How did you transition from saving mode to spending mode?
How did you transition from saving mode to spending mode?
I will be retiring in a few months at age 63. My wife, age 60, would like to work full time a few more years. Neither one of us will have a pension and our plan is to hold off drawing social security at least until my wife turns 66. Based on this, we will need to withdraw from our portfolio to meet living expenses. I've been thinking a lot about how we will handle the mental transition of going from decades of savings to spending down what we have accumulated. I'd like to hear from other Bogleheads who have done this this how it went for you.
Re: How did you transition from saving mode to spending mode
Congrats on your impending retirement. My wife and I were in a similar situation (she was 60 and I was 62) when I retired (she had retired 5 yrs earlier). We are now in our 2nd year of retirement and are living off my taxable accounts + pension until taxable accounts run dry. I had documented our spending over last 2 years of work and based our annual $$ needs based on that. Each year I transfer the annual budget amount into our checking account. Last year (1st retirement year) we met our budget, including financing a wedding with no wants or unfulfilled desires. Forecasting your annual $$ needs is the MOST important part of your retirement plan. Certainly after years of saving it is hard to switch gears, but having budget line items covering your entertainment and travel makes SPENDING those dollars easier. Beast of luck,
Jack
Jack
Re: How did you transition from saving mode to spending mode
I found the mental transition takes care of itself. You figure out how much money you need from your savings to cover the bills and you get it and you pay the bills with it.
This is not meant to be a flippant answer. When the bills are due, if you have money saved, it is not hard to use that money to cover the bills. At least, that was my experience.
This is not meant to be a flippant answer. When the bills are due, if you have money saved, it is not hard to use that money to cover the bills. At least, that was my experience.
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Re: How did you transition from saving mode to spending mode
We waited to retire until our planned retirement income matched our current spending, so there was no dollar difference when retirement started, just different income sources.
Re: How did you transition from saving mode to spending mode
Not a problem....the transition was the whole point of the long term plan...spending is fun part
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Re: How did you transition from saving mode to spending mode
I just set up my retirement income, from tax-sheltered hence taxable now, to be about the same as my taxable income in previous years working.
This exceeds my basic "expenses" by a fair amount and thus allows a fair amount of discretionary spending in retirement.
And I think that's a basic goal of the game...
This exceeds my basic "expenses" by a fair amount and thus allows a fair amount of discretionary spending in retirement.
And I think that's a basic goal of the game...
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Re: How did you transition from saving mode to spending mode
I retired 3 years ago at age 66. It did seem odd to withdraw rather than contribute to our investments, but it wasn't really a difficult adjustment. Congratulations and best of luck in your retirement .
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Re: How did you transition from saving mode to spending mode
It is hard to mentally change from accumulating assets to depleting them. It took a few months being retired to adjust a bit. With a working spouse that helps to provide a softer landing. I had the advantage of a pension that provided about half our monthly needs. I too wanted to delay taking social security so I am using CDs and savings accounts set aside to fund that time period. I also use taxable dividends and cap gains. Each month I have $x dollars sent from my on line bank to a local checking account to supplement my pension.
So far I have not had to sell taxable investments. If I did I would look to sell shares in funds that I eventually want to eliminate first. but you need to look at your projected income and tax bracket from now to age 70. Depending on your wife's income and when you and she collect social security - you may have some low tax years and some high tax years. In general in high tax years you want to sell fewer investment gainers (if you have investment unrealized losses this is the time to take it to offset any gains). You also want to use liquid assets more.
In low tax years the opposite i.e. sell more gainers and ease up on liquid assets.
Some people like to take their monthly draw directly from an investment each month. I like putting 6 months or a years worth in an on line savings account and draw from it. I'm sure it doesn't make much difference but I like to see my living expenses as a separate account that I replenish from various sources e.g. taxable distributions, tax returns and when needed investments.
So far I have not had to sell taxable investments. If I did I would look to sell shares in funds that I eventually want to eliminate first. but you need to look at your projected income and tax bracket from now to age 70. Depending on your wife's income and when you and she collect social security - you may have some low tax years and some high tax years. In general in high tax years you want to sell fewer investment gainers (if you have investment unrealized losses this is the time to take it to offset any gains). You also want to use liquid assets more.
In low tax years the opposite i.e. sell more gainers and ease up on liquid assets.
Some people like to take their monthly draw directly from an investment each month. I like putting 6 months or a years worth in an on line savings account and draw from it. I'm sure it doesn't make much difference but I like to see my living expenses as a separate account that I replenish from various sources e.g. taxable distributions, tax returns and when needed investments.
Re: How did you transition from saving mode to spending mode
Same with me.retiredjg wrote:I found the mental transition takes care of itself. You figure out how much money you need from your savings to cover the bills and you get it and you pay the bills with it.
This is not meant to be a flippant answer. When the bills are due, if you have money saved, it is not hard to use that money to cover the bills. At least, that was my experience.
