July 16, 2025 • 19 mins
One of the biggest challenges of retirement is actually spending your money! After decades of working, saving, and investing, pivoting to spending down your accumulated wealth can be surprisingly difficult.
Christine Benz is the Director of Personal Finance and Retirement Planning at Morningstar. She's published numerous books on retirement, most recently, “How to Retire: 20 Lessons for a Happy, Successful and Wealthy Retirement.”
Each week, “At the Money” discusses an important topic in money management. From portfolio construction to taxes and cutting down on fees, join Barry Ritholtz to learn the best ways to put your money to work.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:16):
Speak to any financial advisor and they'll tell you one
of the biggest challenges they have professionally is getting clients
to actually spend their money. After decades of working and
saving and investing, making the turn to spending money can
be a challenge. I'm Barry Ritolts, and on today's edition
(00:37):
of At the Money, we're going to discuss spending your
molah in retirement. To help us unpack all of this
and what it means to your retirement, let's bring in
Christine Benz. She is the director of Personal Finance and
retirement Planning at morning Star. She's published numerous books on money,
investing and retirement, most recently How to Retire Twenty Lessons
(01:02):
for a Happy, successful, and Wealthy Retirement. So let's start
with the basic problem. Getting those type A personalities who
are used to working and saving and working and investing
to kind of pivot to working and spending is a
big challenge. How big of an issue is this amongst
(01:25):
people who are looking at retirement.
Speaker 3 (01:28):
It's a very big issue, and it's kind of a
difficult topic to talk about because we have a lot
of people in our society who are quite undersaved relative
to what they will need for retirement, they'll be exclusively
dependent on social Security. But there is also a segment
of our population who struggles with spending appropriately. I can't
(01:51):
tell you, Barry, how many times I've been out speaking
to a group of older adults and I'll have someone
come up at the end of one of my sessions,
clearly his or her eighties. Usually his based on the
composition of the audiences I usually speak with, and he'll
proudly say, I only spend two percent of my portfolio
(02:11):
per year, whatever the value is, that's what I spend.
And I kind of think to myself, well, gosh, I
hope that that delivers you a good quality of life.
And I also think to myself, you're probably pretty significantly
short changing yourself if you're just spending at that level.
And as you said, Barry, I hear this from financial
(02:33):
advisors as well, that they struggle getting their clients to
spend appropriately.
Speaker 2 (02:38):
I heard a funny line from a pair of older
clients who were getting on a plane and they were
sitting in first class and they bump into friends they
know who are sitting in coach, and the conversation was
they just could imagine each other's conversation. Look at them
(03:00):
in the front of the plane spending their kids' inheritance,
and then the one sitting in the front of the
plane saying, can you imagine their flying coach so their
kids can fly first first class. It's kind of funny,
But ultimately, isn't this a psychological struggle about not just
outliving your own money. Assuming we're talking about people who
(03:22):
aren't going to outlive their own money, there's still this
enormous hesitancy to spend their kids inheritance or to spend
money when they've spent their whole lives. As Savers tell us.
Speaker 3 (03:33):
About that exactly, it's a sense of identity. I think
that one builds as a saver and an investor that
you are someone who defers gratification. You set money aside
each month, and the further you go along in that journey,
probably the more successful you are, you get to see
the incredible power of compounding. I think there is a
(03:57):
common tendency to kind of anchor on the portfolio Leo's
high water mark, to think, well, if it's here, I
never want to see it go lower. It just does
not feel good to see the balance go down after
a lifetime of seeing it generally escalate. So there's a
lot going on psychologically, and kind of an elephant in
the room in this respect is long term care. That
(04:22):
people who have not purchased long term care insurance and
may have really good reasons to not have done so,
still have this risk of like, oh, may I have
this balloon payment at the end of my life where
you know, I could get stuck with years and years
of expensive care. So I think that that is a
real risk factor that is in the mix as well.
Speaker 2 (04:45):
Really really interesting. So since we're talking about long term care,
let's talk about generally putting together a personalized plan, thinking
about needs and goals, lifestyle considerations. What should someone who
wants to spend more of their money do in order
to feel comfortable that they can afford to spend the
(05:06):
little cash?
