Ep. 259 – Why Savvy Savers Should Spend More in Retirement

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In this episode of the Secure Your Retirement Podcast, Radon and Murs discuss the importance of spending more in retirement. The savings habits we build in our working years can unintentionally lead to a fear of spending money to enjoy life in retirement.

Listen in to learn how to shift your mindset from fear of spending and start building good habits that will lead to a successful retirement. You will also learn about the experiences and things you can spend money on, plus the importance of planning ahead of your retirement.

In this episode, find out:

●     How the fear of running out of money in retirement is putting you into a fear mindset.

●     How saving habits become deeply ingrained in us that it becomes difficult to spend in retirement.

●     How to shift your mindset and start building good habits for a successful retirement.

●     How to spend money on experiences and things that can make your life more enjoyable.

●     The importance of planning ahead of your retirement to make vision financially possible.

Tweetable Quotes:

●     “People often experience immense anxiety about depleting their finances during retirement, and this fear can be paralyzing, trapping them in a mindset dominated by fear.”– Radon Stancil

●     “We get so good at saving, and these habits get ingrained so deeply in our brains that it makes it very difficult to start spending our money, particularly in retirement age.”– Murs Tariq

Resources:

If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Radon Stancil:	Welcome everyone to Secure Your Retirement podcast. Today is going to probably be an episode that you wouldn’t think you’re going to hear from two financial planners and advisors, because really the theme of this is if you’ve done a good job saving, we’re going to encourage you to think about spending more money. Now, you might think, “Well, what in the world would you encourage somebody to spend more money for?” And I’m going to just give you the baseline. Here’s what we’re going to do because we think it’s this important to at least talk through. We know, and I’ve been doing this for over 22 years, Murs have been doing this for 13 years, and what we see all the time is that there is a humongous fear of running out of money, and sometimes that fear of running out of money is debilitating and it puts people into a fear mindset.
	And for the vast majority of our clients, and when I say that we’re talking, 99.9% of our clients are leaving behind significant inheritances, and that’s okay. There’s no problem with that. What we want to talk about though is that we are in conversations many times with our clients and we’re encouraging them, and we’re not saying go off the charts, but to say, “Hey, you might want to think about spending a little bit more money. Maybe make a memory, maybe do something today versus leaving behind these funds that, yeah, you can feel good about leaving money behind to the kids and grandkids, but could you maybe do a little bit of both where you get to benefit today and still leave the money behind?” Now there’s got to be good planning here and we’re going to talk all that through.
	I think I’ll set this up though with this story and then we’ll kind of go through this topic. I received a call one day from a client, and this was a long time ago, but this kind of gives you the mentality of this idea. She basically said, “Hey, Radon, I’ve got some water damage that happened in the kitchen.” And this particular client had at the time about $2.5. She was living only on her social security.
	She was very, very frugal, and she’s in her 70s. She had some water damage in the kitchen and she says, “Insurance is going to help replace the floors the way they were.” The floors were linoleum floors. And she said, “I just want to know Radon, do you think I can afford, if I were to upgrade them, I’d have to pay the difference and put in hardwood floors?” And I said, “Okay, well, how much are we talking about here?” And she says, “Probably around $15,000 would’ve been the upgrade.” Obviously I didn’t have to do any math. I was like, “Yes, 100%, you can put in the hardwood floors.” I mean, she’s not touching her money. But guess what she did? She went with the linoleum floors. Why? Because it bothered her so bad she was so scared of this idea of running out of money. And all essence what happened? She had a nice life, but she left behind a few million dollars to her children and grandchildren.
	Again, not a bad story in the context of leaving money behind, but could she have done a little bit more maybe to enjoy life and to enjoy things while she was here? So let’s kind of go through this and I’ll let Murs kind of start this next part off about the psychology of saving.
Murs Tariq:	Yeah, so I mean, just think about it. The goal is to get to retirement. The goal is get to a place where you can be comfortable, you’re never worried about money, you can enjoy retirement. The golden years is often a phrase that’s thrown out there or the second phase of life. So everything that we do from graduating college, if you went to college, getting that first job, from there on out, everything we do is taking care of our family and then planning for the future, whether the future being that down payment on the house or planning for your kids and their education, making sure there’s food on the table. Everything we do is all about that. And also on top of that, we’re also thinking about 30, 40, 50 years down the road and we have to plan for that as well because most of us know that social security is not going to be enough to take care of us in retirement, especially the way that we may want to live.
