Savers face a lifestyle change in retirement - spending what they accumulated
It is a nice problem to have. But it's also a real concern for many people who've saved diligently and now are not sure how to go about spending their savings, or are reluctant or afraid to do so.
Consider this Arizona couple, both in their late 50s and retired from full-time work.
"Instead of working full-time and saving/investing intensely, my wife and I are starting to wonder how to spend our money over the rest of our lives," the husband said in an e-mail.
"It seems like we can't switch gears very well."
Few can. The traits that make good savers - such as preferring to delay gratification and plan for the future - conspire against us becoming spenders, even when we have the means.
We savers don't get much of a kick, if any, from spending. When we spend, we question whether the money would be better spent elsewhere - or just saved.
These traits don't make savers all that popular. "The people in my office say they can't save," said a reader who, through systematic savings, has accumulated a six-figure nest egg while in her 40s. "I tell them to cut out the lattes and drink the coffee provided at work, and bring their lunch and cut out the $10 restaurant sandwiches. You'd think I had called them names by the looks on their faces."
Consider what happens with individual retirement accounts. IRAs are designed to help us save for retirement, when we will spend the money. But most IRA owners - natural savers as I see them - plan to leave their money untouched as long as possible, according to a recent study by the Investment Company Institute, an industry group. In fact, most IRA withdrawals are taken just to satisfy required minimum distributions after age 70 1/2.
That doesn't surprise me. "We do hear from people who don't want to spend" their retirement money, said Joan Bloom, a Fidelity Investments executive. Often they are unsure of what could happen during a retirement that can last 30 years or more, and that uncertainty makes them afraid to spend.
So how do savers start spending - and enjoying - the money they worked so hard to save?
Remind yourself the whole purpose of saving was to have money to spend later (unless all you wanted was to make your kids rich). If you really like those lattes and sandwiches, get them now.
Put together a retirement income plan that includes sources of income, such as Social Security, pensions, or part-time work, and a realistic estimate of how much you can safely spend each year. "If there is one key message to get to the public it would be to have a plan," Bloom said. A qualified and trusted financial adviser can be invaluable in this area.
As long as they fit your spending limits, make a list of the things you always wanted to do and do them while you're young and healthy enough to enjoy them.
Help others. Donating to a worthwhile charity will enrich your life.
Humberto Cruz is a syndicated columnist. He can be reached at AskHumberto@aol.com.