Speaker 3 (05:07):
Well, I would say, either get a financial advisor to
help you with this, where they're effectively disbursing a portion
of your portfolio to you per year if you're doing
it on your own, get familiar with the research on
safe spending rates. A lot of the research that's been
done by our team and Others points to the value
(05:28):
of being flexible with your portfolio withdrawals, where you are
taking more when your balance is up when the markets
are up, and you're taking a little bit less when
things are down. I think if people understand the data
that we have on retirement spending, one thing that we
know is that people tend to spend less as they age.
(05:51):
So your early years of retirement should be the higher
spending years of your retirement because that's usually when people's
health is good. They may have pent up demand to
do travel, they may be launching adult children, a lot
of things going on at that life stage. You should
give yourself permission to spend a little bit more early
(06:14):
in retirement with the knowledge that even when we look
at spending trajectories among very wealthy households, people spend less
as they age. So if you're okay with that trade off,
with the idea that you probably will spend less, you
should give yourself a little bit more license to spend
earlier on.
Speaker 2 (06:32):
So let's break those spending desires down. You mentioned travel,
like it's easier to travel in your sixties and seventies
than it is in your eighties and nineties. Hobbies legacy
philanthropy or charitable goals, to say nothing of future healthcare needs.
(06:53):
How should people organize their thoughts and planning for future spending.
Speaker 3 (07:00):
Yeah, I think it's helpful to get very granular about
the budgeting. And I don't mean you know that you're
nickel and diming yourself and looking at every line item.
But if you have, say a big family trip planned
in year two of your retirement, spend some time figuring
out what the implications will be for your plan for
(07:21):
your spending in that year. Know that those big outlays
won't occur every year, but actually spend some time mapping
them out. And the nice thing about that is that,
in addition to it helping your spending plan, it will
also help you get these plans off the ground, rather
than having them as some you know, sort of vague
notion of things that you want to do. You mentioned
(07:44):
lifetime giving, barry to family members and charity. I have
come to be a huge evangelist for this because when
we look at the data on when people inherit money
from their parents, they're usually in their fifties or in
their sixties. They're findingential fortunes are pretty well set by
that life stage, Whereas if you have young people in
(08:05):
your life, whether children, grandchildren, nieces, nephews, you can make
a big impact for them in the twenties, thirties forties
with hometown payments or paying off student loans, and these
don't need to be big ticket gifts. Smaller gifts can
make a big impact. I often talk about how my
mom and dad gave my husband and me a little
(08:28):
bit of padding for our hometown payment on our first home,
and that helped us get into a home that we
were able to stay in for twelve years. We lived
exactly in the community where we wanted to live. So
having that discussion with your loved ones about the gifts
that might help them, I think, is something that can
add a lot of richness to someone's retirement.
Speaker 2 (08:50):
I recall reading your piece, what was it in the
fall last year or maybe around the holidays? Intervevos transfers
is the technical time while you're alive. This seems to
be increasingly modern development. Like I think back twenty five
thirty five years, you didn't hear that much about it,
(09:12):
at least outside of the top one or five percent.
Now it's fairly common for the ex or boomer generation
to help with a down payment or college as you mentioned,
tell us about what you're seeing out in the world.
How significant has this become. Is this something around the
(09:34):
f fringes or are we seeing a lot more intervivos
transfers today than say, twenty thirty forty years ago.
Speaker 3 (09:41):
I don't have any data on it, Barry, but my
sense is that the movement to toward lifetime giving is
picking up steam, and not just for very wealthy people.
I think sometimes people are put off by the term
lifetime giving. It sounds very highbro, but it doesn't have
to be. It can be assistance with some of those
smaller life achievements that young people might might want to
(10:07):
tick off their lists. So I would urge planners and
individuals pursuing their own retirement plans to think about building
in some of those lifetime giving aspirations. And also, you know,
there are really nice tax planning mechanisms that people can
use to help them achieve achieve those things as well.
(10:28):
The donor advised fund for charitable gifts especially.
Speaker 2 (10:32):
And why shouldn't you see family members, friends, whoever enjoy
the benefits of your largest while you're still around it
shouldn't be just something you think about when you're at
you'r a state attorney and you're signing a document and
that's the last you see of it. Why not get
to enjoy your kids or nephews or whoever in a
(10:54):
new house that you help them.
