Retirement Mindset Shift: Saver to Spender

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Tammy LaGorce recently wrote an excellent piece for the New York Times highlighting the difficulty retirees have spending down the retirement assets they worked so hard to accumulate. I hear this sentiment frequently in emails from readers. The Center for Retirement Research at Boston College reported half of retirees are afraid to spend from their savings

mental shift of retirement

Readers of this blog obsess about numbers. We know the best retirement calculators and have checked our results repeatedly. 

Regardless of how many times we check our math, we ultimately have to make important financial decisions with incomplete information. This shift from saver while accumulating to spender in retirement can be scary. Retirement is arguably the largest financial decision of your life.

I recently had the privilege and pleasure of participating in a conversation on the NewRetirement podcast with fellow retirement bloggers Fritz Gilbert of The Retirement Manifesto and Karsten Jeske of Early Retirement Now

Fritz retired at age 55. Karsten and I left our careers in our early forties. Are people who retire a decade, or even decades, earlier than usual immune to these fears? Not at all.

Our discussion illustrated two very different strategies for overcoming fear in deciding if it’s time to start the transition into the unknown of early retirement. 

The Two Approaches

Both Fritz and Karsten took what I’ll call the traditional approach to retirement. Each determined with confidence that they had enough to live without ever earning any more income before leaving their careers.

I took a non-traditional approach by incorporating some earned income into my early retirement spending plans.

Each method comes with unique benefits that can help overcome the fear of making the transition from careers accompanied by regular paychecks and high savings rates to retirement and drawing down investments. Each strategy has distinct risks and disadvantages as well.

Comfort With Retirement Spending

In our conversation, both Fritz and Karsten talked of the certainty that they’ve saved enough. Karsten joked that he is known as “the Grinch” of the F.I.R.E. community for writing the “Safe Withdrawal Rate Series” that blows up the popular idea of a 4% safe withdrawal rate for early retirees. His research indicates the number should be closer to 3%.

He noted that by clearly understanding the numbers he was able to retire with confidence knowing he had enough money to withstand any reasonable scenario. This gives him and others whose numbers he’s analyzed confidence to do what is so difficult for many; use their portfolios to fund the next portion of their lives.

Fritz stated that he padded his numbers. He tracked what he was spending and projected what he thought his retirement spending would look like. To be safe, he added extra margin to assure he wasn’t underestimating his spending. He also decided to work one extra year to be even more certain that he had saved enough.

Both Fritz and Karsten said that they saved enough to pay unsubsidized health insurance premiums. Karsten said he plugged in $20,000 per year and Fritz noted he used $25,000 when estimating how much they would need to spend annually for this expense.

In contrast, I left my career when we had a little less than twenty-five times our current annual spending. My wife and I elected to not save enough to pay for full unsubsidized health insurance premiums. We started with a flexible plan for health insurance in early retirement.

Like many others, I fear spending from our retirement portfolio. The peace of mind they have is a clear advantage to choosing a more traditional retirement.

Retiring Sooner

While peace of mind is important, it is equally important to acknowledge that it comes at a price. Let’s assume that it will take between one and two million dollars for most readers to retire comfortably.

Assuming a 4% safe withdrawal rate, you could spend $40,000 annually from a one million dollar retirement portfolio and $80,000 from a two million dollar portfolio. If you lower your safe withdrawal rate to 3%, you would increase your savings needs to between $1.3 and $2.6 million to create that same amount of income.

How much longer would it take to save an extra $300,000 to $600,000? My wife and I were in the unusual position of saving over 50% of our professional incomes. Still it would have taken about four to five more years to save an additional eight times our annual spending. For most people, it would take even longer.

How does that impact your desired retirement lifestyle? Why are you retiring early?

Our original driving force to retire early was to escape a standard lifestyle while we have good health. I lost an uncle (sudden massive heart attack) and cousin (cancer) in their early forties. My mom and grandmother were both diagnosed with breast cancer in their mid-forties. This made me painfully aware that nothing is guaranteed.

I got serious about retirement planning after the birth of our daughter. It was important for us to change our lifestyle while she was young and appreciated having us around. We timed leaving my career and moving our family west to make these changes before she started school.

