Having trouble spending your money?

Have you ever had trouble spending your money?

If your answer is “no,” then this newsletter isn’t for you!

During my 40 years advising ultra high net worth families on money matters, it may come as a surprise that one of the biggest challenges we face with some clients is being an advocate for spending, rather than saving or investing.

Like all habits in life, training yourself to be a consistent saver, often resulting in bypassing many short-term temptations, takes years to develop. And once it becomes clear that the accumulated resources of a family will more than cover any consumption scenarios in retirement, the rest should be easy. Going from saving to spending in retirement can be a potentially tough hurdle to overcome.

There are many reasons for this, ranging from not having the safety net of a regular paycheck anymore, to observing the fluctuation in value of the proverbial “nest egg” more closely, or perhaps even pangs of guilt from having managed to be in a financial position few others have attained. But the reason isn’t as important as finding a way to overcome it.

Short term “noise” like inflation, recession concerns, rising interest costs, political upheaval, and negative consumer sentiment only adds fuel to this problem.

So as planners, we return to a blank piece of paper and write down all possible expenses in retirement – everything from the basic necessities of life to once in a lifetime trips, philanthropic ambitions, or helping to fund a grandchild’s future college education – and estimate what the initial years of retirement spending will look like.

The term “sequence of returns risk” describes the danger that a market downturn might coincide with a retiree’s first withdrawals from a portfolio, and that those withdrawals will significantly compromise the portfolio’s ability to last through an average 2-person, 30-year retirement period. We have found that setting aside enough cash liquidity to cover your initial 24 to 36 months of retirement overhead helps greatly mitigate this risk, as well as the fear of spending your accumulated funds.

History tells us that even if your retirement date coincides with the start of a lengthy bear market, the duration of that decline rarely exceeds 24 to 36 months.





Arriving at an appropriate amount and time period is a comfort level decision, but erring on the side of caution is best.

Acknowledge the effort and hard work that it took to arrive at the fortunate position of not outliving your assets. Give yourself permission to spend as planned in those initial years of retirement. Expect market volatility to continue in retirement, causing sometimes severe, yet temporary, declines in the value of your long-term portfolio.

As always, please call or set up a time to speak if any questions.




First Trust, History of U.S. Bear and Bull Markets, Daily Returns Since 1942


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