How to Spend Confidently in Retirement

Holistic retirement planning isn’t just about saving — it’s about knowing when and how to spend. One of the most common challenges we see is that people who have done a great job preparing for retirement often feel uncomfortable actually using their money.

In this episode of Retirement Roadmap with MasterPlan Retirement Consultants, Evan and retirement planner Mark Fricks break down the psychology behind spending in retirement, how to build confidence in your financial plan, and practical strategies to balance enjoying life today while staying on track for the future.

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Call 770-980-9262 to speak directly with someone about your retirement planning needs.

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Advisory services offered through MasterPlan Retirement Consultants, Inc., a Registered Investment Advisor in the state of Georgia. Insurance, tax and commodities services offered through Fricks and Associates, Inc. dba MasterPlan Retirement Consultants. The aforementioned are affiliated companies.

Transcript

Fear Of Spending In Retirement

SPEAKER_01 0:10

Are you afraid to spend money in retirement? Hey folks, welcome back. Thank you for joining us. Welcome to Retirement Roadmap with Master Plan Retirement Consultants. My name is Evan. With me as always retirement planner Mark Fricks. During this episode, we're going to discuss how you can spend enough money to enjoy life and retirement while still sticking to your financial strategy. Mark, we see that a lot. A lot of stress around budget, especially folks who come to meet us for the first time. Is their money going to last? They're afraid to spend money in retirement.

SPEAKER_00 0:45

And what's interesting is people that have done a good job of preparing for retirement, that have saved, are typically not big spenders anyway. Right. And so it's almost like we have to give them permission to enjoy retirement and spend a little bit of money. I'm not saying go out and buy Ferraris and and whatever, but definitely, you know, you want you've worked a lot on a lot of years. And you kind of want to enjoy that. And so, yeah, it's one thing, yeah, don't go to Starbucks, that's fine, but it's another thing just to like penny pinch so much that it's uh you're almost living in fear. And so a lot of the work we do is trying to give them that permission.

Budgeting As A Mindset Shift

SPEAKER_01 1:20

Yeah, and you know, one of the things that we plan for too is people work, like you said, a long time and save up a long time. And um they want retirement to be the true golden years. They don't want to have to pull back from their lifestyle, you know, when they've worked decades uh saving up and preparing for that moment. And so making sure that your lifestyle coordinates with your plan. It's uh I mean it really comes down to planning. We'll get into that a little bit later for sure, but um especially pre-retirement. So many people, you just mentioned Starbucks, this is a great point. Many people feel guilty about everyday splurges uh for things like coffee, gadgets, uh travel even, you know, retire vacations are more and more expensive because everything is. Um but people worry about those purchases because they think about their savings and derailing retirement.

SPEAKER_00 2:10

Yeah, uh again, it's it's uh the mentality of of a retirement mindset. Um you you don't have that paycheck coming in every other week. And so you begin thinking more about where's my money coming from and am I dwindling things down? Um again, giving yourself permission to spend without being reckless. Um we'll get into a couple of stories later of some actual clients and discussions we've had and things like that. But it is uh all built around planning. Um, and then there's that ugly word budgeting, right? You know, so uh we're we're not uh you know, most people don't want this super formal budget. There are some great apps out there now that can help as well. But it's more about knowing where your money's going, not so much about keeping an envelope for each purchase or or hey, this is my electricity envelope, this is my whatever envelope, but more about understanding where it's going and and and um and again and and again it's a mindset. People uh people that saved and really watched their money all these years, they're not going to all of a sudden start spending a whole lot of money. But we do again want to give them permission to to loosen up a little bit and enjoy that time.

Stop Raiding Retirement Accounts Early

SPEAKER_01 3:19

Well the reality is that you know, enjoying money today and saving for the future, they can exist in the same world, like s when the spending is intentional, right? Uh the the real danger isn't the occasional splurge, it's the lifestyle creeps. So when spending rises and retirement savings fall behind, that's when we start to have an issue. You know, but they can coexist in the same world. I mean dipping into retirement accounts early, like we've seen that, you know, especially younger folks, if they have a 401k they've been putting into for five or ten years or something and they're thinking, oh, should I take something out for my first home or should I you know, that can work for you, but really dipping into those retirement accounts before you really need them uh to cover that short-term spending, you know, that that can under undermine the long-term progress, right?

