By Brandon Miller, CFP–
One of my clients is gearing up to fulfill a lifelong dream next April by climbing Mt. Everest. We’ve been preparing his finances for the past few years—putting money aside for fees, guides, and equipment; planning for several months of lost income; and, yes, making sure his estate is in order.
I feel confident he’s doing everything possible to get himself up that mountain. What I’m worried about is the way down. More climbers die descending the mountain than ascending it. They don’t have enough energy or resources for the return. But you can’t relive the glory of conquering the mountain if you don’t make it off said peak.
Retirement money follows a similar arc with the focus on the uphill side of things. Gaining money is the sexy part of the retirement equation—and also how financial businesses and professionals turn a profit. That’s why you can find lots of guidance and strategies about how to save money, where to invest it, ways to calculate what’s needed in retirement, and much more.
So, what happens when you switch from wealth accumulation to decumulation? Not nearly as much focus—or helpful advice—is devoted to retirement spending, perhaps because people have less incentive to advertise how to take money out of their pocket.
But if you want to create a happy, successful retirement, you’ll have to be like the mountaineer who prepares for both the climb and a safe return. In other words, your retirement planning should entail not only wealth-building strategies, but also plans for spending your funds wisely so that the money lasts your lifetime and accomplishes what you want.
In next month’s column, I’ll provide some strategies for leveraging your various retirement income streams—savings, IRAs, Social Security, etc. (You can get a preview of these strategies at
https://www.briofg.com/previous-events ) But this month, I want to address the psychological aspects of transitioning from adding to your wealth to drawing it down during retirement.
Friends laugh when I say that one of the hardest parts of my job is getting people to spend money. But truly, it is very difficult for us as humans to change lifelong habits and mindsets. That “penny saved is a penny earned” mentality doesn’t just go away when you clean out your office and slice off a piece of retirement cake.
And, of course, money mistakes in retirement can be more damaging when you stop working and can’t make up for the loss. But rather than be paralyzed by fear—or stay at a job you don’t love even with a fat retirement account—I suggest taking these three steps to prepare yourself for the transition from retirement saving to retirement spending.
1. Define your fears.
“What if I run out of money” is the most common one. People also worry about prolonged inflation that eats into their savings as well as down markets that drag on for years, Social Security going bankrupt, and natural or human-caused catastrophes that wipe out property or savings.
Whatever makes your list, defining what gives you nightmares allows you or a financial advisor to run the numbers and find solutions that help dispel your fears.
2. Get professional advice.
How you spend your money in retirement is so important that I highly recommend turning to a pro to help guide you. You don’t have to make a long-term commitment, but a financial planner can objectively review your financial situation and possibly save you more than the advice costs.
As mentioned, a financial professional can help allay your worries by running what-if scenarios and helping you see new solutions and opportunities. A pro can also give you a realistic assessment of your situation, suggest income strategies, and help mediate differences of opinion between you and your spouse.
3. Give yourself permission.
The last step is to finally accept that, yes, you do have “enough.” And the rest of your life should be spent enjoying everything you worked so hard for. Remind yourself that you have literally earned this. It’s time to enjoy the fruits of your labor, to switch the focus from pennies saved to pennies used to live comfortably, and to have fun and do good with anything leftover … because that’s how you make it off the mountain with a great story to tell.
Brio does not provide tax or legal advice, and nothing contained in these materials should be taken as such. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Brio Financial Group is a registered investment adviser. SEC Registration does not constitute an endorsement of Brio by the SEC nor does it indicate that Brio has attained a particular level of skill or ability. Advisory services are only offered to clients or prospective clients where Brio Financial Group and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Brio Financial Group unless a client service agreement is in place.
Brandon Miller, CFP®, is a financial consultant at Brio Financial Group in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.
Published on August 12, 2021
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