Approaching retirement can be a scary time. What will I do with my time? Will I have enough money to live the life I want? What will give my life meaning? But it is also a time of possibilities. Time to take up a new hobby. Time for yourself – mentally and physically. Time for those trips you always dreamed of. A big part of stress can come from the new financial model that shifts from retirement saving to retirement spending. If you have had good financial advice over the years and been disciplined about saving, you should be able to retire, whether partially or fully, and still maintain your quality of life.

5 steps that will lead you to being at peace with retirement spending:

1. Develop a solid budget

Hopefully, you already had a budget which guided your spending pre-retirement. Take a critical eye to this budget and update it for the new anticipated levels of retirement spending. Some categories will be much the same such as household expenses – mortgage, utilities, etc. Some line items will decrease in retirement. For example, clothing costs may decrease if you are no longer ‘suiting up’ for work. Or car insurance if your mileage amounts decrease substantially. Or, certainly expenses associated with children. We had a pretty substantial raise when our son graduated from college and got a job. We no longer funded his clothes, food, car insurance, etc.

But other expenses may go up for a number of years. Many find that they spend more on travel and entertainment at first since they have more discretionary time. And certainly medical expenses will continue to grow, probably throughout your remaining years. Some increases may last only for part of your retirement. As an example, travel may increase for awhile, then decrease again as you get old enough that significant travel is no longer viable.

But only you have the knowledge about your own situation to predict your new budget needs. And it is critical to make this as accurate as possible in order that you can spend with peace of mind.

2. Get good financial advice

If you don’t have the financial acumen or tools to create your own model of income and expenses over time, I would strongly suggest paying for fee-based advice (i.e. they won’t try to sell you any investments; their charge is only for developing a financial analysis). In the step above, you identified your budget. The other input you will need to know is all your income sources such as social security payments, IRAs, 401 (k)s, pensions or other savings.

The models they can provide will take into account all your income and all your expenses (the above budget), year-by-year, during your anticipated lifespan so that you can be comfortable spending what you’d like (or reducing your budget if necessary). Our plan was one of the best investments we  made toward our peace of mind once retirement comes.

3. Shift assets to provide income

All financial advisors (which I am NOT) will tell you that your asset base in retirement needs to start shifting toward income producing vehicles. Most portfolios will not already be there because earlier in life your investments concentrate on producing growth. But in retirement you want to have money coming in to replace your old salary or wages.

This shift is usually done over time in order to balance returns with liquidity (cash-like assets) but a good advisor will help match your income needs to your planned expenditures and suggest a plan for producing your desired cash flow over possibly 30, even 40, years of retirement.

Of course, one income source that usually starts about the time your work income goes away is social security benefits and these will be factored into your overall planned income.

4. Get comfortable with spending

If you are fiscally conservative, you will probably chaff at the thought of spending your assets while having no work-related income. There is just a paradigm for most of us around NOT touching the ‘nest egg’. But, after all, that is exactly why you have saved all these years – to replace your work income and maintain your lifestyle in retirement. This may be a significant mental and emotional hurdle and many people find it takes years to get comfortable with spending the nest egg. But the sooner you get over it the better!

5. Consider philanthropy

Many people at this stage of life naturally think about the legacy they will leave and sometimes it includes giving to causes you are passionate about. Charitable contributions provide tax advantages as do, potentially, gifts to family members. A tax advisor would be highly valuable in maximizing your giving intention with the appropriate tax write-offs.

So, my best advice would be that good planning is worth its weight in gold when it comes to retirement spending. The five basic steps above will ease your transition to this next phase of life. Carpe diem … you’ve earned it!

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About The Author

Debbie Johnson

Debbie is a native Nebraskan whose career started with AT&T/Lucent Technologies, ending as a Vice President. Then she became a consultant helping businesses grow and be strategic as they give back to their communities. She has written articles for many publications and enjoys sharing her knowledge with others.