SPEAKER_00 4:07

That's a that's a great point. There have been studies done about how many people, it's a very large percentage. I wish I knew the exact, but it seems like the 60 to 70 percent range of any time somebody changes jobs, they don't roll over the 401k, they spend it. Yeah. And then they start over again. Yeah. And in today's environment, we're changing jobs six, eight, ten times over a career, as opposed to my father, the father that worked for Lockheed for 35 years, right? Right. And so that they change jobs. It's almost like it gives them permission to spend that money and start over again. And so that's why we have people coming in at age 50, 50, 55 or whatever, that basically have nothing or very little, and now all of a sudden they're panicking and saying, I've got to get started, and of course we help them get started, but uh that is one of the one of the issues that we see a good bit of.

Pay Yourself First With Simple Systems

SPEAKER_01 4:56

Yeah, like you said, it's a mindset. So, you know, you have to just like anything else, you know, we plan retirement planning, you know, we create retirement plans, but even pre-retirement, years before retirement, um it's more of your mindset, like setting up your mindset to intentional. 100 percent. Like a helpful rule would be um discretionary spending should come only after bills, emergency savings, and then retirement contributions. Make sure those three things are handled and then and and honestly, today things are so automated, you know, you can set everything systematically that's just happening every month. So you don't have to once you set it up, get used to that lifestyle, then the discretionary spending can happen on top of that because that's what's left over, right?

SPEAKER_00 5:39

Exactly. It's called paying yourself first. So if you put that money into a retirement first, which is easy to do in today's world because you work for a job, they take it out before you even get your paycheck. So it's a very automatic thing. And then I've I've even had some people I've told that have had a hard time with this is open a couple of different checking accounts and put enough in the first one to pay your known bills, your house payment, your car payment, uh estimate electricity, all that kind of stuff, and then put the rest of your money in a second account. And if you run out of money in that second account, you're done for the month. Because you you know you get your bills over yeah.

SPEAKER_01 6:14

And it's the it's maintaining the discipline to say, I'm not gonna transfer from my savings for this or whatever. Or pull out my plastic card or whatever. Absolutely. You know, it it's that I I really like those sorts of strategies. Uh my wife and I employ a similar one, but not exactly that. Um but you also have to keep in mind, you know, how much minimum does that checking account require, because all of a sudden you've got all these rules and it feels like every year there's more rules on checking accounts and savings accounts. But absolutely, you just have to make sure not only are you hitting where you need to be, but you've got that minimum in there, and y there's a lot more to balance. And and it's not easy, but nothing worthwhile is is easy. Right.

SPEAKER_00 6:55

And again, there are a lot of apps out there. I've I've I've not used any of them. I'm kind of old school, but I'm sure you probably have looked at some of them as well. Um app you know, apps that will help you kind of gauge your money um where it's going, things of that nature, and that's probably a great idea. I've got some clients that basically have one credit card that that gives them points or gives them money back, and they put everything on that credit card and at the end of the month, they pay it off. Now that's the key.

SPEAKER_02 7:20

Yeah.

SPEAKER_00 7:20

You pay it off at the end of the month. So you you you better have a limit of what's going to go on there. And again, if you've reached that limit and you're out of groceries on the 28th, then beans it is, right? So to speak. So it it's it is a discipline. And and you know, I remember when I was in my twenties, uh retirement seemed so far away. And it was like, why should I start now? I mean, I've I've got plenty of time, I'm gonna enjoy life, and you know, looking back, if I'd started 10 years earlier, um I'd be so much further ahead. Yeah. Uh so don't, you know, um I think part of my my mentality, maybe I'm getting a little bit too open here, but was like, I probably won't make it that old anyway. Yeah, who knows if I'll be there. So you know, my 60s, I eat bacon, I do all this other stuff. Why why worry about it as well? But but it is a mindset of of, and I love to see people that come in here, you know, younger couples in their 30s and 40s that have just done a great job. The day they got married, they had a plan, they talked about it, um, um, you know, they had goals, they talked about their goals, what have we reached, what's next, and they've just got already in their 30s and 40s a nice chunk of change in their 401ks and other accounts. It's just really neat to see uh that that discipline.

Three Buckets For Spending Balance

SPEAKER_01 8:34

If you start out that way and you can, I mean it does take a few months to get used to it. It certainly does, because you have to go through a few bill cycles, figure out where you are, what are you actually, especially if never if you've never um really tried to gauge what your monthly spending is, groceries, gas, things like that. It does take a few months, you know, cyclical bill cycles, you know, bill cycles or whatnot. Um but if you set it up, eventually you can set it, and yeah, it does need maintenance, so you have to make sure you're staying within your parameters. But like I said before, you've got your checking or whatnot that is for the monthly bills, groceries, all that kind of good stuff. Then make sure you have your emergency savings where you want it to be, which is different for everybody. You know, there are a a couple of classic rules, three to six months or whatever um of of your income. But that's kind of up to you what you think you need. Um and then outside of that make sure that you are monthly contributing to your retirement savings. And that could be individual things open up, IRA, Roths, whatever. But also if you're working at a a job that offers a 401k or a similar employer-sponsored plan, uh make sure you're at least getting that match. Um set all that up. Once that stuff is in motion and you can kind of just let it run, that's when you start to understand where's my discretionary spending, what do I have? Um Yeah, and and at that point it's kind of more a maintenance mode, right?

