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Worry Less About Spending Money in Retirement

Greg Sullivan, CPA, CFP®

Director of Financial Education

Last Updated
December 22, 2021

Three Tips for Dealing with Irrational Financial Anxiety

Financial anxiety can hit at any age, and when someone is struggling to make ends meet, those worries are real and justified. However, that’s not the type of financial anxiety I’m referring to in this article. Here, I am addressing “irrational” financial anxiety, which can become especially pronounced as we get older and face the realities of retirement. By irrational anxiety, I mean the fear of spending money when one has plenty of money to spend.

I recently wrote a book, in which I give the example of my parents. One evening, I was at their house for dinner, and they were telling me all about their recent four-week luxury tour of Europe. As we were talking, my mom set a salad bowl on the table and explained that there were no tomatoes in the salad because tomatoes were too expensive that week at the store.

I love that story because it perfectly illustrates what I mean by irrational anxiety. My parents live comfortably in retirement. They had plenty of money to spend on a month-long dream vacation throughout Europe, yet my mom absolutely drew the line at spending a few cents more per pound on tomatoes. Would purchasing those tomatoes in any way impact my parents’ ability to enjoy their retirement? No, it would not have made the slightest impact, yet my mom just could not justify buying tomatoes at a slightly higher price than normal.

Regardless of how well-off we are, we all must make decisions about how to spend our money, but sometimes it’s okay, and even important, to spend a little more to enjoy all that you’ve worked hard to accomplish. Have you ever been anxious about taking a trip or maybe doing a major home renovation because you were concerned how it might impact your investment account(s) and therefore your retirement? When I ask clients this question, almost everyone can recall times where they hesitated or put off a decision because of the fear of not having enough for retirement, even when they inherently know that is not the case.

The following tips can help you turn off the irrational anxiety and stop worrying too much about spending your money.

Tip #1 – Know where you stand

The first step toward feeling more secure in your financial future is understanding how much you have saved and what that translates to, in terms of your retirement lifestyle. Your wealth manager can run projections based on various scenarios to help you understand your specific financial situation and what it means for your retirement. With this analysis you can identify investments or additional income that you may never need for retirement. Once you know where you stand, and how much retirement income you will likely have each month, you can spend freely within those parameters without worrying about every penny.

Tip #2 – Focus on your goals

What’s most important to you? How do you want to spend your time in retirement? Your goals were likely the main driver of your savings when you were planning for retirement, and they should be the main driver of your spending, as well. Once you fully understand and have a plan in place for achieving those goals, you are free to worry less about the small stuff.

Tip #3 – Establish a spend-down plan

Another way to ease your financial anxiety is by having a spend-down plan in place. Taking into account your current situation (#1 above) and your goals (#2), develop a strategy for how you will withdraw assets from your various accounts and income sources, such as Social Security. Ask your wealth manager to provide a visual representation of your spend-down strategy for each year of your retirement, as this can help reassure you that you will have sufficient assets to last your lifetime.

Once you know where you stand, have a plan for achieving your goals and feel confident in your spend-down strategy, you should be able to let go of that irrational anxiety and enjoy retirement a bit more. So go ahead, splurge on the tomatoes – you deserve it.

As with most financial decisions, the key to living with less financial anxiety is to have a plan in place. At Creative Planning, we serve as a partner in helping clients save, plan and spend-down assets in retirement. Our goal is to help ease your financial anxiety by integrating the various aspects of your financial life into a comprehensive financial plan specifically designed to help you achieve your goals and worry less. If you’d like help planning for your financial future, schedule a call with a member of our team. We look forward to getting to know you.

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This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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