Ways to Retire More Confidently, Ep #161

Many people who listen to retirement podcasts and read financial articles are fantastic savers. If that sounds like you, congratulations!

You may have done the hard work to accumulate enough savings and be on track to reach your financial retirement goals. However, after a lifetime of accumulation, you may discover that you have a hard time letting go of your assets.

We recently came across an article in Barron’s magazine called Retirees Aren’t Spending Enough of Their Nest Eggs. Here’s Why.

On this episode, we’ll discuss the reasons that some retirees are reluctant to spend their savings and explore strategies that you can use to ensure you have a successful transition into retirement.

Why is there a reluctance to spend in retirement?

A new study has found that three-quarters of retirees age 62-75 have seen assets remain the same or grow in retirement.

This means many retirees are choosing to live entirely off of their Social Security and pensions without touching their retirement nest egg through the first decade of retirement. These retirees are struggling with the transition from accumulating to spending and have a hard time with the idea of watching their account balances decline.

This reluctance to spend can be due to a fear of running out of money. Human longevity is increasing and many retirees are expected to live to 95 or longer. This longer human life span coupled with rising long-term care costs could lead to bigger financial needs toward the end of retirement.

In addition to these increasing retirement expenses, retirees face worries of market uncertainties. No one can predict what the stock market will do in the short-run: there could be another pandemic, war, bear market, or who knows what else. With all of these worries, it’s no wonder that people entering retirement want to continue a life of frugality to hang on to everything they have.

The right retirement plan can ease your retirement worries

Even though life expectancy has increased, long-term care is costly, and life will throw in some curveballs, the point of accumulating retirement savings is to spend them in retirement. With the right retirement plan, you can give yourself permission to spend what you have saved in retirement.

When you develop a financial plan and continually revisit it, you will understand how much you need to be able to live the life you want. This will allow you to realize how much you can spend comfortably.

Create a retirement paycheck

Creating a paycheck-like experience can be the ‘permission’ you need to spend your retirement nest egg. The article reveals that people who receive a higher percentage of their retirement income in regular payments spend more of their money in retirement.

Since most people won’t receive pensions in retirement, new retirees can explore ways to create a paycheck-like experience by creating an automatic transfer from their IRA or brokerage account into their checking account each month.

Listen in to hear how we do that for our clients at Financial Symmetry. When you press play you’ll also hear the rest of the tactics that you can use to ensure that you are making the most of your retirement nest egg.

Outline of This Episode

  • [1:33] Retirees aren’t spending enough of their nest eggs and here’s why
  • [3:30] Why is there a reluctance to spend in retirement?
  • [6:53] Tactics to spend
  • [10:20] Create a retirement paycheck
  • [12:26] Delay taking Social Security
  • [14:48] Understand the tax tools available to you
  • [19:31] Estate planning is not only about documents
  • [22:05] Today’s progress principle

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