SPEAKER_00 9:58

Well, and then if you get a raise or a promotion, you know, you you again you sit down if you have a spouse or a significant other, uh, you sit down, you kind of talk about, okay, we've got five percent more coming in this year, where does that go? Okay, do we do we put that toward a a car uh savings account because we wouldn't need one in two years? Do we put it into emergency? Do we add to our Rothmore? Yeah, uh maybe split it up, don't, don't, you know, spend some of it, maybe enjoy some of it as well. Yeah. Right? So uh again, I think it's got it's got to be intentional. I keep coming back to that word, but that's that's so true.

SPEAKER_01 10:30

And you know, we we talk about the bucket strategy in retirement planning, how every bucket has a different job. You can kind of look at the savings portion as a bucket strategy too, with like a three bucket strategy. So like bucket one covers expenses, essential savings, things like that, including housing, utilities, insurance, groceries, like I mentioned, retirement contributions, make sure all that's set to go. Bucket two is the emergency fund, and like we said, ideally three to six months of living expenses, but you know your situation. Um I wouldn't you know without knowing you, I can't give advice over the radio to specific people, but you know, seeing the stats on how many Americans actually have emergency savings, I would put more intentionality on making sure that you have emergency savings because for the majority of people, if you have a a medical emergency or some big issue come up, mo a lot of people aren't able to handle that. Um so make sure you give attention to your emergency savings before really um spending your discretionary funds. But that it's really important, especially in today's world where things are more expensive. Um we're we're we're worried about our social safety nets, you know, there's a lot going on. Um we need to make sure that we have that available for us.

SPEAKER_00 11:44

And I think the stats tell us that most people have like two weeks in their checking account to fall back on or or less, you know, pay to paycheck to paycheck. Uh so that that's really an important and again before you you know, I I hesitate to say this, but before you max out that retirement plan, you do need to have that cash on hand uh because you you can't access that 401k unless you pay a big penalty. That's a great point. Uh you can borrow it now you're paying interest or you put it on a credit card, like I said, at 28%. So really, you know, I'll tell people that say, how do I get started? Step one, build up that emergency bucket, you know, get that built up, um, and then let's put it somewhere where it will grow. Don't just leave it in a savings account, all of it in a bank earning two percent. We have some very nice conservative portfolios that we can get four, six, eight percent in and be very conservative. Uh so that could be growing, still accessible. Uh you know, I I hate you know, you you certainly want to work up to that match if your match is five percent at work, uh, but still that that emergency fund is so critical.

SPEAKER_01 12:48

Yeah, 100%. So if we've got bucket one, monthly expenses, all the things that we just have to pay to keep ourselves moving, bucket two emergency savings, and then once you've covered all of that with retirement savings as well, um, then you've got bucket three discretionary, and you should be able to enjoy. You can spend and save at the same time. It needs to coexist because uh lifestyle is important, especially for longevity in these habits. Like there's gotta be a balance to keep it going. And also another another point is like windfalls, like bonuses, um, tax refunds, which is coming up, um raises, they can strengthen uh your financial strategy if some of that money goes towards savings. I know it when we get a big check from the IRS after we file the taxes or something, like it feels really good to say, oh uh for me, okay, I'd love to buy a new guitar. I've been looking at this one for a few months. Like it's it's you know, I really need the these new pickups, you know, and I don't have a guitar with this setup yet, right? Um but um showing discipline even with those big windfalls, with those bonuses, with those raises. And there's a really good point that you make about raises too. Some um really disciplined people um when they get a raise, they'll just bump it into their retirement savings. At least part of it, if not all of it, for sure.

SPEAKER_00 14:00

I think something else too is uh where I've gotten in trouble when I was younger was those purchases that I probably went too heavy into. In other words, you know, I I wanted to upgrade my house. So uh okay, I can spend$200,000, but that$300,000 house has everything I want. And all of a sudden my house payment's 30% more than it should have been, and now I'm struggling, you know, to make ends meet.

SPEAKER_01 14:22

And who knows the timing with the the interest rates of the time, you know, or or car.

