6 Ways to Overcome the Terror of Spending Your Retirement Nest Egg
You were probably a teenager when it happened – the moment when you opened your first paycheck and officially started the cycle of earning and spending your own money. Since then, the following process has never stopped:
Work. Earn money. Spend some. Save some (hopefully)… Repeat.
And now, just because you are ready to retire, you are forced to adjust to an entirely different system. Suddenly, it’s supposed to seem totally normal to spend… Then, spend some more… And then, spend even more – drawing down the retirement nest egg that took you a whole lifetime to build?
That can be terrifying! And, if you are feeling scared, you’re definitely not alone. In fact, research from AgeWave found that it can take retirees about 18 months on average to get over feeling uncomfortable.
Six Ways to Overcome the Terror of Spending That Retirement Nest Egg
If you’re uneasy and not sure you can handle watching that nest egg balance fall month after month. Don’t worry. Here are a few tips for taking the leap into retirement spending.
After reviewing and taking action on the steps below, you’ll no longer need that brown paper bag (for hyperventilation). In fact, you might even take your spouse on that tropical cruise you have always dreamed of.
1) Get Really Comfortable with Your Numbers — Use a Detailed Quality Retirement Calculator
It’s pretty much impossible to look at your nest egg and automatically know that it’ll last you through your retirement. There are just too many variables at play.
It’s easy for someone else to tell you you have enough for retirement. It is much more powerful for you to experience seeing exactly how a comprehensive set of your own values will be used throughout your retirement. With this knowledge, you can gain a sense of financial well being and confidence about your spending.
That’s why NewRetirement offers a free comprehensive retirement planning system. Start by inputting some basic information and get an estimate for how long your money will last. Then, add more detail and start running various scenarios and discover your own safe spending levels.
This incredibly powerful system has been rated the best of the web.
2) Speak With a Financial Adviser
Have you ever sold a house before? Did you try to sell it on your own, or did you seek out an experienced professional that sells dozens of homes each year? Most of you probably went with the experienced realtor.
Why? It’s simple. It’s because you were attempting to make a transaction with the largest asset you had at the time… and it wasn’t worth the risk of getting it wrong.
Now that you’re nearing retirement, you need to decide whether or not to trust your own assessments or get professional advice from a financial advisor about your retirement spending and other financial factors. Talking with a financial advisor will definitely ease your concerns about whether or not your nest egg will last as you as you do — however long that turns out to be.
Additionally, a financial advisor can help you optimize your wealth by helping you with:
- Retirement fund management
- Mortgage advice
- Insurance recommendations
- Tax help
- Investment risk
- Estate planning
3) Change Your Mentality
Money is everything – at least, that’s what you thought when you were young. Heck, that’s why you scrimped and saved! You figured that money would give you security, create options, and maybe even give you some happiness.
Well…while that’s not too far off, it’s not entirely true. Money, all on its own, doesn’t really do that much for us. It’s what we do with that money that might lead us toward happiness.
Let’s say you had $100,000 in excess cash that you could do whatever you wanted with. No strings attached. And, if you lost it all it wouldn’t affect your life whatsoever. You decide….to buy a Ferrari 360 (ie. the most beautiful car on the planet). The thrill is immediate: the vibration of the engine, the way it just grabs the road around those tight corners, the smell of European leather…mmmm.
All sensational, but you know what?
It gets old after a while.
No matter how exotic that car is, the story is still the same. It’s awesome for a few weeks, and then it’s just another car that gets you from point A to point B.
Here’s where spending your retirement nest egg becomes fun instead of terrifying. It’s not about fast cars, it’s not even about big houses – it’s about experiences and making memories. It’s about having the time to do the things you’ve always wanted to do, not buying all the stuff you always thought you’ve wanted.
Plan vacations with your wife and trips to Disney with your grandkids.
When you spend your money on memories, you’ll stop thinking about your dwindling retirement and you’ll actually start living your life the way it was meant to be lived.
4) Guarantee Your Income with a Lifetime Annuity
Alright, that was poetic and all…but let’s come back down to reality. It’s still freaky to spend money that you’re not actively earning. If you’re nodding your head with me (and annoyed by my touchy-feely paragraphs above), then this step is for you.
A lifetime annuity is an insurance product that allows you to pay in a lump sum and in turn, receive a guaranteed monthly paycheck — for life (no matter how long that turns out to be).
In other words, if you have $250,000 and you’d like to receive a set payment each month instead of deciding what to do with this money yourself, you could buy an immediate annuity and receive say, $1,000 a month (the amount differs for everyone…so remember, this is just an example).
The consistent pay might be just enough to ease your tensions about your retirement. It was difficult to know how long your nest egg would last when viewed as a whole, but now that you have a set $1,000 coming in with your social security money….yeah, you can see this working.
The downside of lifetime annuities is that they are not designed to offer you stellar returns on your money. They are supposed to offer peace of mind.
5) Don’t Let The Money Shrink
This option is easier said than done, but it is absolutely possible.
If you already have it in your mind that you’d like to leave a hefty inheritance to your children and grandchildren, then this option might just suit you perfectly.
On average, the stock market has earned approximately 7% per year since the early 1900’s. You’ve probably experienced this growth and can attest to the growth figure. But there have been many ups and downs over the last 100 years and now that you’re nearing retirement you need more certainty about returns than before. I imagine you’ll be on the search for some safer investments that yield between 3-5%.
In comes the 4% rule.
According to many investment professionals, withdrawing from your nest egg at a rate of 4% is one way to hopefully ensure that you will still have money at your death…but it’s not a hard and fast rule. Some argue that 4% is too much, some say it’s too little.
And you know what? They’re both right because everyone has different circumstances and therefore, a different scenario and no one can predict what the stock market will do.
If you’re fearful that you’re going to run out of money in retirement, then you could simply withdraw a percentage that is less than or equal to your rate of return on the money.
In other words, plan to withdraw your money at 2%-3%. It likely won’t shrink and you’ll always have comfort in the fact that you’re being ultra-conservative with your precious nest egg.
6) Trading Money for an Even More Valuable Asset
What’s more important than money? Family, friends, experiences…yes, all of these things. But what’s even more important that?
As the story often goes, a man lays on his deathbed with only a few more minutes to live. He knows it, his family knows it, but there’s nothing that anyone can do about it. What is the one wish of that man?
He thinks of opportunities missed, memories forgone, and precious time that was simply wasted. If only he could have it all back… but he can’t.
When it comes to retirement, don’t get scared away from it. Embrace it. You’ve worked all your life to get to where you are today, and now you have the chance to buy the world’s more valuable asset – time.
It’s the one purchase you’ll absolutely never regret.
It’s Time to Retire Confidently
So what do you think? Do the calculators work in your favor? Do all signs point toward making the leap?
If so, you’ll be the envy of many and you’ll join the happy company of countless others that have already taken the leap.
I sure hope you’ve put that paper bag back in the cupboard at this point. You’ve been researching and planning for your retirement for a long time. You know you’ve got enough money and you’re adult enough to spend it wisely, so why not hang up your work boots and start enjoying life?
Walk through the steps above. Retire with confidence. Never look back.