If you missed Part 1 of this series, we recommend that you either read through our blog post here or listen to the podcast here. Continuing on with Part 2 of why savvy spenders should spend more in retirement, we decided to bring in our own Taylor Wolverton, CFP ®, Enrolled Agent, on the discussion. 

Foundation of Why Savvy Savers Should Spend More in Retirement 

Oftentimes, we have conversations with clients who have more money than they’ll need in retirement. However, at times the fear of running out of money is so great that even when it’s a necessity, they hesitate to spend. Because of this, many will pass on a multimillion-dollar legacy to their beneficiaries at death, whether that is their true intention or not. 

Let’s look at some examples of this concept. 

Husband and Wife, Both 69 Years Old 

Our first example to illustrate the idea is a husband and wife, both currently age 69, with the following details: 

• Both fully retired- not currently receiving wages or employment income 
• Husband receives $4,000 a month from Social Security 
• Wife receives $2,700 a month from Social Security 
• Wife receives a pension of $1,900 
• Cash savings of $200,000 
• Husband’s IRA balance is $1,360,000 
• Husband’s Roth IRA balance is $50,000 
• Wife’s IRA balance is $830,000 
• Wife’s Roth IRA balance is $44,000 
• Joint brokerage account containing stock worth $80,000 

In total, the couple has $2,564,000 between cash savings, IRAs, Roth IRAs, and stock along with steady sources of income from their pension and social security benefits. 

Let’s look at their spending. 

Spending 

This couple spends about $12,000 per month to cover their expenses. This does include $6,000 to $7,000 per year that they use for travel. In our long-term projections of this scenario, we assume inflation on their expenses at a rate of 3% per year for the duration of their retirement. 

Note: When we meet with the client, we try to gather as much information as possible to have an awareness of relevant figures, but there are times when someone forgets about an account or a small pension, so it’s something that we continuously review and tweak as necessary over time. 

Assumptions 

As previously mentioned, we assume inflation will rise 3% per year. To stress test a retirement scenario, we also assume that the invested assets will have a 4% to 5% return each year which we believe is conservative. We assume the social security and pension amounts stay the exact same with no cost-of-living adjustments over time. 

What the Couple’s Retirement Page Looks Like 

Clients of ours receive a one-page retirement summary that outlines income and expenses for the duration of their retirement. For this couple, the page will show the following: 

• $1,900 per month from the pension 
• $6,700 per month in combined Social Security benefits 
• After subtracting an estimated for tax withholdings, net income is $8,400 per month 

Based on the couple’s current spending habits, they need $3,600 – $4,000 distributed from their accounts per month to make up for this difference. The couple has over $2.5 million in savings, IRAs, stock, etc., so they have a decent amount of money available to take distributions from. 

Both spouses are age 69 today. At this rate of distribution, what will happen by the time they’re 80? 

Inflation Calculation 

The couple spends $12,000 a month at age 69, and by 80, with a 3% inflation rate, this figure will be $16,900. In just 11 years, additional pressure is put on the savings and investment accounts because the couple needs about $8,500 a month to cover expenses after pension and Social Security. 

You can quickly see how inflation will impact your assets. 

At age 69, the couple had over $2.5 million in retirement accounts, and by age 80, we project they will have around $3.2 million. If you were feeling stressed up until this point, you’re not alone. But with a conservative 5% annual rate of return, the couple in this example has more in savings and investments at age 80 than when they started at age 69, even when taking regular monthly distributions to cover their expenses. 

What about at age 90? In this scenario, the couple is projected to have $2.9 million in savings and investments. Withdrawals started to impact the accounts somewhat, but at age 90, the total value is nowhere near an amount that would cause concern around the ability to maintain the current level of spending. 

You can do a lot with $2.9 million and enjoy the money that you worked so hard to accumulate. We know that this couple puts aside $6,000 to $7,000 to travel, but they do have a few bucket list trips that they would love to take. 

$30,000 Trip Added In 

The couple is nervous about taking these bucket list trips because they will have to take a larger withdrawal. For a few years, the couple has wanted to take a $30,000 trip that they couldn’t because of work and other obligations. 

We always sit down to crunch the numbers with our clients because retirement spending is a major source of anxiety for a lot of retirees. 

What we show the client is something like this: 

• Remember, at age 90, without taking this trip, you’ll have $2.9 million. 
• Let’s add in the $30,000 expense at age 69. What’s the long-term impact at age 90? The couple has $2,780,000 instead of $2.9 million. 
• Over 20 years, they may lose about $120,000, but they were able to tick something off their bucket list. 

Will the trip and memories be worth the money? For most people, the answer is a resounding “yes.”  

$35,000 Trip Added in for 2026 

Perhaps the couple was so excited about their first trip and didn’t mind the retirement spending, so they added in an additional trip of $35,000. By age 90, with the $30,000 and $35,000 trip taken, the couple will still have $2.6 million in savings and investments. 

Passing $2.6 million to your beneficiaries is always going to be a nice gift. 

Withdrawing money and adding in these larger expenses into your retirement planning really comes down to “what are you working for in retirement?” The sooner we can add these figures into your plan, the faster we can secure your retirement. 