Re: How did you transition from saving mode to spending mode
I was in a state of near panic, worrying about the D-Day .... Distribution-Day from savings. That day came and went November 2012 without any fanfare. We've settled into a routine. The high returns from the stock market has likely helped my mental anguish. We have 3-4yrs of cash to live on and that helps with the ups and downs of the stock market.
I'm 66 and husband is 70. We are now seeing friends die. Some never got to draw on their savings. Others have gotten old beyond their years. Puts time, money and things in a better perspective.
I'm 66 and husband is 70. We are now seeing friends die. Some never got to draw on their savings. Others have gotten old beyond their years. Puts time, money and things in a better perspective.
the best decision many times is the hardest to do
Re: How did you transition from saving mode to spending mode
You have the same age difference my wife and I have, though I'm just a few years older than you. I'm 65 and have already retired and the wife still works. I'm hunkered down and not spending much as she's working and I can't travel until she retires anyway. So I'm delaying SS right now. The wife will turn 63 later this year, retire and draw early SS. I will then be FRA (66) and will file Restricted Application and draw Spousal benefit on her SS while mine continues to increase. I don't know how long I will delay, but I can switch over anytime it becomes necessary. This way, we can draw more SS while I delay. You might consider this method also.Skizbo wrote:I will be retiring in a few months at age 63. My wife, age 60, would like to work full time a few more years. Neither one of us will have a pension and our plan is to hold off drawing social security at least until my wife turns 66. Based on this, we will need to withdraw from our portfolio to meet living expenses. I've been thinking a lot about how we will handle the mental transition of going from decades of savings to spending down what we have accumulated. I'd like to hear from other Bogleheads who have done this this how it went for you.
Re: How did you transition from saving mode to spending mode
My wife and I are both age 66. I'm retired, the wife is not (she loves her job, they love her).
Hint: Just because you "can" now draw down on those tax-deferred accounts does not mean you "must" do so. I rushed to cash in a portion of an IRA CD when I retired, just because, well, I was retired. Only a few months later did I ask myself "why in the dickens did you do that?" We really didn't need the cash, but I thought it was just something retired folks "do". Over seven years later, that withdrawal still sits in our (taxable) savings account, earning all of 0.7%.
Maybe I'll get off my duff one of these days and buy a new car. The 1994 Buick is nearing the end of its useful life, so to speak.
Hint: Just because you "can" now draw down on those tax-deferred accounts does not mean you "must" do so. I rushed to cash in a portion of an IRA CD when I retired, just because, well, I was retired. Only a few months later did I ask myself "why in the dickens did you do that?" We really didn't need the cash, but I thought it was just something retired folks "do". Over seven years later, that withdrawal still sits in our (taxable) savings account, earning all of 0.7%.
Maybe I'll get off my duff one of these days and buy a new car. The 1994 Buick is nearing the end of its useful life, so to speak.
Re: How did you transition from saving mode to spending mode
I found setting up a budget is paramount to your success in managing your retirement funds. After 2 years, it has been rather uneventful. Actually because of the market is doing so well, our net worth is actually higher than 2012, meaning we're still living below our means. Wife still does not believe that I need a Tesla or Panamera. we only got one car paid in cash, a 2013 Mazda CX-5, hardly a luxury item.
We both keep ourselves physically fit. Mentally I could do better. My volunteering work only took about 8 hours work. Read more on the net and cut down cable to a minimum. Still got 2 dumb phones but we could afford smart phones. Guess I'm still a scrooge deep at heart after all these years.
Good luck. You earned it.
We both keep ourselves physically fit. Mentally I could do better. My volunteering work only took about 8 hours work. Read more on the net and cut down cable to a minimum. Still got 2 dumb phones but we could afford smart phones. Guess I'm still a scrooge deep at heart after all these years.
Good luck. You earned it.
Re: How did you transition from saving mode to spending mode
I agree that budgeting is key, but am reminded that one thing that can endanger even a well-made plan is to retire into a falling market. I had the fortune(?) to retire in 2009 with no pension, no SS and assets down by 33%. It took a couple of years of rising markets before I really felt comfortable with withdrawals. On the other hand if I had retired in 2007 I would have faced a truly harrowing few years. So keep a good budget, tempered by current conditions and whatever you consider a safe withdrawal rate. Then stay the course.
Re: How did you transition from saving mode to spending mode
Though I have been retired for 10+ years we still seem to be in the accumulation mode as our savings and investments are slowly increasing on a regular basis due to the fact that existing pension and SS income streams seem to provide us with more than enough cash for everyday activities and expenses.
RMD will force me into distribution phase (the way that Uncle Sam planned it) in 2015, so I will have to come up with a plan to increase our spending.
RMD will force me into distribution phase (the way that Uncle Sam planned it) in 2015, so I will have to come up with a plan to increase our spending.
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“The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
Re: How did you transition from saving mode to spending mode
Excellent point on RMD, but by then I'll be too old to get into a sports car.