The theme this week on the One Minute Retirement Tip podcast is: new research that will shatter your expectations about spending in retirement. 

Research data reveals that retirees are likely to match their spending to their guaranteed income sources in retirement and show a strong aversion to dipping into their portfolio for income. Could you match your spending in retirement to your guaranteed income sources or will you dip into your investments to supplement your guaranteed income sources in retirement? 

Now it’s important to state that this is based on an average of a group of people with very diverse spending habits, so whether you’re more likely to preserve and grow your assets in retirement, or spend 4% of your retirement portfolio each year to supplement your guaranteed income sources, there is no right or wrong method here. 

Someone who just spends their guaranteed income sources in retirement and let’s their million dollar investment portfolio grow to 2 or 3 million over their retirement years, may not be enjoying life or retirement in a way that’s fulfilling, deferring enjoyment of their retirement years by not taking the trip or not buying a more reliable car when they really should spend some more money. But there are only so many years that retirees can enjoy an active retirement and it may lead to regret later on, realizing that you spent your retirement years in a way that didn’t bring any meaning or fun. 

On the other hand, someone who is supplementing their guaranteed income sources in retirement with spending from their portfolio needs to be very careful to not spend down their assets. Many people who are spenders may load themselves up with a boat, RV, or a beach house that cost money upfront and also cost money to maintain over time. Or they go on expensive vacations, buy a golf membership, and eat out and buy new and expensive clothes and shoes. Or maybe all of the above. Can your portfolio sustain your spending habits even if inflation increases or there’s a drop in your portfolio value? Retirees who are spending down their portfolios still need to remain flexible with a willingness to cut spending and ensure that they don’t lock themselves into too many expenses that can’t be sustained over time. 

The takeaway here is to know thyself. Are you likely to show a preference for preserving assets in retirement, or preserve your spending in retirement, choosing instead to draw income from your portfolio? 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance