For most people in, or approaching, retirement, the plan for their later years has looked something like this: save hard, spend cautiously and leave as much as possible to the children and grandchildren.
But a new cohort looking ahead to retirement are throwing away that rule book and adopting a new strategy.
Francesca and Andy Baker-Brooker, 39 and 41, live in a flat they own in Shoreditch, East London, and do not intend to have children.
Francesca, who works in PR, already has £400,000 in her pension – a figure most people twice her age never reach – and Andy, an accountant, says he is aiming to retire with roughly £1m saved.
Their plan? Die with as little cash left in the bank as possible.
“We’ve saved what we need to,” Francesca says. “But we’re not people who would say: I’m going to save for this part of the future or that part of the future. We enjoy living life and that is something we don’t want to change.”
Francesca and Andy live in a flat they own in Shoreditch, East London (Photo: Joe Gatt Photography)The book that coined the term
The idea of spending everything before you die comes from a bestseller. Die With Zero, published in 2020 by the American hedge fund manager Bill Perkins, argues that money has no value in itself – only what it buys you in experience.
Every pound left over on the day you die, he says, is a pound of your life you worked for and never spent – a pound wasted, in other words.
Much of Perkins’ argument revolves around children: money that your kids inherit when they are 60 would have transformed their lives at 30, so it is better to give it to them when they are younger – with the added bonus that you are alive to see the fruits of their bolstered finances.
For those who won’t have children, this question falls away entirely, leaving a starker one: if nobody is waiting for the money, then what is it for?
Francesca says it’s something people should think about more. “Most of our friends in London don’t have children,” she says. “One friend’s father died recently, and his mother asked tentatively whether the family would mind her spending some of the inheritance money on a holiday.”
The friend’s answer? Spend it all. The Baker-Brookers say they’d tell their own parents the same.
What about life expectancy?
Alistair Cunningham, a chartered financial planner at Wingate Financial Planning, broadly supports what Perkins terms “memory dividends” – the compounding value of experiences had earlier in life, especially with family.
However, he points out a problem – the strategy of the book asks its readers to accept a very specific risk: “You may live much longer than the average,” says Cunningham.
While Perkins writes for an American audience and tends to assume dying in your 80s, Cunningham tends to create plans for his clients that run until age 100 – not unreasonable given that the number of centenarians in the UK has doubled in the past 20 years.
The book’s philosophy requires a guess regarding your own lifespan, and the evidence is that people typically guess badly.
Research by economists at the Institute for Fiscal Studies (IFS) found that people routinely underestimate their chances of reaching old age throughout their 50s, 60s and 70s. Those in their 50s and 60s underestimate their chances of making it to 75 by around 20 percentage points.
In practice, Brits do not tend to err towards the dying with zero mentality. IFS analysis using the English Longitudinal Study of Ageing found that retirees run their wealth down remarkably slowly, with the wish to leave something behind often a key driver.
Clients who genuinely plan to spend everything, Cunningham says, tend to be people with reason to expect a shorter life. One client, he recalls, after a health scare, built a plan expecting the money to run out within 15 years – which he had to keep extending.
Inheritance tax changes
Philosophy aside, there is a key financial reason that some people are toying with the idea of dying with an empty bank account.
From 6 April 2027, most unused pension pots will count as part of your estate for inheritance tax (IHT). The old orthodoxy of spending your ISA while preserving the pension as a tax-free legacy to leave to your loved ones no longer holds.
The £325,000 threshold at which your estate becomes liable for IHT has been frozen since 2009 and is set to remain so until 2031. Those leaving a main residence to a direct descendant get an extra £175,000 (known as the residence nil-rate band), but this doesn’t apply to those without children.
Ciara Octigan, chartered financial planner at Succession Wealth, says the die with zero mindset is increasingly common.
Many clients have “watched friends or relatives pass away with substantial savings they never had the chance to enjoy” and are choosing to give “with a warm hand rather than a cold one”, she says.
But she warns against taking the concept too literally: “The goal shouldn’t be to die with nothing, but to strike the right balance between enjoying the wealth you’ve worked hard to build and keeping enough in reserve for whatever later life may bring.”
Running out in your eighties or nineties, she adds, “could have serious consequences”.
How to spend your savings – without running out
Build a floor: Make sure you have planned for a guaranteed income that covers all the essentials. The full new state pension is £12,548 a year – rising to £12,578 in April – and an annuity can top it up. Above the floor, spend freely.
Pensions UK puts a comfortable retirement at a household income of £45,400 a year for one person and £62,700 for a couple, after tax and housing costs, assuming the retiree owns their home outright.
Consider spending more during your best years: Health, not money, tends to be the main constraint on enjoying a retirement, so it’s worth considering spending more in the first decade of retirement than the last.
Ring-fence care costs: Residential care averages around £1,300 a week according to Carehome.co.uk, and those in England must pay for their own care in full if they have capital above £23,250. Without adult children to help organise it, your care reserve may have to work harder.
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