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Spend More in Retirement Without Running Out of Money · Retire and Thrive

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  So let's talk about spending more during retirement, Dan, and
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  we're focusing on three different ways that we can do so
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  and make sure that we're not running out of money.
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  We talk about spending. One of the things that I think
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  about is spending based on the phase of retirement that you're
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  in. Spend confidently from the right
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  accounts. How can we make sure folks are
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  doing that? It's OK to spend that Roth money
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  if that's going to put you into the next tax bracket.
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  Any other advice that you'd have for folks?
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  If you're working with an advisor, the number one question
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  I would ask that advisor is welcome back to another edition
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  of Retire and Thrive where we help you build your life with
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  purpose, wealth, and confidence. I'm Cami, and this is Dan.
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  Thanks so much for joining us this week.
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  I think this week's topic is a little fun.
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  It's about spending during retirement and how we can spend
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  more money without running out of money during retirement.
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  But spending more kind of always sounds fun.
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  Not as fun as taxes, of course. Taxes are so boring.
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  They're intimidating. Spending money is a little bit
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  easier, but doing so properly, That's where the problems come
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  in. So Dan's going to.
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  You kind of lit up like a Christmas tree when we started
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  talking about spending. Spending's a lot easier to
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  understand than taxes. I don't know the tax code very
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  well and I'm learning. You are learning.
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  I'm learning especially for folks during retirement, there's
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  a little bit more that they need to know when it comes to taxes
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  as well. So let's talk about spending
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  more during retirement, Dan. And we're focusing on the three
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  different ways that we can do so and make sure that we're not
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  running out of money during retirement.
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  So what's #1? We talk about spending.
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  One of the things that I think about is spending based on the
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  phase of retirement that you're in.
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  So what what, what I mean by that is oftentimes what we have
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  found. And again, I've got years and
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  years and years of experience. One of the things that I've I've
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  discovered is that people spend money differently based on what
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  phase they are in, in retirement.
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  And kind of a fun little cute phrase, but, and I can't even
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  take credit cuz I did not come up with this.
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  I think actually a client of mine or I'd read it somewhere.
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  But one way to look at retirement, if you break it up
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  is there's really 3 phases of retirement.
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  There's the go go years, there's the slow go years and then
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  there's the no go years. Yeah, yeah, yeah.
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  So if you think about it from that standpoint and that this
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  is, you know, kind of joking obviously with those phrases.
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  But if you, if you look at it from those, from from those
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  three different stages, people in the go go years spend a lot
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  more money than people in that next stage.
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  And if you want to break it up in decades, we could say from 60
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  to 70 would be the go go years. You know, from 71 to 80 would be
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  the slow go years. And then from 80 to 90 might be
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  the no go years or the slowing down years, whatever you want to
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  phrase. But I look at, you know, even
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  like my mom, you know, she's now passed, but she passed at age 91
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  in 2020. And the last decade that she was
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  alive, she didn't go out to dinner very much.
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  She didn't travel a lot. And so I would say the one thing
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  that the audience should think about is break up your
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  retirement years. And if you think about what your
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  spending needs are going to be during those retirement years,
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  it may be different. In other words, it's OK to spend
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  more money from 60 to 70 then it would be, say, from 80 to 90,
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  which I know we're talking about spending here, but that can also
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  play into Social Security too. And again, this is not a
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  discussion on Social Security, Cammy, but you know, often times
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  we can run numbers backwards and forwards of when to take Social
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  Security, how to delay it and doesn't make sense.
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  And should we pull out of retirement accounts instead?
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  And how do we maximize the Social Security?
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  And often times we put all of that aside and just say, you
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  know, what if your break even by delaying Social Security till
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  your full retirement age 67 is age 82.
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  Does it really matter? Because at age 82 and beyond, So
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  what if you would have gotten an extra few 100 bucks a month?
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  And so a lot of a lot of the decisions should be based on
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  what phase that you're in during those years.
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  And so oftentimes we will build in something called an advanced
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  age. So in other words, that might
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  look like, you know, not necessarily the three phases
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  which we could build out, but we might build out a retirement
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  income spending strategy from age say 65 to age 80.
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  And then from 80 we might dial it way down.
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  So those are the phases I'm referring to is you can look at
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  those income phases and you could match income accordingly.
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  Yeah, match your spending to those.
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  And as you always say, it depends with each individual.
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  Everyone's different. All right #2 spend confidently
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  from the right accounts. How can we make sure folks are
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  doing that? I know you're not going to
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  appreciate me saying this, but it does go back to taxes.
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  And so when we say spending confidently, what that really is
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  saying is it's OK to spend that Roth money if that's going to
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  put you into the next tax bracket and it's OK to pull from
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  pre tax if it's not going to push you into the next bracket.
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  So using using different types of accounts, and I mentioned
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  this several times, when you're on the tax side of it is there's
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  three different types. There's the pre tax that's never
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  been taxed. As you pull money out, you get
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  treated as regular income. Then you got the after tax
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  money. Most of the time when you sell
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  investments from there, it's treated as capital gains and
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  then you've got the Roth accounts.
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  So spending from the right accounts is nothing more than to
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  say where should we where should we be pulling this money out,
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  whether it's the monthly reoccurring or if it's one off
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  expenses for items that may occur every three to five years.
