I am surprised how often we advise clients to spend more money in their retirement.
It is, of course, a wonderful problem to have, but I have found that people often feel guilty — not about spending the money they had always planned — but guilt about enjoying their resources. I think this is because many people draw an emotional equivalency between enjoyment and irresponsibility.
I want to disentagle those two because, while enjoyment can be done irresponsibly, you are also allowed to enjoy the fruits of your years of labor, discipline, and savings. After all, if you don’t enjoy your savings, someone else will enjoy it for you!
I have, therefore, three simple rules for spending in retirement — but before we get to those, let’s talk about a key idea underpinning those rules.
Your Resources Serve a Purpose
“Money is a good servant,
Francis Bacon
but a bad master.”
Ultimately, your resources — your money, your health, your social standing, etc — should serve you, not the other way round. While this seems obvious, it is not so obvious in practice. Because in order for your resources to serve you, you must have some vision of what it is you want to accomplish with them. In short, you must have a goal. Absent that, we are left with no other objective than: “make more money.” But to what end? And how do we know when we’ve accomplished that objective?
What’s worse, that makes enjoyment of those resources difficult. If the objective is to see a bigger number on a statement, withdrawals certainly work against that.
Of course, that isn’t to say that enjoyment is the purpose of retirement! I simply use “enjoyment” as a placeholder for a life well lived. Living the best possible version of your life should be the point. Your resources should serve that objective. Do not sacrifice a well-lived life for bigger numbers on a piece of paper you receive every month.
Do not sacrifice a well-lived life
for bigger numbers on a monthly statement.
The Three Rules
With that in mind, we have three rules for retirement spending. Only three, but in combination they are quite powerful.
Rule #1: Spend Intentionally.
Whatever you spend, we want to make sure it isn’t by accident.
For example, maybe shopping is an enjoyable experience for you, and that is perfectly okay. However, accidentally ordering $100,000 worth of stuff on Amazon is not a good way to enjoy your resources. If you do it with intention, not by accident, that is another matter — then you are enjoying the experience.
Doing things without intention robs you of enjoyment. That’s why our first rule is intentionality.
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Rule #2: Spend Meaningfully.
Whenever you spend, spend on meaningful things, experiences, causes, or people.
When you spend retirement funds, ensure that the spending is building meaning into your life. Meaning is had from things that help you accomplish objectives (hobbies, dreams, fun), experiences with loved ones that build memories and legacy, causes that you find important and impactful, and people that you care about.
Paying for an annual family vacation, for example, is a way to create experiences with loved ones that they will remember forever. Watching your loved ones enjoy your resources is something many find very meaningful.
Rule #3: Spend with a Budget.
Of course, whatever we do, it needs to be budgeted.
Budgets do two things for us. First, they allow us, as your advisors, to organize your resources to give you the best chance of doing these things on an ongoing basis. We can discuss what your resources can and cannot support, and how to best make it all happen.
There is a more important reason, however. Budgets offer freedom from guilt. When you have confidence that these funds are sustainable and are not undermining your future needs, you can spend the funds freely and without hesitation. Freedom from that guilt and hesitation allows you to indulge fully in the enjoyment of it.
Spend with intention, spend on meaning, and spend with a budget. Those are the only three spending rules you need in retirement. Of course, the last one requires quite a bit of work with numbers — not just in setting the budget, but also in organizing your resources to meet it! But, that is the value of working with an advisor: your job is to dream, our job is to work out the details.
So, there is really only one question left: what does a life well lived look like to you?
What does your best life look like?
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