Speaker 3 (10:55):
Get there exactly. That is the huge side benefit of
contemplating lifetime giving.
Speaker 2 (11:02):
So let's talk about a little more formal type of giving.
You mentioned donor advised funds. Philanthropy when it comes to
both financial and estate planning. I'm going to say that again,
philanthropy is a big part of both retirement and estate planning.
Talk a little bit about the idea behind how families
(11:24):
should be thinking about managing philanthropy or donating to causes
that are near and dear to their heart.
Speaker 3 (11:33):
Yeah, get some advice on the tax aspect of this.
The donor advised fund is a really nice mechanism for
people of varying means, and it's especially appropriate for people
who have concentrated positions in their portfolios. Off an employer
stock where you can kind of take a risk out
of the portfolio and donate the say employer stock to
(11:57):
the donor advised fund and get a tax deduction on
that contribution, and you can also remove the capital gains
tax associated with that big gain in the position at
the same time. And then from there on, once you've
established the donor advice funds, you can make those charitable
(12:21):
gifts on an ongoing basis. So that's one strategy that
I would say would be kind of a first line
to consider for people of all levels of wealth. And
then for people who are moving up and getting into retirement,
using the charitable Qualified Charitable distribution from IRAS can be
(12:42):
a really nice strategy as well, where you are giving
a portion of your IRA once you pass age seventy
and a half to charity. And we've seen a little
inflation adjustment in the amount that you can give, but
it's now over one hundred thousand dollars per year. It's
a way to reduce the tax burden associated with that
(13:05):
I RaSE. So that's another strategy to consider. I just
wish it were available to people of all ages where
you could potentially lighten up your I RAY a little
bit and get a tax break and do some charitable giving.
Speaker 2 (13:18):
So we're talking about spending in retirement, but we have
yet to talk about drawing down portfolios. Bill Sharp, Nobel
laureate and a key person when it comes to both
modern portfolio theory and understanding asset allocation, has called this
the thornious problem in all of finance. Why is figuring
(13:43):
out how much to draw down your portfolios, whether just
to live on it or for special spending. Why is
that such a challenging set of numbers?
Speaker 3 (13:55):
The key issue is that you're dealing with a bunch
of wild cards. So do you have an uncert in
time horizon. You don't know how long you'll live, and
you may have a little bit of a window into
that as you age, but most of us do not
have that crystal ball. And then we don't know how
the markets will perform over our retirement time horizon. And
then this recent inflation shock really illustrated the wild card
(14:17):
that inflation is for retirement plans. So you don't know
how inflation will play out over your horizon. So you
don't know how much you'll have to elevate your spending
just to kind of keep your head above water. So
all of those things are super tricky to get to
get your arms around. And the key conclusion for a
(14:39):
lot of people is like, well, I'd rather be safe
than sorry. I'd rather be a little bit conservative if
it means a very high likelihood that I won't run out.
But I do think that kind of one and done
withdrawal rate. The four percent style guideline is, you know,
maybe a good proxy if you're fifty in trying to
figure out if you have enough. But it's not a
(15:01):
retirement spending plan because people don't spend that way. They
don't just spend the same amount in a straight line
adjusted for inflation throughout retirement.
Speaker 2 (15:09):
It's lumpier, so you have a sequence of return problem
on the asset side, and then you have a front
loaded spend on the consumption side. That sounds like that
could be potentially challenging with just a straight up four.
Speaker 3 (15:25):
Percent, definitely, and then long term care, which we talked
about earlier, that's another wild card in the mix.
Speaker 2 (15:32):
So how often should retirees be reviewing their holdings? How
often should they be making changes to their budgets? Is
this a set and forget or do you need to
regularly be updating this.
Speaker 3 (15:46):
I like the idea of doing it once a year
as kind of a holistic strategy where you're checking up
on your withdrawal rate. You're looking at what your portfolio
could support in the year ahead, and you're doing a
little bit of portfolio maintenance. So I'm a big believer
in the bucket approach to retirement income. If you've spent
from that cash bucket in the previous year, you're also
(16:08):
looking at your portfolio and deciding, well, where is the
same place for me to pull from if I need
to top up that cash bucket to provide me with
spending money in the year ahead. And you're also doing
a little bit of tax planning as well, so if
you're subject to required minimum distributions, for example, you're figuring
out where to where to go for them. So I
(16:30):
think a good, one stop, holistic portfolio review is fine
for most retirees.