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  And pulling from the right accounts does matter.
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  And so the other option is, is if if people have money and Roth
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  accounts and Iras and and non retirement accounts, there's
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  nothing to say. If you're pulling out a certain
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  amount every month, there's nothing to say.
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  You can't mix and match based on tax brackets.
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  It's not an all or nothing, OK? Yeah, so it does go back to
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  taxes. As always.
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  We are again, we're trying to spend more money and making sure
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  that we don't run out of money. And strict budgets aren't
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  necessarily the end all tell. They're not the best thing to
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  do. Apparently, according to you,
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  we're building guardrails instead.
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  Yeah. And I, I think the guardrails, I
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  think of maybe just building a little bit of cushion is kind of
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  the guardrails we're referring to.
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  And I know we've talked about this before, both on camera and
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  then off camera, that a lot of retirees we find don't have a
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  budget. And this isn't the episode to
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  talk about budgeting, but it is the episode to talk about
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  spending. And often times when we're
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  sitting down with somebody who's newly retired and we really try
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  to dial in what they're spending or what they have spent, we get
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  down to that number and we look at mandatory spending versus
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  discretionary spending. And mandatory spending is, you
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  know, I have to pay my property taxes, I have to pay my gas
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  bill. You know, I have to do all of
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  these other things. But I don't have to take trips.
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  I don't have to buy expensive clothes.
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  I don't have to have a car payment.
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  I mean, all of those things are more, you know, discretionary
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  type. And so sometimes when we build
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  out these budgets for people, we'll say, what do you have to
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  do to keep the, you know, the lights on and the house and
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  everything else. And we may derive at a number
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  and then we come back and say, ideally, how much would you like
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  to spend? I mean, realistically, ideally
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  is probably not the right. But realistically, if everything
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  came together and then we start looking at those and that may be
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  where our guardrails come in. You know, maybe, maybe what they
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  need is $3500 a month just to meet all of the necessary
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  expenses. But they'd love to spend an
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  extra $1000 a month on other things.
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  And it could be trips and it could be, you know, golf
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  excursions or whatever it might be.
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  And that's, you know, the budget might be, you know, the 3500 and
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  the guardrails might be the 4500.
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  And then we'll model those scenarios so.
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  That's easy enough to do, really.
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  Really, it is any other advice that you'd have for folks as
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  they're in retirement looking to spend money but not be fearful
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  of losing or, you know, running out of money.
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  Yeah, I'm trying to think last week when we were talking about
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  the psychology behind spending money versus saving money and
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  how I mentioned how it is very, very real.
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  And you and I can't quite relate to that.
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  But I think the biggest advice I would give people that are newly
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  retired is it's OK to give yourself permission so that you
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  can spend confidently. And if you're working with an
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  advisor, the number one question I would ask that advisor is
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  based on your projections, what is my spending rate, What is my
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  withdrawal rate? And once that gets answered,
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  then go right to the other side of the equation, say what do you
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  anticipate this portfolio rate of return is going to be?
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  Sure. Let me just touch on that real
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  quickly because the rate of return on a portfolio is going
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  to vary drastically based on how you've got that portfolio
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  invested. And so if you've got the
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  majority of your money in the stock market, you can anticipate
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  a much higher return than if it's in the bond market or in
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  money markets or cash. So having kind of that blended
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  portfolio, that maybe is a realistic number and we're not
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  talking pie in the sky, but be conservative with those numbers.
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  And if your advisor comes back and says, you know, I think 9
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  percents realistic, dial that number down and see what it
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  really would look like. And yeah, so I think giving
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  yourself permission to spend that money and then looking at
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  the withdrawal rate and then also taking a look at the
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  allocation of the portfolio and making yourself feel confident
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  that you're going to be OK. And we will go through those ups
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  and downs. We talked last episode about the
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  sequence of withdrawals based on either markets going up or going
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  down when you start pulling it out and having that cushion on
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  the side. We talked a little bit about
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  adding inflation. But I think my biggest advice on
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  this is I look at people that are newly retired and I always
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  love hearing their stories. You know, where they started out
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  in their job, when they got married, how old their kids are,
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  what are their kids doing? And the kids got out of the
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  house. And so then they increase their,
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  you know, investments and contributions to the retirement
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  plan. And it's like that psychology of
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  shifting from accumulating to spending is difficult because
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  most people, when they retire, they've never had a lot of
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  additional income to spend. And I'm just simply saying this
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  is the stage in life, whatever that window is, 20 years, 30
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  years, whatever it is for retires to truly enjoy it
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  because that's what you've spent 30-40 years working for is to be
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  at this stage and to simply hoard it.
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  That's not what you work so hard and save so hard for.
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  Yeah. That is 100% true.
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  Anything more you'd like to add? I think that's it.
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  Just kind of that last point about giving yourself the green
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  light that you've worked hard and enjoy those fruits of your
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  labor, yeah. Perfect.
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  All right, Dan, thank you so much.
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  Thanks to you for joining us here this week.
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• 12:22
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• 12:26
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• 12:30
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• 12:32
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• 12:35
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• 12:37
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• 12:39
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• 12:42
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