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Having your Cake and Eating it Too (How to Spend More in Retirement)

Nearly half of all Americans worry about running out of money in retirement; it’s not surprising then, that the Employee Benefit Research Institute found that people who retired with more than $500,000 in savings on average were often afraid to spend it. Therefore, they still had about 88% their retirement nest egg left 18 years after retirement.  More often than not, they were worrying about things that never happened.  This means they struggled on a tight budget during, what should have been, the best years of their life.

Retirement can broadly be broken down into three stages:

  • Go-Go Years 
  • Slow-Go Years
  • No-Go Years  

Go-Go Years are when you make up for opportunities lost when you were working. You are free to travel, see the grandkids, pick up new (or old) hobbies, join a band, pick up an encore career, etc.  

After checking off items on their bucket list, people tend to get comfortable, stay a little closer to home and begin their Slow-Go Years.  Retirees in the Slow-Go phase often trade skydiving and African safaris for less physical activities and more home-based fun.

Ultimately, depending on how kind nature has been, people reach their No-Go Years, when health issues creep up, making it difficult to keep up a more active pace.   Also, these health issues later in life may cause spending to rise if specialized care is needed.  

How can you Have your Cake and Eat it Too?

In order to get the maximum fun out of your retirement, you must strike while the iron is hot.  That means you need to take full advantage of the Go-Go years when you’re most able to enjoy retirement.  It is a delicate balancing act: you want to have fun now (which can be expensive) while making sure you have enough money to be comfortable in your 80s or 90s. In addition, many people desire to leave a legacy for future generations and the causes they care about.  

Step One - Design a plan that fits you.  You need to think about how you want your retirement to look, both now and later in life. Make decisions (you can always change your mind), understand the personal and financial trade offs that result from those decisions, write an implementation plan and get started.  This first step is equally important regardless if you are 50 or 80.  No matter where you are in life, good planning will help you make the most of your future.

Since the primary objective of your plan’s design is to provide resources for your Go-Go Years’ spending, without jeopardizing your financial situation later in life, much of your plan design must focus on financial matters. Risk management, tax planning, portfolio strategies, and sequence risk must all be considered in building a plan in which you can have confidence, during difficult times.

In addition to the considerations mentioned above, HCM believes a formal Distribution Policy should be part of every retiree’s plan.  Implementing a customized distribution policy allows you to take larger distributions today, during the Go-Go Years, and only make spending adjustments if bad things happen, rather than living with a permanently reduced spending level just in case bad things happen.  Remember that most people spend their lives worrying about things that never happen.   And, even if bad financial events do pop up, with proper advance planning they are most often non-events.

The research shows working with an advisor may create significant benefits for your net worth, goal achievement and financial security in retirement.  This is due to many factors including tax optimization, behavioral impacts, overcoming an aversion to planning and better execution.  Also, a plan that is regularly monitored by your advisor, who possesses all of the appropriate tools, can help keep you on pace to have plenty to spend to enjoy your retirement now without spending so much that you put your financial security at risk later in life.

Talk to an advisor today to find out how HCM can help you discover real financial peace of mind.  

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About the Author: Steve Hengehold

As a Wealth Advisor and Partner of HCM Wealth Advisors, Steve enjoys taking the vision of his clients’ financial future and breaking it down into the small jobs that will get the job done in a manageable way.  He is inspired by the big achievements that HCM clients have already accomplished and knows the importance of continuing to work towards other ones.


IN HIS SPARE TIME HE ENJOYS PLAYING GUITAR, AND is featured IN A CLASSIC ROCK BAND THAT RAISES MONEY FOR DISABLED POLICE, MILITARY, AND FIREFIGHTERS.  CHECK OUT THEIR NEXT SHOW


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