	And so from a young age, hopefully you start saving into these retirement types of plans, all these different types of investment accounts, and you build these really, really good habits of thinking about, “Should I buy this or is this excessive? Would it be better to just save for the future?” And a lot of times in our younger years, I’m right there. I’ve got a four-year-old, and a lot of the decisions I make are around, “Do we really need this right now or should we just,… Let’s not do this yet. Let’s save something like this for later on when we’re way more stable financially and maybe the kid’s out of school and safe on his own and let’s save it for later. Let’s just sock away as much money as possible today so that we can really enjoy it later.”
	But what we see happening, and this is, I mean I see this in my own parents, is that we get so good at saving, we build these habits around finding the sale, using the coupons, doing whatever it is, we get so good at saving and these habits get ingrained so deeply in our brain that it makes it very difficult to start spending our money, particularly once we reach retirement age. And so those habits are hard to break. There’s also the factor of we are going from accumulation mode. Let’s save, save, save as much as we can because we know at some point we’re not going to be earning anymore and social security is not enough so let’s save, save, save. And then we get to this point, this transitionary period of our life where now we are entering into retirement and the emotional aspect of now having to start withdrawing on our money, that’s another factor that comes into play.
	So what we want to talk about here is, well, how do I break some of those habits? We don’t want to go crazy, but we do want to start shaping our minds. Especially if you’re five years out of retirement, 10 years out of retirement and you know you’re on track for a successful retirement, we want to start shaping our minds a little bit more towards, “Well, what am I going to do in retirement? What is that going to cost me in retirement? Have I even given it any thought as to what is my bucket list?” We hear those words all the time. “Where do I want to travel or what hobbies do I want to pick up? Do I want a second home? How am I going to hang out with my family, kids and grandkids?” All these different things. A lot of times we neglect those because we’re just trying to get there first.
	I’ve heard it way too many times in meetings with clients that are approaching retirement, I say, “What are you going to do? You’ve got a good amount of money. And from everything that we’ve ran projection-wise and the plan, everything looks very successful. Everything looks really, really good, but what are you going to do?” And they say, “I don’t know. I’m too busy to think about that.” Or, “I don’t know. Just get me there first and I’ll figure it out there.” I would encourage you to start changing that mindset and start working towards a goal of, “Well, if I’m going to retire, I need to know ahead of time what I’m going to do from a financial planning perspective that now lets us actually put dollars to our goals.” And goals are a big thing.
	So what I wanted to talk about here is that obviously realize that if we are going to have a successful retirement, the only way we got there is we had really good habits. And sometimes like Radon was saying, those habits can get a little bit in our way when we reach into this retirement stage, which is our de-accumulation phase of life. We’re spending our money and that’s hard to do.
Radon Stancil:	Yeah. And just so you know, we are going to do it entire case study on our next episode, but we’re talking about simple things here. For example, we just had a client in, newly retired, and they’ve got a significant trip that was kind of one of those things they’d like to do. And it’s probably going to run for them to do this trip. I mean, it’s probably going to be depending upon how long they’d end up going and maybe some of the nicer places they end up going, but let’s call it 30,000 to $35,000 for this trip that they’re going to spend. But this is not a every year thing. This is just a trip they’re going to take. But think about the memories, okay? Think about that.
	So let’s talk a little bit about some of the things that you could think about. Murs mentioned them pretty quickly, but it could be travel, new experiences. Maybe we want to upgrade the kitchen or maybe we want to upgrade that bathroom to make it more accessible for me so that I can get around a little bit better. Health and wellness opportunities. Meaning maybe I do want to hire a trainer. Maybe I want to hire somebody that’s going to help me keep my mobility, maybe keep my health at optimal rates.
	I just took an experience myself. I’m 51. I went out, I had to pay for it out of pocket. Health insurance did not pay, but I was able to have a lot of tests ran, able to look at different areas just to make sure that everything was good. Now, for the most part, health was good, but there’s a couple areas they found that I can start correcting those now. And to me, I said, “Hey, I’d rather spend the money now than to then later be dealing with something that could cost me more time and money.”
	The other thing is I could create experiences with the family. I’ll give you an example. We had a client, this was one of their things they wanted to do. And obviously it cost them some money, but it did not change their retirement plan at all, but they did. They wanted to take the whole family on a cruise, so it was their paying. They got the family there. So they took all their children, all their grandchildren, spouses, everything, and they went on this cruise together for a week. It was a great experience. I mean, just think about that. The whole entire family going. And the grandparents, our clients are the ones who paid for it. That’s obviously not something you’re going to do all the time. It was an experience though, something that they’ll always have as a memory, every one of those down to the grandchildren.