SPEAKER_00 14:27

I mean, it cars are get you. You know, the first thing they want you to do is get in that car and smell that new car smell, right? And drive it. That was that was the big thing. And and all of a sudden, instead of buying that Corolla, you know, you want that top of the line, you know, forerunner or whatever. Yeah, it feels good, but man, you just spent a whole lot more money.

SPEAKER_01 14:44

And is the car? What's the you know, we don't think about how much is our insurance going to get it?

A Travel Regret Story From Retirees

SPEAKER_00 14:48

Insurance. I never thought about that when I was 18 and 20, was, yeah, that's a nice car, and all of a sudden you get your insurance bill and it's gone, it's doubled, right? You know, to cover it. So don't don't let that that um that emotional wave take you too far. I guess you don't have to keep up with everybody. And and again, I think I think the people that have saved really well, that we know, that we work with, if you'll look at what they're driving, it's fine, it's nice, but it's not a it's not a Porsche. It's not top of the line or whatever, until they get to be 60 and they've saved all this money. Now they can get the Porsche. Now they can do whatever, uh now they might do something better. So uh need to probably mention the website.

SPEAKER_01 15:29

That's a great point, yeah. Uh masterplanretire.com. Uh you can schedule your complimentary consultation. It'll take you directly to our calendar, find a time that works best for you. Uh Mark, what are those consultations like really?

SPEAKER_00 15:41

Yeah, so it's a really great time. We gather a little bit of information uh from you. First of all, we gather more emotional information. And what I mean by that is what are your feelings about money? What are your goals about retirement? When you think you might want to retire, what are you gonna do in retirement? And then we gather some some actual financial numbers uh just to kind of find out what your money's gonna look like the rest of your life. If you retire at this age and you just cruise on, is it gonna last a lifetime? And we look at that, and maybe it does, maybe it doesn't, but also life's not perfect, so we some run some other reports about what if taxes go up or when taxes go up, what if this happens, what what if that happens, what if you lose your spouse, and then we can have strategies that will cover that if we decide to work together. But those repr reports are all complimentary, be glad to run those for you. Masterplanretire.com, there's a little button that says schedule now. Uh you can give us a call at 770-980-9262, uh, and we'll be glad to uh give you some of our time and maybe it'd be worth your time.

SPEAKER_01 16:44

That's good. Masterplanretire.com. So we were talking a little bit uh more focused on pre-retirement, but something you mentioned at the top of the show is um some retirees experience the problem that they've saved well their entire lives, but now they feel uncomfortable spending that money. They've been in an accumulation phase forever. And then in retirement, now we're in decumulation phase essentially, and they don't feel comfortable spending their money. Um and um which I could see that that could be a good problem when you're younger, but in retirement you really have been building up so that you can enjoy that time of your life that you can um stop working and start doing the things that you really want, or have been putting off, hope you know, hopefully not putting off too much. But you know what I'm saying. We've got the bucket list and all that kind of good stuff, but we've seen retirees, you know, like really afraid to spend money.

Income Planning So You Can Spend

SPEAKER_00 17:38

I think there's two reasons. Number one is they know they don't have any more paychecks coming in. Yeah. And also maybe because they've always lived that way. That's why they have money. But the other reason is a story that that I'll relate to you real quickly, and this is this happened to me probably the first year that we founded this firm. Uh I was on vacation, uh, it was a river cruise in Europe, and uh met this couple, lovely couple from Birmingham, Alabama, had the sweetest southern accents. They were probably in their late 70s, early 80s, and kind of got to know them, had dinner with them several times, kind of hung out with them a little bit, uh, had a little bit of a connection. And uh toward the end of the trip, um I was just curious, and we'd gotten close enough. I said, So uh have you been traveling throughout your whole retirement? And they they were like, Really? This is the first big trip we've taken. I said, Oh, really? I said, special occasion or what? He said, actually, to be honest with you, we've been afraid to spend money because we were afraid we'd we'd run out of money. And now we're finally in our 70s, uh, you know, early 80s. We felt like, okay, there's still enough cushion left, let's spend some now. The problem was they could not do most of the excursions because of their age. Uh they couldn't make it up the hills to the castle, they couldn't make it to the villages far enough to to enjoy the tour. And so here they'd waited and they'd waited past their go-go years into almost their no-go years, right? And so they had missed out on some wonderful trips. And so our focus here is having an income plan that gives you permission to spend. That's right. And so we know what's coming in, we know it's coming in for a lifetime, regardless of what the market's doing, um, so that that check never stops as long as you live and as long as your spouse lives. So you can use that to travel, and then you still have other money over here growing in the stock market. And so it's a way of basically delivering that guaranteed paycheck. In fact, it's more guaranteed than a paycheck.

