Spend Smart in Retirement - “Don’t Leave it All to Your Kids”

March 21, 2023

Story Location:
31454 Winterplace Parkway
Salisbury, MD 21804
United States

Spend Smart in Retirement Class

Don’t Leave it All to Your Kids

Many people want the ability to spend more earlier in their retirement years, and rightfully so, they’re younger and more active. A large disappointment in my line of work, is the passing of individuals who leave inordinately large sums of money in their accounts in addition to large estates. While the children enjoy this, there may have been more “life to live” for the parents who kept close watch on their spending and grew their investments right until the end of their lives.  Why is so much left behind?

Common advice in the investment industry and even academia is to spend no more than 4% of your investment dollars annually, to prevent running out of money. This 4% rate of withdrawal, while debatable, is generally considered sustainable for 25 years, from ages 65 to 90. The challenge is that spending more, five, or even seven percent of your investments for 25 years of retirement is largely considered unsustainable and therefore not advisable.  We would agree - typically.  The question that follows “Is there a way to spend more earlier in retirement and adjust later to steer clear of running out of money?”  With a standard 4% withdrawal rate, some people are living on what can be a bit of austerity plan relatively speaking – maybe at the behest of their adviser, and in hopes of not running out of money. But what happens when things are going so well that these retirees are not anywhere close to running out of money, and accounts have grown considerably regardless of spending four and five percent annually.  What then? Or at least, what have we learned? The lesson is you might, in fact, be able to spend more earlier in retirement, and still prevent running out of money.  Many people ask, “How can I do this?”, the answer might be a dynamic spending strategy.

A dynamic spending strategy is quite simply one where you change your spending throughout your retirement years, spending more now and less later. A strategy like this requires two budgets of sorts: first, a list of annual expenses you’d like to make early in retirement, and second, a list of expenses that you will switch to when the higher rate is no longer sustainable.  These two budgets are absolutely required before starting a dynamic spending strategy and must cover all your needs.  The first is the higher budget, which can allow for more travel, hobbies, and leisure activities. The second budget would be your basic expenses for later in life with significantly reduced travel, hobby, and leisure activities. By switching to the lower budget at an appropriate time, you can still maintain a sustainable and maybe more enjoyable retirement. 

Eric W. Johnston, CFP®, Financial Advisor and President of InFocus Financial Advisors, Inc. 410-677-484 for questions or comments.

To learn more about Spending Smart in Retirement register for Class at the Lewes Public Library -3 /28 1:00PM – 2:00PM.

Space is limited! Registration to attend class is done online or by calling:  410-677-4848

For more information on this class contact:

Ryane Porter, Client Experience Associate
InFocus Financial Advisors, Inc.
31454 Winterplace Parkway
Salisbury, MD 21804


Investment Advisor Representative offering securities and advisory services offered through Cetera Advisors LLC, member FINRA/SIPC, a broker dealer and a Registered Investment Adviser. Cetera is under separate ownership from any other named entity.

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