One of the biggest transitions in life is to go from worker to retiree, or from saver to spender (call it decumulation or spend downer if you like).
Today I’m addressing an issue faced by those who have managed to save through most or all their working careers and now find it’s time to begin using some of their savings in consumption. After all, those savings, in most cases, are deferred income they put away into retirement accounts.
These quotes might be echoing you your head right now: Habits die hard. A penny saved is a penny earned. Delayed gratification. Save for a rainy day.
Yes, it’s tough to go from saver to spender. But you must decumulate either because you need some of your savings to live on, or the government is forcing you to distribute some of your retirement savings into your checking account or savings account since you’ve reached 70 and a half years of age.
Here are some strategies to help you with this transition:
Develop a monthly spending plan
o Try it out the year before you retire to see how it works
Develop a withdrawal strategy
o Use Buckets to hold cash for short term expenses and withdrawals
o Reduce your exposure to equities, if it exceeds a certain percentage
Plan your healthcare Expenditures
o Take advantage of any options in your employer plan before retirement
o Make sure your doctors will still serve you on Medicare or a Retiree Health Plan
Plan Experiences now that time constraints are no longer a factor like when you were working
o Take more trips
o Join more groups
o Volunteer in an area that excites you
Focus on others whether its grandkids, church members, the homeless or whomever you can benefit
Many of Americans however, have few retirement savings according to reports cited lately in the press. A recent Forbes article reports that the Government Accountability Office announced that half of American aged 55+ had no retirement savings. My thought: It’s hard to live on just a social security check. Let fear be a motivator and get to saving now. But that’s an idea for another post.
For today, plan on changing your habits and adjusting to a new lifestyle. If you don’t want to call it retirement, call if Financial Freedom. It’s okay to spend. You’ve saved enough and you’ve got your plan.