Having the willingness to choose a non-traditional retirement allowed us to create the life we desired far sooner than a more traditional retirement would have. This is a clear advantage to a non-traditional approach to retirement.

True Freedom

Many people start their path to financial independence and early retirement in search of freedom. We try to escape the demands of jobs that dominate time and suck energy that could be used in other ways.

Both Fritz and Karsten used their freedom to the fullest. Fritz and his wife spent the better part of the summer enjoying a cross country RV trip. Karsten and his family spent about seven months traveling the world.

My wife and I created a much better lifestyle for ourselves as well. We now spend time together most days pursuing our passions. We, and I in particular, have more quality and quantity of time with our daughter. 

But we still don’t have the complete freedom that those with a more traditional retirement do. It would be as stressful as it would be pleasurable for us to travel for more than a week or two at a time. 

My wife works part-time, has location independence and tremendous flexibility with her schedule. Still she has demands of a normal job — deadlines, meetings, occasional travel and limited vacation time.

The complete freedom to do whatever you want, whenever you want to do it is a clear advantage of a more traditional retirement. However, it is also important to acknowledge that this can be overly romanticized. Few of us are completely free. 

Many people have children, grandchildren, pets, social connections, volunteer work, etc that are more limiting than my wife’s job. That’s not a bad thing. Those are often the things that give life purpose and meaning

Understanding how much freedom you desire will help determine the best path for you.

Acknowledging Reality

Many people have the perception that retirement means no work and no earned income. I frequently receive comments from people telling me that I’m “not really retired.” 

They say I’m “just” a stay at home parent because my spouse continues to earn a regular income. I’m “just” changing careers or becoming an entrepreneur. 

In fairness, there is an element of truth to these statements. It’s also fair for me to point out that having a high degree of financial independence gave me the courage and confidence to choose these options with minimal financial risk.

I’ve studied retirement trends and talked to many retirees. I’m among those who have decided to work in retirement for various reasons. 

The USA Today recently reported, “One in three Americans who are at least 40 have or plan to have a job in retirement to prepare for a longer life.” The same article states that reasons for working go beyond making money. “Other reasons. . . include personal fulfillment such as staying mentally fit, preventing boredom or avoiding depression.”

I acknowledged this and built it into our retirement spending plans. Despite planning a more traditional retirement, Fritz and Karsten both have ended up in a position that looks similar.

Fritz retired comfortably, but he has since accepted a position on a board, continued to monetize his blog and recently started writing a book. Karsten also retired with financial security. Still he trades options, which is not a passive investment strategy. He also writes a blog, is entertaining writing a book and hasn’t ruled out other paid work.

Many people make money after retirement. Choosing to earn income in an enjoyable way can add financial security, make spending less scary and accelerate your time to retirement.

Finding Your Path

People get to the point of considering early retirement by being good savers. Going from accumulation to decumulation requires a different mentality. It is natural to fear spending from the savings you’ve worked so hard to create.

The beautiful thing about retirement planning is that there are few hard and fast rules to follow. This is also the most challenging part of retirement planning.

No one can tell you exactly when to start spending down retirement assets or how much you can afford to spend. You must make choices based on your goals, needs, desires and comfort level.

What will you choose? Let’s talk about it in the comments.

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[Chris Mamula used principles of traditional retirement planning, combined with creative lifestyle design, to retire from a career as a physical therapist at age 41. After poor experiences with the financial industry early in his professional life, he educated himself on investing and tax planning. After achieving financial independence, Chris began writing about wealth building, DIY investing, financial planning, early retirement, and lifestyle design at Can I Retire Yet? He is also the primary author of the book Choose FI: Your Blueprint to Financial Independence. Chris also does financial planning with individuals and couples at Abundo Wealth, a low-cost, advice-only financial planning firm with the mission of making quality financial advice available to populations for whom it was previously inaccessible. Chris has been featured on MarketWatch, Morningstar, U.S. News & World Report, and Business Insider. He has spoken at events including the Bogleheads and the American Institute of Certified Public Accountants annual conferences. Blog inquiries can be sent to Financial planning inquiries can be sent to]

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  1. I’m only semi-retired and 20 hours a week at my W2, but posts like this are great to read. My income has chopped in half but I’m still able to save, just not nearly as much. But with the market still booming and my net worth still rocketing up, I do think about how it will feel mentally when I eventually start drawing down from my investments. The prospect seems a bit daunting, so it’s good to read how others process it.

