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Soon-to-be retirees: Transitioning from saver to spender

Retirement is a major financial milestone – the culmination of decades of hard work and diligent saving. If you have spent most of your life focused on accumulating wealth to live off of later, the moment when you finally tap into that nest egg can be quite unnerving.

Here are recommendations for navigating this saver to spender transition smartly and confidently:

Develop a spending plan. Unlike a strict budget, a spending plan is more flexible and tailored to your retirement goals. Collaborate with your financial advisor to make sure you have enough to cover your essentials while also being able to spend on discretionary things that bring you joy.

Calculate your withdrawal rate. Understand your sustainable withdrawal rate from your retirement savings. Your advisor can help take your specific needs and circumstances into account. It is essential to consider your health, life expectancy, family dynamics and the overall market conditions.

Embrace the change. Retirement is not just the end of your working years. It is the beginning of a new, exciting phase of your life. Recognize that your financial focus is shifting from accumulation to utilization.

Address psychological barriers. Transitioning to retirement can bring up feelings of anxiety and guilt, especially if you have been a diligent saver over your entire career. Understand that it is okay to enjoy the money you have saved. Celebrate your financial achievements and take pride in what you have created for yourself.

Reflect on your goals. Consider what you want your retirement to look like. Do you dream of traveling, pursuing hobbies, spending time with family, volunteering, or being active in your community? Identifying your goals will help you align your spending with your values and aspirations.

Leverage tax-efficient withdrawals. Understand the tax implications of tapping into different types of retirement accounts, such as Roth IRAs and traditional IRAs. A tax-efficient withdrawal strategy can help you minimize your lifetime tax bill and stretch your savings further.

Be mindful of lifestyle inflation. It can be very tempting to upgrade your lifestyle in retirement. Be cognizant of how these changes may affect your long-term financial security. Lean on your advisor for guidance on finding a balance that allows you to enjoy today without jeopardizing your financial future.

Stay engaged and informed. Review your financial plan with your advisor at least annually to help stay on track and accountable. Stay informed about financial trends, market conditions and potential investment opportunities. 

Adjust as needed. Be willing to adjust your spending plan as your life changes. Health issues, market fluctuations or unexpected expenses may necessitate altering your strategy. Flexibility is the key to maintaining financial stability.

By taking a thoughtful and strategic financial approach to retirement, you can enjoy your golden years with confidence and peace of mind. Leaning on your advisor as a resource gives you the ability to make smart decisions about optimizing your retirement years.

If we can be of any additional guidance along the way, do not hesitate to reach out.

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