For 30 or 40 years, you got very good at one thing: saving money. Then retirement asks you to do the opposite. Even with significant wealth, watching your balances go down can feel like you’re doing something wrong.
In this short video, Rory O’Hara explains why spending in retirement is harder than it sounds, where the 4% rule falls short, and the four things Ausperity focuses on to help clients spend with greater confidence. Watch now.
Transcript
Why Spending Your Retirement Savings Is So Hard
You’ve spent 30 or 40 years getting really good at one thing: saving money. And then retirement comes along, and suddenly you’re supposed to do the exact opposite. Start spending it!
Sounds easy, right? Well, for many successful retirees, it’s surprisingly difficult. In fact, a study from Allianz found that 67% of Americans worry more about running out of money than they do about dying.
Think about that for a second.
I’m Rory O’Hara with Ausperity Private Wealth, and one thing I’ve learned working with retirees is that having enough money and feeling comfortable spending it are two very different things.
When the Paycheck Stops
For decades, you received a paycheck, saved a portion of it, and watched your investments grow.
Now the paycheck stops, and instead of adding to those accounts, you’re taking money out.
Even when you’ve accumulated significant wealth, watching those balances decline can feel like you’re doing something wrong.
The 4% Rule and Its Limits
You’ve probably heard of the 4% rule. It’s a popular guideline suggesting you withdraw 4% of your portfolio in your first year of retirement and then adjust that initial dollar amount for inflation each year.
So if you’ve accumulated $3 million, that would mean $120,000 in your first year, before taxes.
(This example is hypothetical, provided for illustration only, and does not reflect an actual client or a projection of results.)
But here’s the challenge: your retirement isn’t a rule of thumb. Your lifestyle, taxes, investments, and goals are unique. And your retirement plan needs to reflect that.
4 Ways to Spend With Greater Confidence
At Ausperity, we focus on four things to help clients spend with greater confidence.
1. Recreate Your Paycheck
First, recreate your paycheck. We establish monthly distributions so money continues arriving in your checking account, just like when you were working.
2. Build the Right Investment Allocation
Second, build the right investment allocation. A thoughtful mix of stocks and bonds, combined with disciplined rebalancing, helps manage investment risk while supporting your retirement income needs.
3. Regularly Update Your Financial Plan
Third, regularly update your financial plan. This is a big one. At Ausperity, we hold financial planning meetings every six months to update our clients’ retirement projections, review their spending, and evaluate whether they’re still on track.
And honestly, one of my favorite conversations is when we update a client’s financial plan, show them they’re still in great financial shape, and tell them: “You can afford to take that family vacation. You can afford to spend a little more. That’s what you saved for!”
Those conversations are incredibly rewarding because we’re not just managing someone’s money. We’re helping them feel confident enough to enjoy it.
4. Be Smart About Taxes
And fourth, be smart about taxes. Whether you withdraw from an IRA, Roth, or brokerage account can make a meaningful difference in how much money you actually get to spend.
You Saved So You Could Enjoy It
Here’s what I remind our clients: you didn’t spend 40 years saving money just to be afraid to spend it. You saved to travel, enjoy retirement, spend time with family, and have the freedom to do the things you love.
A great retirement plan shouldn’t just help you avoid running out of money. It should give you the confidence to enjoy that money while you still have the time and health to do so.
Let’s Talk
If you’re not sure how much you can comfortably spend in retirement, our team would be glad to talk it through with you.
To schedule a meeting, call (856) 252-0102, email [email protected], or book online.
I’m Rory O’Hara with Ausperity Private Wealth. Thanks for watching.
Frequently Asked Questions
Why is it so hard to start spending my retirement savings?
Spending retirement savings feels hard because it reverses decades of habit. For 30 or 40 years, a growing balance meant you were winning. In retirement, the balance is supposed to go down. Without a regular paycheck or a clear spending plan, many retirees default to taking less and end up underspending in their healthiest years.
How do I create a paycheck in retirement?
A retirement paycheck is a set monthly amount that moves from your investment accounts into checking automatically. Two pieces make it work:
- Automatic transfers on the same date each month
- A cash buffer of one to two years of living expenses, which can help you avoid selling investments at a loss during a market drop.
Learn how retirement income planning works.
Which retirement account should I withdraw from first?
The right order depends on your tax bracket, age, and account mix. Traditional IRA withdrawals are taxed as ordinary income, qualified Roth withdrawals are tax-free, and brokerage withdrawals are generally taxed only on gains. At Ausperity Private Wealth, we map that order across multiple years as part of our tax-aware investment management to help manage lifetime taxes.