Speaker 2 (16:38):
And our final question, you talked about the difference between
retirement spending and legacy planning. Explain to listeners what that
difference actually is.
Speaker 3 (16:51):
So I'm not sure how to answer that question, Barry, And.
Speaker 2 (16:56):
It came from your article about your parents helping you
with the down payment.
Speaker 3 (17:01):
Okay, okay, could you ask me again?
Speaker 2 (17:04):
Sure? So, in the article you wrote about spending while
you're still alive, talking about how your folks help you
and your husband with the down payment for your first
house and how much that was a significant change to you.
Guys personally explain the difference between simple retirement spending and
(17:29):
legacy planning.
Speaker 3 (17:31):
The term spending I think is super loaded. When we
tell people they should be able to spend X in retirement,
I think they automatically jump to It means we're telling
them to buy cars every year and if they don't
need a new one, or go out to dinner every night,
even if that's not really something they want to do.
And so I think this term spending is kind of loaded,
(17:51):
and maybe we're a little bit judgy about it, but
I would urge people to think broadly about retirement spending,
and you use their retirement spending to do some legacy planning.
So you know, the example of our hometown payment is
one way that I think my parents pursued legacy. They
(18:13):
you know, certainly made an impact on our lives. They
kept us nice and close to them so that we
were able to help them later in life because we
lived nice and close by. So I would urge people
to think bigger about retirement spending, that it should encompass
some of these legacy goals, and you should give yourself
permission to give to your loved ones during their lifetimes
(18:36):
and during your lifetime.
Speaker 2 (18:38):
So to wrap up, everybody needs to plan for retirement,
but we also need to think about our spending. The
odds are that we're going to spend more in the
early parts of our retirement when we're still younger and
more mobile than the latter part of our retirement. And
we really need to think about the prior standard of
(19:02):
waiting till you're deceased for the monies to find its
way to the rest of your family. Assuming you have
enough money to live on and that you're not going
to outlive your cash, don't be afraid to spend a
little money. Don't be afraid to donate a little money,
whether it's family members or charity, while you're still alive
and while you could see the benefits of your generosity
(19:25):
with your own eyes. I'm Barry retults. You're listening to
Bloombergs at the money in material
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:16):
Speak to any financial advisor and they'll tell you one
of the biggest challenges they have professionally is getting clients
to actually spend their money. After decades of working and
saving and investing, making the turn to spending money can
be a challenge. I'm Barry Ritolts, and on today's edition
(00:37):
of At the Money, we're going to discuss spending your
molah in retirement. To help us unpack all of this
and what it means to your retirement, let's bring in
Christine Benz. She is the director of Personal Finance and
retirement Planning at morning Star. She's published numerous books on money,
investing and retirement, most recently How to Retire Twenty Lessons
(01:02):
for a Happy, successful, and Wealthy Retirement. So let's start
with the basic problem. Getting those type A personalities who
are used to working and saving and working and investing
to kind of pivot to working and spending is a
big challenge. How big of an issue is this amongst
(01:25):
people who are looking at retirement.
Speaker 3 (01:28):
It's a very big issue, and it's kind of a
difficult topic to talk about because we have a lot
of people in our society who are quite undersaved relative
to what they will need for retirement, they'll be exclusively
dependent on social Security. But there is also a segment
of our population who struggles with spending appropriately. I can't
(01:51):
tell you, Barry, how many times I've been out speaking
to a group of older adults and I'll have someone
come up at the end of one of my sessions,
clearly his or her eighties. Usually his based on the
composition of the audiences I usually speak with, and he'll
proudly say, I only spend two percent of my portfolio
(02:11):
per year, whatever the value is, that's what I spend.
And I kind of think to myself, well, gosh, I
hope that that delivers you a good quality of life.
And I also think to myself, you're probably pretty significantly
short changing yourself if you're just spending at that level.
And as you said, Barry, I hear this from financial
(02:33):
advisors as well, that they struggle getting their clients to
spend appropriately.
