The Retirement Spending Mistake That Could Cost You Your Golden Years
For nearly two decades, I’ve had the privilege of walking alongside clients as they transition from saving for retirement to actually spending their hard-earned nest eggs. And let me tell you—this shift isn’t just financial, it’s deeply psychological.
I’ve seen it time and time again: clients enter retirement with substantial savings, but when it comes time to withdraw those funds, they freeze. Some are so concerned about running out of money that they rely solely on Social Security or Required Minimum Distributions (RMDs), even when their portfolios could support a more comfortable lifestyle.
In fact, research shows that after nearly 20 years of retirement, many retirees still have about 80% of their pre-retirement savings intact. That’s not necessarily a sign of financial success—it often signals missed opportunities to truly enjoy retirement.
Why Does This Happen?
Retirement brings a whole new set of uncertainties:
- What if I outlive my savings?
- What if healthcare costs skyrocket?
- What if the market takes a downturn?
These are valid concerns. But they’re also why a sound withdrawal strategy is essential—not just to help preserve your money, but to ensure you can actually enjoy the lifestyle you’ve worked so hard for.
Here are a few tips I share with my clients to make the most of their hard-earned savings.
Smart Strategies for Withdrawing Your Retirement Savings:
- Organize Your Expenses:
- Break your expenses into three key categories:
- Essential Costs: Food, housing, insurance.
- Lifestyle Costs: Travel, hobbies.
- Unexpected Costs: Healthcare, emergencies.
- Use please remove income sources (like Social Security or annuities) for essentials, growth investments for lifestyle expenses, and a cash reserve for unexpected costs.
- Be Tax-Savvy with Your Withdrawals:
Balancing withdrawals from tax-deferred accounts (like IRAs or 401(k)s) and taxable investment accounts can potentially reduce your tax burden. A thoughtful withdrawal strategy can help you minimize taxes over time, help you maximize your savings, and could make your money last longer.
- Stay Flexible and Review Regularly:
Retirement spending isn’t one-size-fits-all. Some years will require more spending (think big trips or home projects), while others may call for a more conservative approach. Regularly reviewing your withdrawal strategy with your advisor ensures you can adjust for market changes, unexpected expenses, and evolving goals.
Retirement is About Balance
Your golden years shouldn’t be clouded by fear or guilt around spending. With a thoughtful withdrawal strategy, you can have confidence and permission to enjoy the life you’ve envisioned.
If you’re feeling unsure about how to transition from saving to spending, let’s talk. Together, we’ll build a plan that balances financial security with the confidence to fully embrace retirement.
Sources:
Aackerle, & Nefouni. (n.d.). Spending in Retirement | BlackRock. BlackRock. https://www.blackrock.com/us/individual/insights/retirement/spending-and-investing-in-retirement?
