Learning to Spend in Retirement
When it comes to financial planning, we often spend a lot of time talking about saving: how much we should save, how long we should save, and how we can save more. Especially during the early, accumulating phase of life – we like to see clients who have made saving a habit. The clients best prepared for retirement are those who have saved well. Unfortunately, patterns can be hard to break. It’s not uncommon to find clients who have done such an excellent job of saving that when it comes time to retire, they find it challenging to transition away from a saving mindset and permit themselves to spend.
Don’t get me wrong, saving is essential. Saving and investing for the future is how we chart a path of success towards our financial goals. But when we reach our goals, we also have to learn how to enjoy them. We aren’t recommending that you make a complete 180 and spend out of control. Nevertheless, just because you shouldn’t have steak dinners every night in retirement doesn’t mean that you need to be eating peanut butter and jelly sandwiches. There is space for moderation and enjoying the fruits of your hard work.
When it comes to learning to spend, it’s crucial that you first have a financial plan that you are both comfortable with and confident in. If you aren’t satisfied with your financial plan, you won’t allow it to factor into your decision-making. If you aren’t confident in your financial plan, you won’t trust what it has to say, and you will continue to be fearful of spending the funds you’ve worked so hard to save. Be honest about your relationship with your financial plan. If you’re worried that it isn’t conservative enough or isn’t factoring everything in that it should, let your advisor know. You can have a great custom financial plan, but if you don’t believe in it and what it communicates, it’s not worth much.
Once you have a plan in place and you have an idea of what you can safely spend in retirement, continue to check in with your advisor periodically, particularly if you’re contemplating a significant, non-routine expense. While we want to be careful not to overspend and draw down on your portfolio’s ability to deliver a sustainable income, it’s a similar tragedy to let life pass without allowing yourself to enjoy it. If you’re unsure if you can afford a particular draw, it doesn’t hurt to ask. Reach out to your advisor and allow them to crunch the numbers and update your plan in response.
Finally, allow yourself to dream and to enjoy what your retirement could be. Take the time to explore your goals and what’s important to you. Permit yourself to transition away from being a habitual saver to someone who can enjoy the benefits of your saving within reason. And if you find that the thing most valuable to you is passing on your wealth to your loved ones or an organization near to your heart, make sure that your estate is set up accordingly. When you’ve worked hard to build a financial legacy, that legacy deserves to be both enjoyed and taken care of in accordance with your values.