    1. We’re actually in a similar position. We are on track to have a positive savings rate again this year from just my wife’s part-time income despite doing a major home project this year. Next year, we don’t have any planned big expenses and I’ll finally (after 5 years on the original blog and two years here and working on the book) likely make enough income from my writing to move the needle also.

      While we could definitely sustain our lifestyle by spending from our investments for a couple of decades and possibly forever, it just feels better for us to not do so until we have that peace of mind that Karsten and Fritz talk about. Our path gives us a pretty nice lifestyle until we reach that point, rather than staying in the lifestyle that we had to potentially save more than necessary.

  2. Hello Chris,

    I am a “traditional” retiree, having retired in Dec. 2016, with my wife following in June 2017. Our goal is to create a do-it-yourself pension, so that when we hit age 72 we will be living off nothing but fixed income (SS + small pension + possible annuity). We are fortunate that our house is paid off, we have little debt (car payments, basically), and because we are former state employees, the state pays the premiums for us to continue in the health care plan we had while working (we pay for eye and dental through our union). We have long-term health insurance as well. We hope to be able to convert a small sum from our savings into an immediate fixed annuity. When we have to begin taking RMDs, we would like to channel those into funds for our children’s retirement. We are not as worried about our retirement as we are about our children’s ability to retire, so we hope to be able to pass on a good portion of our 401(k)s to them. In short, we want to be able to continue to save and invest for the future while spending for ourselves from a fixed income, rather than worrying about a SWR. In short, I am trying to make the shift from saver to spender by looking to spend from fixed, guaranteed sources, while continuing to save/invest for my three children. I think it’s a unique plan, and like any plan, I’m not sure it will work precisely as I intend. Should I need to raid my savings I can do that, but I am not sanguine about the future of retirement for upcoming generations, so if I can pull this off, that’s what will make me sleep well at night.

    1. Thanks for reading and sharing Tom.

      A lot of people find it easier to spend money from SS, pension, annuity (and I’ll add rental income or income from a job), while having difficulty spending from a volatile investment portfolio. I think it is interesting that even with a pension and a solid plan for health insurance in early retirement that you fit this pattern.

      My wife and I recognized that we fit this path as well and so decided that we might as well use the financial security that we’ve accumulated to start improving our lifestyle sooner. Like you, we acknowledge that we don’t know precisely how it will turn out, but we’re very comfortable with the small financial risks that we’re taking for an opportunity to live a different lifestyle sooner.


    2. I retired 4 1/2 years ago at age 57, and have found that I am spending less than I anticipated. Because of this, I am converting 15K-20K annually from my IRA to my Roth IRA. While paying a little extra in taxes now, I expect this to prevent a larger tax burden when I start taking RMDs. Just something else to consider, especially if one is able to stay in the 12% Federal Tax bracket while converting IRA to Roth IRA.

      1. Am curious what you do for health insurance. Like you, I retired 3 years ago at age 58. My wife and I have an ACA health plan and because we are able to keep our income low we qualify for significant premium subsidies that make our high-deductible plan affordable. We have a large percentage of our nest egg in tax-deferred IRA’s and would like to do Roth conversions but don’t want to lose the ACA subsidies. Guess we’ll just have to wait til age 65 to make the Roth conversions.

  3. My wife and I retired 6 years ago and have yet to spend down anything in our funds. We have lived of dividends, an annuity and interest. When I turn 70 all that money is what I would call “free” I still have stock and bond funds and it so nice (and different)to go from watching daily the market ups and downs to when was the last time we looked at our portfolio? I have been pondering when SS kicks in do I sell everything and buy another annuity. We would have nothing in the market at all and more income per month than we would ever spend. (Even counting the unexpected (health, etc)

    Great post, thanks.

    1. Paul,

      Just curious if you don’t mind sharing. Why would you surrender control of your investments to buy another annuity? It sounds like you’re getting by w/o SS and w/o the 2nd annuity already. Once you start collecting SS you would be able to increase spending w/o spending from principle or decrease spending from your portfolio by reinvesting the dividends and interest you currently spend while maintaining your current spending level.


