spreadsheet with new strategies.
Plus, we have not even explored how changing some of the basic assumptions (investment return rates, life expectancy and annual withdrawals) would change the outcomes.
And then there is one of the magic tools in the FI toolkit: flexibility. Adding some flex to a Die With Zero plan would no doubt make things even more appealing.
Dying with zero isn’t an exact science. But if we work with assumptions that we are comfortable with (similar to the way we pick assumptions for our FI calculations), we can come up with a plan that allows us to…
- stop saving earlier
- make withdrawals from our investments sooner
- withdraw higher annual amounts from our portfolio
… than with the classic FIRE method – if we are willing to die with zero dollars in our pockets.
It turns out that little things like a few extra contributions can make a massive difference in the long run. As do higher or lower investment returns, obviously.
Whether the math actually works over the very long term is a different question. I’ve always held the belief that no plan is risk-free and that even methods like FIRE aren’t as simple and binary as they seem at first.
The “Die With Zero” mindset is all about adding a little YOLO to our lives, making memories and opting for “just enough” vs ” as bulletproof as possible”. What is right for you and what suits your psychological makeup and risk appetite is, of course, a 100% personal decision. I don’t think there is a right or wrong answer to this.
Personally, I find the option to switch over to a strategy that would see us spend much more money on experiences in semi-retirement and later on in full retirement quite tempting. Even if it means that we’ll die with zero (or, more realistically, a modest portfolio balance and a paid-off house).
We live deep in the “green zone” these days, and feel comfortable with the investments we’ve accumulated. It is also looking less and less likely we’ll actually retire anytime soon as we love working. We are seriously considering switching to a Die With Zero type plan. Mr. Flamingo and I are both very aware of the biggest risk of all – running out of time – and want to get the most out of life and the wealth we’ve created for our family.
Like Bill says in the book – we can always make more money…
Have you considered a “Die With Zero” type plan? I’d love to hear your thoughts!