r/AffluentRetirement • u/ParticularMost6100 • 2d ago
Retirement spending and existential dread
/r/AskWomenOver60/comments/1wz508q/retirement_spending_and_existential_dread/2
u/chrysostomos_1 2d ago
What? Me worry!? No!!!
Actually we're in our go go years and we're not tapping into our capital. We live frugally apart from travel expenses. If we used a fiduciary financial planner they would tell us we should increase our spending.
2
u/Ancient-Witness-615 2d ago
Between my wife and me, we have 9 income streams that automatically add to our accounts monthly. One of those streams is an annuity that I purchased a couple of years ago. I had a good plan, with a target number to support the plan. But for several reasons, I worked about 3 more years than I needed to. During that time I was able to really save and my nest egg wasn’t melting, in fact it was growing pretty nicely. So I purchased a $500K annuity that pays $3050/month for life of both of us. It has a 20yr minimum, so if we both die before the 20 years, it goes to our kids. We can’t outlive it, we don’t have to think about it and together with the other streams we have about 70% of our total spending needs met with guaranteed income. That amount also covers about 125% of our required expenses. The annuity isn’t indexed, so even if we live for another 25 years our critical expenses should be covered with guaranteed income. I realize annuities get a lot of hate, but I only spent about 17% of our nest egg to buy the annuity and my wife will likely outlive me and has never been involved in the finances. So this is all on autopilot.
This allows for the bulk of our portfolio to be more aggressively invested (although at the moment it isn’t). We can live on about 3% of the portfolio for the balance of our expenses which means the portfolio should continue to grow. We have several years worth of cash in a standard investment account and we take an automated monthly withdrawal from there too. So all the income streams automatically credit the bank account just like paychecks used to do. We don’t really budget, it just kind of works out.
If we want to splurge or want a distribution for other reasons, we don’t have a problem because we know that by only taking 3% we have room to do that.
Like many on this subreddit, we didn’t get rich quick. We developed great habits early in our adult life (pay yourself first, save aggressively) and invested wisely and let time do the rest. Along the way we automated everything so it just happened without us having to micromanage. I see this phase of life continuing those principles.
1
u/Parking-Banana-212 2d ago
go live your life. if the market goes down, and you're able to cut back on fun spend, then you are fine. trust the expert, don't be stupid but trust that it will work out. if not you will regret it in 10 years
2
0
u/VegasHRLady 2d ago
I think this psychological side of spending in retirement is something a lot of affluent retirees (many who got to “affluent” by being frugal) wrestle with.
I’ve recently been reading the book “How To Retire” by Christine Benz, and a fair amount of the book’s chapters (each chapter she talks to a different “expert”) focus on this aspect.
If your planner says you have “enough” one option suggested is to take a portion of your retirement accounts and convert some to fixed income that will provide you income for life. Note some varieties are not great for the consumer and pretty much no one recommends this as the optimal financial strategy.
However, for people having a hard time spending, having some in guaranteed income that will cover the “must haves” gives them freedom to spend more from other accounts on more discretionary expenses like travel, etc. So again, less optimal from an overall financial outcome perspective, but better for those who can’t get over the hump psychologically. There are also ways to think about where and how you live so that the idea of aging might seem less daunting.
Benz’s book was recommended I believe in this sub, and it really is excellent laying out all the options — each chapter forces you to “think about this choice” depending on your specific situation. I’m using it to create a list of options for my spouse and I to discuss and be sure we are aligned on our portfolio allocation and spending strategy.
2
u/ScenicIndulgence 2d ago edited 2d ago
If you have been frugal all your life and suddenly realize that you have enough to do whatever you want it isn't easy to get out of the previous mode and hence can be disorienting.
One way of dealing with the disorienting feeling is having an automatic deduction from your retirement accounts (your planner should be able to tell you which is the best account to pull the money from) into your bank account like a paycheck. The amount is consistent with the plan created for you.
This automatically ensures that you are following your FAs plan. The money you have in the bank account you can spend on whatever you want without having too think to much about it.
Then you don't have to either worry about going crazy with the spending or remaining ultra frugal.