  4. I have been retired since 2015. There are many paths to retirement. I worked for a municipal utility and earned a pension. I also saved in a 457 B account for decades. Worked a ton of overtime which boosted my Social Security taxes and eventual benefit for me and the wife. My former employer still pays for my Medicare Advantage premium and half of the wife’s. I carefully used spread sheets to estimate retirement income to compare to my working income. I net more income retired than working. Mainly due to less taxes and reduce living expenses.

    Our Social Security alone makes our basic expense as our home is paid off and the only debt I have is our car which is soon to be paid off. We have always lived frugally. And still do. I travel now, voluntary at our church , I do a lot of hiking and work out at the gym 3 times a week. I also read a lot.

    I used a spreadsheet I built to estimate lifetime impact on when to take our Social Security. In our case because the wife is 4 years older, did not have enough credits to take a benefit on her own record . and the rule that a spouse benefit does not increase after reaching full retirement age the trigger was to both file as soon as I retired would net us the most lifetime money. I mention this as each couple is different. If the wife had enough credits to file on or I was single that result would of been much different. Each couple or individual has to figure out their unique situation.

    Some people cobble an income from a 401 K, buy annuities, and own real estate to generate income in retirement. Or keep working. Many ways to skin the cat of retirement. The biggest factor in my opinion in retirement is health insurance and health care. Especial before Medicare age.If the ACA was not in place I would of waited until I was of medicare age to pull the trigger. If my former employer dropped covering their retirees I knew I was guarantee coverage under the ACA.. I would not of received any subsidy because my income was too high. My wife was already of medicare age. My payment for a decent plan would of been about 1500 a month in my area.I knew I could cover that. Many early retirees with less income would receive help. One group helped much by the ACA was early retirees.

    I have been tapping my 457 B account for fun stuff and to help family. It is still growing faster than my withdraws. If the market drops I simply post pone taking any money out until it recovers. I can do this because I do not need this money to pay my basic bills.

    I have moved some of this money out of my 457 B to an IRA and over the next few years before I am at the RMD age converting it to a roth IRA. Staying just within my marginal tax bracket. A major mistake was not putting some of my saving into a roth account. Correcting that now.

    Another miscalculation was not realizing some family would need help even during my retirement years. I have a disable brother on a limited income I help. And helped my mother in law for decades before she passed away. I also am helping my sister in law and brother in law. . Both are on limited incomes. Occasionally I still help my children and grandkids. But thankfully both of my daughters are self sufficient and ok.

    I have avoided going back to work so far. I still have skills in demand and that at this point in my life is always an option. But throwing me into a higher tax bracket could cost us on our Medicare premium and push us into a higher tax bracket. So the increase in income would be off set a lot.

    I hope this helps other people make good decisions of when to retire. As well as how to finance it.

    1. Great insights Stephen. Thanks for being willing to share so many details of your experience. It’s very helpful to learn from what works (and what hasn’t) for others.


  5. I’ll find it very difficult to make the shift from earning/saving to spending. My current reason not to is the fact that I have kids in middle and high school. At that age, they have school, activities and friends that they need/want to tend to. So touring the world/country (like Karsten/Fritz) isn’t something the kids will like or best for them, IMO. We were not fortunate enough to hit our “FIRE number” until a little later in life. I’m curious what Karsten will do once his kids are older. For me, I might as well keep working as I’ll need to be home a lot anyways … work isn’t too bad if you don’t really care about climbing the promotion ladder and are able to work at home most days.

    Once I retire, we’re planning what are hopefully “layers” of protection to try and avoid sequence of return risks.
    – Withdraw from our portfolio based on some version of a CAPE based withdrawal rule (thanks to Karsten for the introduction to that concept)
    – Ensure my wife maintains clinical skills and medical licenses in case we need some income if thing go drastically bad. Fortunately, part time or per-diem work exists in her profession and as baby boomers get old, geriatric care will very likely continue to grow in demand
    – Look to diversify into real estate. Rental earnings and asset appreciation of real estate are different than stocks/bonds so hopefully will provide some stability during down markets. And I think I may enjoy researching properties.
    – Clamp down spending if need be. You can live on very little if you have no debt or mortgage. Expenses can be cut down to just groceries, health care, utilities, property taxes and modest transportation and entertainment costs if need be. Assuming social security will be paying at 80% of current projections, close to all of these essential expenses should be covered once we are eligible.