Speaker 2 (02:38):
I heard a funny line from a pair of older
clients who were getting on a plane and they were
sitting in first class and they bump into friends they
know who are sitting in coach, and the conversation was
they just could imagine each other's conversation. Look at them
(03:00):
in the front of the plane spending their kids' inheritance,
and then the one sitting in the front of the
plane saying, can you imagine their flying coach so their
kids can fly first first class. It's kind of funny,
But ultimately, isn't this a psychological struggle about not just
outliving your own money. Assuming we're talking about people who
(03:22):
aren't going to outlive their own money, there's still this
enormous hesitancy to spend their kids inheritance or to spend
money when they've spent their whole lives. As Savers tell us.
Speaker 3 (03:33):
About that exactly, it's a sense of identity. I think
that one builds as a saver and an investor that
you are someone who defers gratification. You set money aside
each month, and the further you go along in that journey,
probably the more successful you are, you get to see
the incredible power of compounding. I think there is a
(03:57):
common tendency to kind of anchor on the portfolio Leo's
high water mark, to think, well, if it's here, I
never want to see it go lower. It just does
not feel good to see the balance go down after
a lifetime of seeing it generally escalate. So there's a
lot going on psychologically, and kind of an elephant in
the room in this respect is long term care. That
(04:22):
people who have not purchased long term care insurance and
may have really good reasons to not have done so,
still have this risk of like, oh, may I have
this balloon payment at the end of my life where
you know, I could get stuck with years and years
of expensive care. So I think that that is a
real risk factor that is in the mix as well.
Speaker 2 (04:45):
Really really interesting. So since we're talking about long term care,
let's talk about generally putting together a personalized plan, thinking
about needs and goals, lifestyle considerations. What should someone who
wants to spend more of their money do in order
to feel comfortable that they can afford to spend the
(05:06):
little cash?
Speaker 3 (05:07):
Well, I would say, either get a financial advisor to
help you with this, where they're effectively disbursing a portion
of your portfolio to you per year if you're doing
it on your own, get familiar with the research on
safe spending rates. A lot of the research that's been
done by our team and Others points to the value
(05:28):
of being flexible with your portfolio withdrawals, where you are
taking more when your balance is up when the markets
are up, and you're taking a little bit less when
things are down. I think if people understand the data
that we have on retirement spending, one thing that we
know is that people tend to spend less as they age.
(05:51):
So your early years of retirement should be the higher
spending years of your retirement because that's usually when people's
health is good. They may have pent up demand to
do travel, they may be launching adult children, a lot
of things going on at that life stage. You should
give yourself permission to spend a little bit more early
(06:14):
in retirement with the knowledge that even when we look
at spending trajectories among very wealthy households, people spend less
as they age. So if you're okay with that trade off,
with the idea that you probably will spend less, you
should give yourself a little bit more license to spend
earlier on.
Speaker 2 (06:32):
So let's break those spending desires down. You mentioned travel,
like it's easier to travel in your sixties and seventies
than it is in your eighties and nineties. Hobbies legacy
philanthropy or charitable goals, to say nothing of future healthcare needs.
(06:53):
How should people organize their thoughts and planning for future spending.
Speaker 3 (07:00):
Yeah, I think it's helpful to get very granular about
the budgeting. And I don't mean you know that you're
nickel and diming yourself and looking at every line item.
But if you have, say a big family trip planned
in year two of your retirement, spend some time figuring
out what the implications will be for your plan for
(07:21):
your spending in that year. Know that those big outlays
won't occur every year, but actually spend some time mapping
them out. And the nice thing about that is that,
in addition to it helping your spending plan, it will
also help you get these plans off the ground, rather
than having them as some you know, sort of vague
notion of things that you want to do. You mentioned
(07:44):
lifetime giving, barry to family members and charity. I have
come to be a huge evangelist for this because when
we look at the data on when people inherit money
from their parents, they're usually in their fifties or in
their sixties. They're findingential fortunes are pretty well set by
that life stage, Whereas if you have young people in
(08:05):
your life, whether children, grandchildren, nieces, nephews, you can make
a big impact for them in the twenties, thirties forties
with hometown payments or paying off student loans, and these
don't need to be big ticket gifts. Smaller gifts can
make a big impact. I often talk about how my
mom and dad gave my husband and me a little
(08:28):
bit of padding for our hometown payment on our first home,
and that helped us get into a home that we
were able to stay in for twelve years. We lived
exactly in the community where we wanted to live. So
having that discussion with your loved ones about the gifts
that might help them, I think, is something that can
add a lot of richness to someone's retirement.
