RETIREMENT INCOME IS VITAL TO OUR HAPPINESS.
Can we manipulate our finances to coincide with our death, the last dollar spent simultaneously with the last breath taken?
Retirees are in a desperate dilemma; will we still be alive when we spend our last dollar? What will happen to us if we run out of money? Happiness may increase with secure finances, but it may plateau or even fall when there is no additional income, like retirement. We attempt to maintain a comfortable lifestyle and not go broke.
Much is written about planning for retirement, but not about how to safely spend your retirement money so it will last as long as you need it. How much to spend is precisely my predicament. My nest egg is diminishing due to market conditions, world affairs, and too many lunches at moderate restaurants.
Mostly, I can’t control these happenings, including growing closer to death every day. As I said in a previous blog entitled, “Its Problematic Not Knowing When You’ll Die,” published in my memoir, “MY PANDEMIC PARADOX” (available on Amazon), the end date is uncertain.
We all have different styles of how to spend money. The classes started in childhood. My three children’s allowances, while varying by age, also differed in their spending styles. One child always had money in his pocket, and the other two were always broke. Spending large sums of money scares me. However, I am comfortable parting with small change but will squander the money multiple times. For example, I will eat lunch out ten times at a lunch counter rather than once at a fancy cafe for the same dollars.
Our lessons as we grew up set the stage for our futures. My husband and I grew up in vastly different-income homes. His family was poor; mine was not. I loved ( and still do) to browse jewelry stores. He always waited for me outside because he said, “I have no interest in jewelry.” On so many levels, this attitude was disappointing. Marriages can fall apart based on how assets are handled.
According to Larry Rosenthal in his article entitled, “How Much To Withdraw From Retirement Savings,” in Forbes Magazine, June 10, 2013, there are factors to consider when deciding how much money to withdraw each year to maximize how long your money last. They are your age and expected years left, the variety of investments you have (like going to 100% bonds for safety — not a good idea), and the potential ups and downs of investment returns during retirement.
The “4% rule” — originated in the early 1990s by financial adviser Bill Bengen — says that if you withdraw 4.5% of your retirement savings each year, adjusted for inflation, your money should last 30 years.
When the 4% rule emerged, investment portfolios earned about 8% annually. According to the article, today’s earnings are generally in the 3 to 4% range.
There are times that I become frantic just from paying my rent. Three aspects of my financial situation make me nuts, one is NYC’s high prices, two is recent inflation, and three, I didn’t count on severe market swerves. Taken together, they cause me uneasiness about my future. On paper, I have lost a lot of money recently and pray that I won’t need much before the stock market recovers.
Many online tools can help you find your withdrawal rate, including ING U.S.’s retirement planner calculator. I plan on looking at this and taking the steps I need to reduce my anxiety. I have been living in the city for one year, and it’s a good idea to see how I’m doing.
It’s possible that I’m worrying over nothing and that I’ll be fine. But what if I need to make significant changes in my lifestyle now?