Broker Check

You Can Celebrate Retirement Stress-Free

| December 19, 2023

Congratulations on your recent retirement! You’ve devoted a lifetime to accumulating wealth, and now the focus has abruptly shifted to spending it. Naturally, many new retirees aren’t quite sure what that transition (from earner/saver to spender) is supposed to look like. Overspending creates a shortfall later on, yet underspending can prevent you from truly enjoying the retirement you’ve worked so hard for!

Let us help put your mind at ease. Our experience has shown that it takes about 18 months for retirees to ease into their new lifestyle, which often includes less income and a longer-term approach to budgeting. So, if you’re feeling anxious, it’s completely normal. We’re sharing the three most common observations we’ve made over the years -- these should help alleviate any spending worries you have during this time of transition: 

1. The first few months of spending more: After decades of saving, most retirees cross the finish line and immediately break their own spending rules. We get it! You’re relieved, elated, and ready to have fun. If you overspend, catch yourself and then correct it. You can then make adjustments to make up for it by revisiting your financial plan and realigning the spending limits you use as your guardrails.

2. Spending less than you thought later on: Retirees tend to spend less than they expected once they’re settled in. So, overspending a little now typically evens out in the long run. That’s not permission to blow through your savings because that will prove detrimental to all your carefully laid plans. Again, regular review of your financial progress in retirement will allow you to keep tweaking your guardrails to align them with your lifestyle better.

3. Realization that you’re collecting an income: A considerable stress for new retirees is spending without having a salary. But remember, your income now comes from your financial portfolio instead of an employer. How much you can spend is determined by calculating your safe withdrawal rate (SWR). SWR is the rate you can withdraw from your portfolio each year, and it provides a high probability you’ll never run out of money (4% per year is the general rule of thumb, but the plan we built specifically for you may deviate from that). If you stay within the plan, your retirement savings should be adequate for life.

Retirement is a fantastic achievement that was brought about by hard work, discipline, and focus. Try not to worry too much about your spending or your income – both of those things will work out, mainly because we’ll review them at least annually to make sure we stay on track. If you feel like you’re spending too much or you have a significant expense in mind, book some time with us to talk about it. That’s what we’re here for!