Speaker 2 (08:50):
I recall reading your piece, what was it in the
fall last year or maybe around the holidays? Intervevos transfers
is the technical time while you're alive. This seems to
be increasingly modern development. Like I think back twenty five
thirty five years, you didn't hear that much about it,
(09:12):
at least outside of the top one or five percent.
Now it's fairly common for the ex or boomer generation
to help with a down payment or college as you mentioned,
tell us about what you're seeing out in the world.
How significant has this become. Is this something around the
(09:34):
f fringes or are we seeing a lot more intervivos
transfers today than say, twenty thirty forty years ago.
Speaker 3 (09:41):
I don't have any data on it, Barry, but my
sense is that the movement to toward lifetime giving is
picking up steam, and not just for very wealthy people.
I think sometimes people are put off by the term
lifetime giving. It sounds very highbro, but it doesn't have
to be. It can be assistance with some of those
smaller life achievements that young people might might want to
(10:07):
tick off their lists. So I would urge planners and
individuals pursuing their own retirement plans to think about building
in some of those lifetime giving aspirations. And also, you know,
there are really nice tax planning mechanisms that people can
use to help them achieve achieve those things as well.
(10:28):
The donor advised fund for charitable gifts especially.
Speaker 2 (10:32):
And why shouldn't you see family members, friends, whoever enjoy
the benefits of your largest while you're still around it
shouldn't be just something you think about when you're at
you'r a state attorney and you're signing a document and
that's the last you see of it. Why not get
to enjoy your kids or nephews or whoever in a
(10:54):
new house that you help them.
Speaker 3 (10:55):
Get there exactly. That is the huge side benefit of
contemplating lifetime giving.
Speaker 2 (11:02):
So let's talk about a little more formal type of giving.
You mentioned donor advised funds. Philanthropy when it comes to
both financial and estate planning. I'm going to say that again,
philanthropy is a big part of both retirement and estate planning.
Talk a little bit about the idea behind how families
(11:24):
should be thinking about managing philanthropy or donating to causes
that are near and dear to their heart.
Speaker 3 (11:33):
Yeah, get some advice on the tax aspect of this.
The donor advised fund is a really nice mechanism for
people of varying means, and it's especially appropriate for people
who have concentrated positions in their portfolios. Off an employer
stock where you can kind of take a risk out
of the portfolio and donate the say employer stock to
(11:57):
the donor advised fund and get a tax deduction on
that contribution, and you can also remove the capital gains
tax associated with that big gain in the position at
the same time. And then from there on, once you've
established the donor advice funds, you can make those charitable
(12:21):
gifts on an ongoing basis. So that's one strategy that
I would say would be kind of a first line
to consider for people of all levels of wealth. And
then for people who are moving up and getting into retirement,
using the charitable Qualified Charitable distribution from IRAS can be
(12:42):
a really nice strategy as well, where you are giving
a portion of your IRA once you pass age seventy
and a half to charity. And we've seen a little
inflation adjustment in the amount that you can give, but
it's now over one hundred thousand dollars per year. It's
a way to reduce the tax burden associated with that
(13:05):
I RaSE. So that's another strategy to consider. I just
wish it were available to people of all ages where
you could potentially lighten up your I RAY a little
bit and get a tax break and do some charitable giving.
Speaker 2 (13:18):
So we're talking about spending in retirement, but we have
yet to talk about drawing down portfolios. Bill Sharp, Nobel
laureate and a key person when it comes to both
modern portfolio theory and understanding asset allocation, has called this
the thornious problem in all of finance. Why is figuring
(13:43):
out how much to draw down your portfolios, whether just
to live on it or for special spending. Why is
that such a challenging set of numbers?