SPEAKER_02 19:26

Yeah.

SPEAKER_00 19:27

Because you can lose a job. You can't lose this income stream. And so that taught us that that had to be a special part of our planning process. And and people love it because they they can see that it works. Yeah. You know, and I love when we kind of have that first planning meeting, had one yesterday, and as I laid it out how it works, the big picture, you could just see they were both nodding. They were like, oh, that makes sense. You said that works. I love this, this is good. And then we move ahead from there. So um that was a lesson we learned, and and we've kind of carried it through all the years.

SPEAKER_01 19:58

The income plan is so crucial. Um, it's it's just one part of the holistic, right, comprehensive retirement plan. But once you create that clear withdrawal strategy, um, that's part of your income plan. It's it's and basically your stress testing in the early years too, your financial plan to see, okay, what do we need, what do we not need. But once you've got that rolling and you've got that in place, then you know where you're at. You don't have to worry about the daily bills, the budget, and everything's uh everything like that. And you could use your other funds that you've allocated. Uh we talked about the bucket strategy, every bucket has a different job in retirement, things like that. But it it uh it really is making room for your lifestyle in retirement.

SPEAKER_00 20:39

Can you imagine being retired? And and there are people out there listening that do it this way, that have they have all their money in the stock market, maybe it's conservative, I don't know. It could be anywhere, it could be in different places, but knowing that any day that the market drops substantially, or any year it drops substantially, your income may go substantially down.

SPEAKER_02 20:59

Yeah.

SPEAKER_00 20:59

And so all of a sudden you're on a strict budget because the market's not doing well, we're in a recession, the economy's not doing good, inflation's up, uh, we're in a bear market, market's down 35 percent, or whatever it may be. I couldn't live that way. Wake up every morning checking, checking the stock market to see what it's doing, and and dreading uh an announcement from the White House or from Congress or from um ExxonMobil or whatever.

SPEAKER_01 21:21

What's my is my budget stake or serial this month? You know, yeah.

SPEAKER_00 21:24

It it's it it would be a horrible way to live. And so that's why we don't set it up that way. We have money to grow, and some years that might be down. Well, that's okay, because we know next year it'll be back up. But in the meantime, where our income's coming from, again, so guaranteed income stream on top of pensions, on top of social security, it's just additional pension type money that's guaranteed to flow again as long as you live.

SPEAKER_01 21:46

So Yeah, and this isn't so much a planning episode as it is talking about you know retirement spending and such, but that's true. Once we set our guaranteed income stream, we don't have to uh be so concerned about the daily budget. At that point, if that's there. Like our bills are covered, that you know, our our monthly bill is covered, right? Um but the excess stuff, long-term growth, things like that, trips, um, yeah, the market could be down. But also part of the plan is to make sure that you have enough flavors in the market that um, you know, something's always making money. You know, every month. You know, there's always something, and so making sure you have enough flavors. So um yeah, if you have a discretionary fund thing to spend money on, money's available. But also, if an emergency comes up, oh, we need a a tree fell on our deck or whatever, we need a new roof or whatever, um, that there's something that's always able you're able to pull from. You have enough uh options there.

SPEAKER_00 22:44

Yes, really interesting. One of our portfolios that is uh our most conservative, uh it's had like three negative years in the last 26 years, otherwise it's averaging seven or eight percent. It was up twenty-something percent last year, just because they happened to hit upon the right, you know, they're they're trying not to lose money first, but they just hit upon the right things, and then there was a couple of things they bought that were making great money, and and so it outperformed our more aggressive portfolios last year, many of them. So just uh but but again, like it like Evan said, to be kind of clear about this, is uh if you've got five or six portfolios, it's because each one has a different flavor, like Evan said, and is it is invested differently, and so each market this one might do better next year, this one might do better the year after, uh, one might be down, but two might be up, or whatever. So hopefully again, there's always something positive that we can go to when an emergency comes up or that desire comes up. Either way.

Free Consultation And Closing

SPEAKER_01 23:39

Uh folks, I want to remind you, masterplanretire.com. You can schedule your complimentary consultation uh with one of our advisors. That's an opportunity to discuss your own retirement, your um hopes, your fears, uh, your dreams, run a series of reports for you. Um that's completely complimentary. Again, masterplanretire.com or call us at the office 770-980-9262.

SPEAKER_00 24:04

And it would it wouldn't it be nice to to have a picture of is your money going to last? And that's what that consultation would do. So until we see each other again, remember plan well and prosper.

unknown 24:14

Take care of the city.