    1. Like me, Karsten times his career exit before his daughter started school. They have since settled into a new home and don’t plan to continue a nomadic lifestyle.

      Like you, my wife and I reached the same conclusion that our freedom would be limited by our daughter’s school schedule and our desire for her to have stability, so we felt it made more sense to start our transition sooner and incorporate some continued paid work into our plans. We also have similar contingencies to the ones you mention.

      Thanks for chiming in.

  6. Thanks for the post Chris. Early retired at 56. Now at age 59, plan to delay SS payments until FRA, so portfolio drawdown to some degree is necessary until then to cover living expenses ( I would like to see more analysis of the issues related to drawdown before SS filing.). There are so many unpredictable variables beyond a retiree’s control that factor into the retirement planning equation. I think the best we can do, for many of us with limited resources, is to monitor the equation year by year and adjust as necessary as things roll out.

    The elephant in the room – how will retirees react when the inevitable and overdue bear market wipes out a major chunk of our paper net worth and the decline lasts for a while. This will certainly impact spending psychology.

    I see ages mid 50’s to late 60’s as the “sweet spot” for those of us retirees who want to have a physically active retirement, so have to roll the retirement dice to some degree to take advantage of this very limited time window before the inevitable physical decline begins.

    1. Bill, I wrote a post about our Withdrawal Strategy that may be of interest (we’re planning to delay our SS until Age 70):

      Also, I agree that mid-50’s is a sweet spot, since we can have the confidence to “spend” in retirement, while still having our health. That said, Chris is correct in saying we may have sacrificed 10 more years than he did to get to this point. Great article, good food for thought.

      1. Thanks Fritz. Agree that we never know with certainty, so interesting having a variety of strategies and ideas to build a plan that works for you.

      2. Fritz, the post you linked is one of the most thorough drawdown strategies that I have seen in writing. I will also follow the leads you provided with your “Chain” of posts. Thanks for the information and your efforts.

        P.S. I’m jealous of that good looking rig you now have for your travel adventures!

    2. I wasn’t going to post a comment, but then you mentioned you’d like to hear more about the decision to drawdown before SS filing.
      It was a big decision for me. I have a military pension that covers 75% of our living expenses, and our healthcare is also covered by the military for basically $300/year. My plan was to pull the trigger at 62, use savings to cover the balance of our expenses, and wait til 70 to start collecting SS. My wife has no work credits so she is not eligible until I begin collecting. I stayed on this path for a year. I had tracked our spending and saving closely for years, and we were perfectly on track according to plan. Yet I hated it. I had worked for so many years to build up the investments/savings, and I couldn’t stand the thought of spending them down. So we changed paths. I started collecting SS (and my wife started as well).
      – A bigger nest egg earns more dividends than a smaller one. Spending it down meant my lifetime savings would be diminished. (If we both collected bigger SS payments through age 100, maybe we’d break even, but those are long odds).
      – With both of us collecting SS now, our income exceeds our expenses by a large margin, and I don’t have to drawdown savings. Just the opposite, I can save the extra that’s not needed for expenses. This, and the extra dividends it will earn, will help to balance the higher SS payments I would have gotten by waiting til 70 to start collecting.
      – The breakeven point between collecting lesser payments now vs waiting til 70 and collecting larger payments was around age 82. That’s a bird in the hand scenario. There are no guarantees that we’ll be around that long. But the SS we collect now is in the bank.
      – Psychologically, I knew this was the right decision as soon as I made it and collected the first check. The positive feeling of having passive, guaranteed income that exceeds expenses is huge. The other path of spending down the nest egg to survive was awful, and kept me obsessively watching the money. In the wait-to-collect scenario, the nest egg is essential for survival. In the collect-now scenario, the nest egg just sits there growing, and won’t be touched unless there’s an unexpected crisis.