Speaker 3 (13:55):
The key issue is that you're dealing with a bunch
of wild cards. So do you have an uncert in
time horizon. You don't know how long you'll live, and
you may have a little bit of a window into
that as you age, but most of us do not
have that crystal ball. And then we don't know how
the markets will perform over our retirement time horizon. And
then this recent inflation shock really illustrated the wild card
(14:17):
that inflation is for retirement plans. So you don't know
how inflation will play out over your horizon. So you
don't know how much you'll have to elevate your spending
just to kind of keep your head above water. So
all of those things are super tricky to get to
get your arms around. And the key conclusion for a
(14:39):
lot of people is like, well, I'd rather be safe
than sorry. I'd rather be a little bit conservative if
it means a very high likelihood that I won't run out.
But I do think that kind of one and done
withdrawal rate. The four percent style guideline is, you know,
maybe a good proxy if you're fifty in trying to
figure out if you have enough. But it's not a
(15:01):
retirement spending plan because people don't spend that way. They
don't just spend the same amount in a straight line
adjusted for inflation throughout retirement.
Speaker 2 (15:09):
It's lumpier, so you have a sequence of return problem
on the asset side, and then you have a front
loaded spend on the consumption side. That sounds like that
could be potentially challenging with just a straight up four.
Speaker 3 (15:25):
Percent, definitely, and then long term care, which we talked
about earlier, that's another wild card in the mix.
Speaker 2 (15:32):
So how often should retirees be reviewing their holdings? How
often should they be making changes to their budgets? Is
this a set and forget or do you need to
regularly be updating this.
Speaker 3 (15:46):
I like the idea of doing it once a year
as kind of a holistic strategy where you're checking up
on your withdrawal rate. You're looking at what your portfolio
could support in the year ahead, and you're doing a
little bit of portfolio maintenance. So I'm a big believer
in the bucket approach to retirement income. If you've spent
from that cash bucket in the previous year, you're also
(16:08):
looking at your portfolio and deciding, well, where is the
same place for me to pull from if I need
to top up that cash bucket to provide me with
spending money in the year ahead. And you're also doing
a little bit of tax planning as well, so if
you're subject to required minimum distributions, for example, you're figuring
out where to where to go for them. So I
(16:30):
think a good, one stop, holistic portfolio review is fine
for most retirees.
Speaker 2 (16:38):
And our final question, you talked about the difference between
retirement spending and legacy planning. Explain to listeners what that
difference actually is.
Speaker 3 (16:51):
So I'm not sure how to answer that question, Barry, And.
Speaker 2 (16:56):
It came from your article about your parents helping you
with the down payment.
Speaker 3 (17:01):
Okay, okay, could you ask me again?
Speaker 2 (17:04):
Sure? So, in the article you wrote about spending while
you're still alive, talking about how your folks help you
and your husband with the down payment for your first
house and how much that was a significant change to you.
Guys personally explain the difference between simple retirement spending and
(17:29):
legacy planning.
Speaker 3 (17:31):
The term spending I think is super loaded. When we
tell people they should be able to spend X in retirement,
I think they automatically jump to It means we're telling
them to buy cars every year and if they don't
need a new one, or go out to dinner every night,
even if that's not really something they want to do.
And so I think this term spending is kind of loaded,
(17:51):
and maybe we're a little bit judgy about it, but
I would urge people to think broadly about retirement spending,
and you use their retirement spending to do some legacy planning.
So you know, the example of our hometown payment is
one way that I think my parents pursued legacy. They
(18:13):
you know, certainly made an impact on our lives. They
kept us nice and close to them so that we
were able to help them later in life because we
lived nice and close by. So I would urge people
to think bigger about retirement spending, that it should encompass
some of these legacy goals, and you should give yourself
permission to give to your loved ones during their lifetimes
(18:36):
and during your lifetime.
Speaker 2 (18:38):
So to wrap up, everybody needs to plan for retirement,
but we also need to think about our spending. The
odds are that we're going to spend more in the
early parts of our retirement when we're still younger and
more mobile than the latter part of our retirement. And
we really need to think about the prior standard of
(19:02):
waiting till you're deceased for the monies to find its
way to the rest of your family. Assuming you have
enough money to live on and that you're not going
to outlive your cash, don't be afraid to spend a
little money. Don't be afraid to donate a little money,
whether it's family members or charity, while you're still alive
and while you could see the benefits of your generosity
(19:25):
with your own eyes. I'm Barry retults. You're listening to
Bloombergs at the money in material
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