Enjoy Spending in Retirement: How to Overcome the Psychology of Saving

For the last few decades, you’ve been saving money and now it’s finally time to retire. But how do you switch from a mindset of saving to spending? As it turns out, it’s not always as easy as it seems. After years of saving, you’ve likely become focused on acquiring assets without thinking about the mental switch to spending in retirement. Maybe you’ve never really thought about the psychological effects of withdrawing the money. The fear of withdrawing money is common, but might cause you to end up living more frugally than necessary. But, today you can learn what you need to know about spending in retirement.

Spending in Retirement

The Problem with Uncertainty

So, why is it so hard to spend your nest egg? You might be spending as little as possible to save for medical bills, inheritances, or philanthropic pursuits. However, in many cases, it’s because you aren’t sure how to know if you are withdrawing the right amount of money to last your lifetime. You may worry about the “what if’s” of retirement and want to ensure you are prepared for what the future holds. 

Inflation can erode savings and the returns on your portfolio may vary. Health care costs can escalate and many people every year outlive their savings. We certainly aren’t saying there is no reason to be afraid of spending in retirement. By saving more and spending less in the first years of retirement, you may hope to offset the uncertainty of the future. 

What Can You Do?

Consulting with your financial advisor can help keep you confident about your retirement savings and assure you that you have enough to live comfortably. Just like during your working years, you can create a reserve savings fund that is designed for emergencies. Additionally, having a solid plan for how to distribute your funds before you retire can help alleviate the anxiety about spending in retirement.

Withdrawing Your Funds

If you are nervous about withdrawing your retirement savings, here are a few things to keep in mind:

Organize Your Expenses

Three typical savings categories include:

• Essential expenses (food, housing, insurance)
• Lifestyle expenses (hobbies, vacation, relaxation)
• Unexpected expenses (medical costs, car repairs)

Be sure to pay your essential expenses, though you may be able to use Social Security benefits for this. You may want to use investments to fund your lifestyle expenses, and maintain a cash reserve for unexpected expenses. If you want to make life easier by consolidating your costs, a CCRC might be right for you.

With all the senior living options today, researching each of them can be exhausting. To help, we have created your FREE Continuing Care Retirement Community Guide to get you started.