      Full disclosure: I have one more pension waiting in the wings that I earned after I retired from the military. I could start collecting its monthly payments now, but by waiting til 70, the payments will be more than double what I could get now. That’s a big hedge against inflation and should give us plenty of income even as expenses increase. And of course the nest egg will still be growing untouched, so that could provide another income source if needed.

      There is one other thing I’ll share. If you ask the SS office, they’ll tell you that if your spouse collects on your benefits, they will get 50% of your SS payment. That’s almost accurate. They will get 50% of the payment you would get at full retirement age, even if you start collecting early. Since I started collecting at age 63, my SS payment is lower than what I would get at FRA, but my wife’s payment is more than 50% of what I get. So that was a few hundred a month extra that we weren’t expecting.

      1. Thanks for sharing JJ. A couple of follow up questions that may add more insight.

        Did you use a SS calculator? If so, would you recommend one you found most helpful (or several)?

        Did you factor in RMDs and taxation when making your decision? Again if so, did you find any particular calculators or resources particularly useful?


        1. The online SS calculator didn’t cover enough scenarios, so early on I used their downloadable, advanced calculator to estimate benefits:
          But I got better info by visiting the SS office. They printed out a sheet that showed the monthly payment amount, depending on when I started collecting. It showed every month from age 62 to 70, so I could see exactly how much it would help to delay longer. Since my earning years were over, these sheets were very accurate for all my projections. Using those figures in Excel, I figured out the breakeven points between my two scenarios.
          I didn’t factor in RMDs at all. I’d be interested in what other people consider about that.
          For taxes, I looked at which tax brackets the various income levels would put me in. Social security tax takes extra calculation to figure out, but it’s just a formula based on your other earnings.

    3. Bill,

      What was interesting about our podcast discussion is that whenever we start retirement, be it in our 40’s, mid 50’s or even a more traditional retirement age, there is always some element of rolling the dice both with regards to whether we have enough money and whether we will still have our health. You just never know with certainty.

      Like you, we worried about balancing against the need to invest aggressively enough to have adequate growth for our long retirement vs. the need to protect against the potentially devastating effects of a market crash early in our retirement. Our non-traditional or semi-retirement plan means that we shouldn’t have to spend more than the income that our investments produce, without touching principal for a while. In all likelihood, by the time we transition to a more traditional or full retirement, our portfolio will have grown substantially and we won’t be as concerned about spending from it.

  7. Relying on obtaining enough pay from casual employment to pay for unsubsidized health premiums seems risky to me. If the economy turns negative at the same time one of you has a health crisis–you may not be able to find work. The post online from a FIRE couple where the husband developed a serious brain cancer is instructive in this regard. Also, family history matters nothwithstanding healthy lifestyles. Early cancer and early heart disease in one’s family history are troubling although not fully predictive.

    1. You make good points. In my case, my wife’s health took an unexpected downturn 3 months after I retired, and I became her full-time caregiver. There’s no way I could work a job any more, my schedule revolves around her needs now. So I’m very lucky that we made it to a secure retirement position in time for me to do this. If I had planned to work part time to cover some needed expenses, I’d be in real trouble.

      1. JJ,

        I’m sorry to hear that. Thanks for sharing your experiences and perspectives.


    2. P S,

      You make some good points that we considered. Here are the counterpoints that ultimately won out for us.

      Re: Health insurance. We factored in what we currently pay in health insurance. If we optimized our income to obtain subsidies, we would actually pay less for our insurance buying it on the exchanges than we currently do by purchasing it through my wife’s employer. So we are continuing to allow our portfolio to grow to account for the political risk that the law changes so eventually we will have enough to pay unsubsidized expenses if needed. But as the law is currently written, we have actually saved more than we would need. And by taking this small risk, we can live a better lifestyle far sooner. Also, if we developed a health condition, our out of pocket expenses would go up. But our biggest items in our budget are discretionary (charitable giving, travel, outdoor hobbies, kid’s activities) so if one of us had a serious medical issue we wouldn’t be doing all of those things which would free up the money to cover increased expenses.

