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Be Wise With Money
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4 Tips to Help Calm Retirement Spending Fears
April 21, 2016 | Leslie Pepper; excerpted from Thrivent magazine
How to feel more at ease about spending your life's savings
Tom Pfenning made a comfortable living as a bank executive for more than 30 years. The Thrivent member socked away part of every paycheck into his 401(k) for years. But when he retired, he still felt uneasy about money.
"You get a paycheck every two weeks without fail," Pfenning says. "But now that my money was mainly in stocks, I didn't want to wake up every morning and wonder, 'Am I going to be able to eat today?'"
Pfenning isn't alone in his worry. Most retirees don't want to fret over their finances in retirement. But a few smart financial and mental strategies can help you shift your money mindset so you can feel comfortable as you begin spending your life's savings.
1. Give yourself regular income.
Thrivent Financial representative Libby Greiwe, who works in the Loveland, Ohio, area, recommends retirees set up their own regular withdrawals from their retirement accounts.
"This simulates what you were used to in your working years," Greiwe says.
Just contact your financial institution and arrange for a direct deposit from your retirement savings into your checking account.
2. Examine the numbers.
Retirees should take a close look at their financial situation – their assets, debts and expenses. It may be rosier than they think.
Pfenning put the numbers on paper and realized that now that he wasn't paying for new suits and commuting to work, he had more money to spend.
3. Remember needs & wants.
To overcome spending anxiety, Greiwe has her members set up two budgets. One for "needs" and one for "wants."
The needs category contains the bills that must be paid: mortgage, groceries, health insurance, utility bills and property taxes. The wants budget has the extras, such as vacations or lunches with friends.
This exercise eases people's minds, she says, because they know that in the worst-case scenario, they can cut their wants and cover their living expenses.
4. Prepare for the unexpected.
Ideally, you should have an emergency fund set up before you retire. This gives you quick access to cash when something happens, like medical bills or large house repairs, without having to tap into your retirement accounts unexpectedly and risk triggering a tax penalty. This account should have enough money in it to cover about three months' worth of expenses, plus a small cushion.
Planning ahead for how you'll actually tap into your retirement savings pays off, as Thrivent member Dona Pugh found out.
When a company buyout forced her to retire, she wasn't sure she and her husband would be able to make it financially. But she worked with her Thrivent Financial representative to figure it out.
After putting all the information down on paper, Pugh realized that she and her husband's actual expenses were less than she thought.
"Once we got the first Social Security direct deposits and our Thrivent Financial direct deposit, I was able to see how the amount [of money] coming in was going to support the amount going out," Pugh says.
She even felt comfortable enough to tap their savings for a cruise around the British Isles, which she and her husband covered through their regular retirement withdrawals. "What a relief, and what freedom!" Pugh says.
Easing the transition
You've worked hard to build up your retirement savings over the years. So switching from a "savings" mindset to a "spending" mindset once you hit retirement can be tough. Working with a Thrivent Financial representative can help bring you some reassurance during this transition so you can feel more comfortable about starting to spend your savings.
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