We encourage you to start looking at the things that you really want to do in retirement and begin planning them now. 

It doesn’t matter if you would never spend $30,000 on a trip or don’t have $2.5 million in retirement accounts. 

Spending and retirement accounts vary drastically between couples. If you’re not spending more than you have, there’s always a good chance that you can start checking off some of the items on your bucket list and still have more than enough money for yourself well into retirement. 

We can run these numbers for you so that you can feel confident about spending more money and making memories for yourself while in retirement. 

If you have any questions or would like us to run the numbers for you, please feel free to reach out to us. 

Click here to schedule a call with us. 

You’ve saved well enough to secure and enjoy your retirement. Today, you’re going to hear two financial advisors (us) say something that you never thought you would hear: spend more in retirement.

We see it all the time – people are so used to saving that spending money is difficult.

People have developed a mindset where spending money in retirement becomes a moment of anxiety. Many of our clients leave behind significant inheritances. We encourage them, with good and thoughtful planning, to spend some of that money to:

• Make memories
• Experience new things

You can spend a little more and still leave money behind for the next generation.

Why Savvy Savers Should Spend More in Retirement

A long time ago, we had a client call us. She had about $2.5 million in retirement and at the time, she had some water damage in the kitchen. She was living on only her Social Security amount and was in her 70s.

She said that insurance would cover the replacement of her linoleum floors, and she asked if she had enough money to upgrade to hardwood floors for about $15,000. We knew that with 100% certainty that she could upgrade, but she was so scared and reluctant to use any of her $2.5 million, she never did.

She left behind a few million dollars to her children and grandchildren, but she never spent her money on herself. Perhaps she would have enjoyed life a little more while she was here by doing something like buying those hardwood floors for $15,000.

The Psychology of Savings

You want to save for retirement and get to a place where you don’t need to worry about having enough money. From a young age, you decide to save for the future, and you put away as much money as you can to enjoy it later.

Everything you do in life is for your family and future, whether it’s saving for a house, putting food on the table, or putting money away for retirement.

You build a habit of saving over the course of decades, and then what happens? It becomes an ingrained habit that can be hard to break. People become extremely frugal, and it’s difficult to spend your money when you reach retirement age.

There’s also a factor of going from accumulation mode to retirement, so you’re taking money out of your retirement and no longer earning a paycheck, which is scary change for a lot of people.

Shaping Your Mind for Retirement

Five or ten years from retirement, when you know you’re on the right track to secure your retirement, it’s time to start switching your mindset. You want to think about:

• What you’ll do in retirement
• What big travel or experience goals you have
• How you’ll spend time with family
• Whether you want to own a second home

When we’re working, we tend to neglect some things in life, but when you finally hit the retirement milestone, you deserve to make the most out of your time.

We always ask our clients what they’re going to do when they’re on pace to reach their goal, and they’ll often say:

• We’re too busy to think about that
• We’ll figure it out when we get there

If you start making goals for what you’ll do in retirement, you can start allotting money to it. Good saving habits help to reach big goals in retirement, but you need to break that “saving only” habit to some extent.

Things to Think About When You Hit Retirement

What are the things you would like to do in retirement? A few questions we like to ask are:

• Where would you like to travel to in retirement? How would you like to travel?
• Do you want to do any major house renovations?
• Do you want to focus on your health and wellness? Ex: hire a personal trainer?

Paying for health and mobility improvements are always going to be worthwhile.

You can also create experiences with your family. For example, we have one client who took their entire family on a cruise for a week. While the person spent a little money on the experience, they created a memory that will last a lifetime.

We’re not saying go out and spend 75% of your retirement, but you can enjoy the money you worked to save and still be confident that you have planned well to secure your retirement.

What You Need to Think About to Spend Your Money Smartly

We don’t want you to go out and spend all your money. What we would like to do is have our clients get these goals in place so that we can use financial planning to help them reach their goals.

If you think about your goals ahead of time, we can:

• Plan for these costs
• Allot enough money for these expenses

Imagine a $35,000 trip that you want to go on. We can add the expense to your retirement plan and see its true impact.

When we understand the numbers, it makes it much more comfortable for clients to spend some money in retirement because they see the true impact of their spending.

One story that we love to share is of a client who wanted to sell their house, buy an RV, and travel the US for 10 years.

We told them to provide the details and let us run the numbers. The clients came back with data on the cost of the RV, the sale price of the house, expenses, and everything else you could imagine.

They have been happily traveling in their RV for over 10 years now.

We sat down with them last week, and they plan to keep traveling for the next 5 or so years. Next week, we’ll run through case studies to show you the numbers, examples, and “what-ifs” for this type of retirement goal.

A financial plan is like a GPS to help you reach your retirement destination. If your destination changes, the GPS can reroute you to get you where you want to be. Proper financial planning can help you safely reach your retirement destination while still making pit stops along the way.

If you want to learn more about planning for retirement and spending more money, please feel free to reach out to us.

Schedule a call with us to talk more about spending money in retirement.