      Re: health risks in our family. My cousin and my uncle were both extremely healthy, active, etc and yet had conditions that couldn’t be predicted. On the other hand, my grandfather was the opposite. He chewed and smoked tobacco, was a heavy drinker, and I never saw him eat a vegetable other than french fried potatoes and ketchup and yet he lived to 96. And my grandmother who had CA still lived to a healthy 94 years old after being treated. So you just never know.

      All in all, there is a risk that we don’t have enough to truly retire and live off our portfolio. But there is a very real chance that we’ve already saved too much and we’re living a pretty great lifestyle now while continuing to allow our portfolio to grow and even adding small amounts to it.


  8. Chris
    Great post and I did catch the podcast on If folks are concerned about having enough in retirement, I highly recommend the retirement calculator at that site ( It is very complete and a wonderful tool for the do-it-yourdselfer!

  9. I retired close to three years ago at age 58 after 33 years in a professional practice.

    I worked hard, lived frugally, and adopted investing as a hobby.

    I essentially replaced my professional income with investment income.

    My mantra was any decision to spend a dollar is a decision to work longer.

    In retirement I now find the most difficult decision is how to spend the money. It’s hard to go from a saver’s mentality to a spender’s mentality.

    Do I really need this? Is this the best price/quality deal out there?

    I spend about 20% of what I’m able to spend so my dilemma is changing my mindset from a saver to a spender. Feeling guilty is the main problem believe it or not. I feel sad spending and happy when saving. I don’t feel guilty spending on necessities, but extravagance spending really bothers me.

    I noticed this with a friend of mine whom retired from government service. He gets a monthly check and his stated goal is to spend it each month!

    I need to adapt his philosophy and through most of my inhibitions to the wind!

    1. There is definitely a positive characteristic that allows us to save, but it can become a negative characteristic if we allow fear and guilt to prevent us from enjoying what we’ve worked so hard to build. It is definitely something my wife and I struggle with on different levels and interesting to hear so many different takes on it. Thanks for sharing.

  10. Not sure how in-depth I intend to get with this, but I feel I have something to contribute to the discussion. Especially when it comes to retiring early, suffering sequence of returns issues, taking SS, and living within the SWR (which we have not).

    First a bit of background…I retired a few months after my 57th birthday with $1.51M. That was in January of 2008. Just as the financial crisis was hitting. By the end of Feb ’09 our nest egg had bottomed out just under $865K. But we were ok because we were, at that time, living off a CD ladder I had created over the previous several years. So we were not forced to sell our equities during that time. By the time we had exhausted the CDs the market had begun to recover. Oh, and BTW, we retired to a 40′ motorhome and have spent the last 12 years touring all of North America. So, the summer of ’09 we got ourselves a workamping job (work and camp at the same time), which saved us travel expenses, camping fees, and provided a small stipend to reduce our ‘burn rate’. By the end of that summer our portfolio had improved so much that we no longer needed to workamp and we resumed our travels. By the end of July of ’09 we were back over $1M in our portfolio. By the end of Sep ’10 we were north of $1.2M (our cut-off amount for needing to workamp). And by the end of July ’14 we had fully recovered the $1.51M.

    During all that time our spending exceeded the SWR (4%) by 50%. We have been spending north of 6% a year, on average, for the last 12 years. Yet, as of today, our portfolio has grown to north of $1.624M. I keep a spreadsheet that tracks our portfolio performance and our annual spending, so I have all the data needed to report that our portfolio performance has been 9.88% CAGR (compound annual growth rate) since Jan ’09, before expenses, and 4.25% CAGR *after* expenses.

    Since July ’17 we have been collecting SS. My FRA was 66, but I waited until my wife turned 66 (I was 66.8 years old) to pull the trigger on my SS. And, at that time, we had her begin collecting Spousal SS. In a couple more years she will convert to her own SS at age 70. Our SS income (after Medicare premium deductions) is currently a bit north of $43K and after she starts collecting her own it will jump to just north of $52K. Using a spreadsheet (my favorite tool), I laid out our SS withdrawal options (file early, wait until both FRA, wait until both 70) and settled on the plan we chose because it seemed like a good compromise between collecting the max SS, but being too old to enjoy it, and collecting enough that it allowed our portfolio to ‘rest’ somewhat before RMD starts.

