Spend That Dollar Today!

It’s okay to spend your life savings…when you retire.  You may think it’s unnecessary to give that permission, but many retirees need it. After literally decades of saving each month “for your old age”, that accumulation habit becomes as much a part of your normal day as a morning cup of caffeine.  And watching your accounts grow over the years is very satisfying and reaffirming. 

Then one day, “old age”, more attractively called “retirement”, finally arrives. Happy Days! Or is it?  Many people suddenly become very conflicted and concerned.  Taking money OUT of their accounts feels like the Mississippi River has started to flow north.  It can freeze any spending activity impulses and, frankly, ruin true enjoyment of your retirement. The worst case I ever witnessed of this came from a new senior citizen client who showed up in complete misery many years ago.  For over 15 minutes, Misery told a sad tale of how Misery and Spouse had worked over 45 years in middle class jobs and saved prodigiously for Old Age. When retirement came, Spouse suddenly dies, which means that Social Security check stopped.  Now Misery was struggling to survive on the remaining Social Security benefit. Gray-haired Misery felt the only thing to do was to return to work full time.  I was truly moved and concerned.  Until, in the course of my normal factfinding, I discovered Misery had several million dollars sitting in a combination of a checking account, a bank savings account and a bank IRA. Gently, I asked why Misery didn’t think there was enough money to live on. The surprising response…Misery didn’t want to touch one dime of the savings. It was the security Misery and Spouse had saved diligently over their lives and Misery couldn’t conceive how to spend any of it!

Being of the more frugal mindset myself, I could see how this dynamic of “saving, not spending” could become entrenched, but this was the mental habit at its extreme.

Recognize that turning on the spending switch and beginning to take account withdrawals in retirement will be a strange new habit… like sleeping in on Monday morning.  But it won’t be as comfortable.  You are changing the habit of a lifetime, but it’s okay! You planned for this. That money is there to take care of you now. Spending it actually creates your security of retirement income. As long as you have a well-designed retirement spending plan and live within that discipline, your nest egg won’t disappear before you do.  I can vouch after seven years of actual retirement; you CAN get used to taking those withdrawals and enjoying the fruits of your long labor. (Although I can still bargain shop to distraction.) Work with your planner, come up with a reasonable spending plan which you should recheck every few years and HAVE FUN!

What happened to Misery?  Sad to say that Misery went back to full-time work, bank accounts fully intact.

Guest blog written by Grace Worley, Retired Founder of Worley Erhart-Graves Financial Advisors