	So let’s think a little bit about what we have to do though. And again, we’re not going to go into detail today. What we want to do though is we want to say, “What kind of things do I need to think about before I go do this?” We’re not saying haphazardly go out and spend a bunch of money. We want to do it smartly. And what we talk about that is we say, look, we need to put financial planning to the work to work here. So Murs, could you just walk through… And listen, let’s just keep it brief today because I want to going go into great detail next week, but let’s talk a little bit about what we would do before you do that. So the financial planning thought process.
Murs Tariq:	Yeah. So obviously the more detail we could get ahead of time, that’s why I said earlier, you get these goals in place, start thinking about them sooner before you retire, that way it’s easier to make it a reality. A reality being, “Hey, we know how much it costs. We know when we would like to go and we know all the nuances that this is going to require. All the planning that this is going to require for this bucket list item to be checked off of our list.”
	How we look at it is when we know, let’s just call it a big trip, we know what that is, we know relatively what it’s going to cost, well, then it becomes rather easy in the sense of we just put it into the plan. We say, “Hey, in this year, let’s say 2026, we know that we just retired and we’ve been putting off this big trip for a long time. Let’s go ahead and plan this into the budget for 2026.And yeah, it’s going to be an expensive one. We fully realize that. So let’s go ahead and plan it in and see what type of impact it’s going to have.”
	A lot of times, even though it may feel scary to take a big 20,000, 30,000, $50,000 withdrawal out of an account to take care of this one thing that we’ve been wanting to do for 20 or 30 years, a lot of times it doesn’t have a massive impact on the retirement plan. And so if we show that to you, it gives you the confidence to say, “Oh, we can do this. And we could probably do this again if we wanted to.” So understanding the numbers is the big thing.
	I’ll tell you a quick story that was purely financial planning was we had a client, I tell this story all the time because I think it’s beautiful. We had a long-standing client of ours came to us when they retired. We’d been working with them for a little bit. They came to us when they retired and said, “Hey, we want to sell our house. We want to buy an RV and we want to travel the US for the next 10 years.” So we said, “Okay, we need details, we need numbers, and then we will run it for you.”
	So they came back to us, said, “Here’s what the house is going to sell for. Here’s how much that RV is going to cost. And here’s what we think our upkeep is going to be on the RV and how much we’re going to travel and all this stuff.’ We put into the plan. They thought it through very well. I can tell you they’ve been happily doing that for more than 10 years at this point. I actually just sat down with them last week for a financial planning strategy meeting to say, “Hey, are we still doing this?” And their intentions are to keep doing it as long as they can, which is for another five to 10 years.
	So that is a incredible success story, and it comes down to, hey, they had a dream and a vision and they put numbers to it, and that made it financially possible.
Radon Stancil:	Again, what we’re trying to do today is whet the appetite for what we’re talking about. Next week, we are going to do an entire case study where we’ll take something that’s very similar to what we’ve actually done in real life. Obviously we’ll change the names. We’re not going to share private information about anybody in any individual, but we’re going to build out something that is very reasonable, very much what we run into every single day. And we’re going to run you through the numbers and we’re going to give you examples. We’re going to go through what ifs and we’re going to use real what ifs, what ifs that we’ve dealt with and that we deal with every single week so that you can get to understand it.
	Because I think if you think about the idea of a financial plan as a GPS, which we talk about that quite a bit. Basically with a GPS, if I decide I’m going on a trip, so I know I’m headed to whatever at my destination, let’s say I’m going to Florida and we’re riding along the way and it says, “Hey, I’m going to get to Florida at 300 P.M.” But then the person riding when you in the car says, “I really want a Starbucks,” right? What do you do? Well, you can go right on your GPS and you can just add a stop and then you say, “Well, I’m going to go into the Starbucks because we’re going to splurge on a Starbucks.” And what does the GPS do? It recalculates and it says, “Instead of me getting there at 3:00, I’m going to get there at 3:30.” So you have a conversation. You say, “Are we okay getting there at 3:30?”
	“Yeah, I’m fine getting there at 3:30. Who cares?” That’s exactly what we’re talking about here. “Hey, maybe I’m going to have $3 million when I retire, but if I go do this pit stop and we go on this vacation, instead of having 3 million, I’m going to have $2,900,000. Do we care? Are we good with that?”
	“Yeah, we’re good with that.” And that’s kind of how this whole process works, and that’s what we’re going to walk you through next week.