    Also, by that time we will be required to begin drawing RMD from my IRA that will add another $18K to our annual income (she has no IRA). That will put our annual income at almost $70,500. That’s just a tad less than we typically budget for the year for basic needs. Anything extra we need we will take from our taxable brokerage account. Our brokerage account has just about twice as much in it as our IRA. Our SWR by that time should be under 3%. So, we feel good about where we’ve ended up. 8^)

    Also, just as an aside, I recently adjusted our asset allocation down from 72/28 to 67/33, equities to non-equities.

    1. A couple of important points there.

      1.) You were flexible and willing to do things to earn more and spend less when things weren’t going well. You can certainly save more for security, but it can be quite expensive both in dollars and years to save those dollars.
      2.) I wouldn’t expect someone retiring today to be able to WD >4% and replicate your results. That being said, you never know and there are times when you can take >4% and be fine. Unfortunately, you never know until looking back what was ultimately safe.

      I highly recommend taking the time to read ERN’s safe withdrawal rate series that I linked in the post to fully understand these risks.

  11. As the article title implies, I find this early spending stage and its worries a mental burden. A year ago we hired with Vanguard Professional Advisors, which has a Dynamic Spending Model. It ignores the blunt, one size fits all 3 or 4% Rules and tells us how much we can spend this year based on our unique goals, financial plan and expenses, how much we have, other income sources out in our future, like SS at age 70, etc. and make our money last to age 95. It will never ask us to spend more than 5% or less than 2% from one year to the next, which is a manageable band. I have a lot more confidence in Vanguard and all of their expensive proprietary software and experience than I do my own calculations, so their model is a relief, really. It projects we can spend a lot more than 4%/year. To each their own though. I’m enjoying your book!

    1. Thanks for the insights on Vanguards advisory service. A number of readers have asked about it, sounds like something I may need to review.

      1. Yes, That would be worthwhile. It costs 30 basis points + the Vanguard index funds’ expense ratios. I think that’s a bargain in order to avoid costly mistakes I might make out of emotion. It has also proven to be a great way to get my wife and me on the same page. Finally, it gives me comfort to know she has help should something happen to me.

  12. Great post, Chris, and I appreciate the research links.

    While the NYT article focused on the half of retirees who fear drawing down their assets, I noticed that the unmentioned other half is presumably sleeping well at night. Maybe it’s because I’ve been retired for over 17 years and I’ve learned to look for the good news in everything.

    Every major lifestyle change starts with fear and caution (“Have we made a horrible mistake?”) which encourages a scarcity mentality.

    After a few years of experience, I think people are more comfortable in their new lifestyles (“It’s all going to work out!”) and they shift to abundance.

    It’d be interesting to see the Center for Retirement Research repeat their survey in 5-10 years on the original participants.

    At this point in our lives, my spouse and I know that we aren’t spending it fast enough. It’s not fear. We simply don’t want to take care of even a Tesla, let alone a yacht or a private jet. We still enjoy slow travel and we have lots of places left to explore (along with favorites to revisit), yet the money continues growing faster than we’re growing new experiences.

    I doubt we’ll ever spend our last dollar… although we’ll probably donate lots of them to charities.

    1. Appreciate the feedback and insights. There is a lot of validity in what you write regarding becoming more comfortable in the new lifestyle as well as the benefits in looking for the positives vs. dwelling on worst case scenarios. It is however also important to acknowledge that the past decade has been pretty amazing for most people’s portfolios.

      People in your retirement cohort simultaneously made it through a decade plus of life that they no longer need to support while watching their portfolios grow meaning they can comfortably sustain or even increase spending while having a lower drawdown rate than you started with. This means your real financial risk is much less than when you started retirement.

      I hope to be in a similar scenario in a decade, but I think some angst is warranted b/c there is a good likelihood that the next decade won’t treat investors, particularly those drawing down assets in retirement, as well.

      Happy surfing my friend!

  13. We can’t be considered early retirees, really, because my husband didn’t retire until age 63. It was more or less forced on him because the company offered a retirement package to all employees over 60. When all was settled he got about 10 months pay out of the severance, with about 6 months of paid health insurance. After that we were on our own for health insurance. For the first year, we signed up for a silver ACA plan and because he had started a consulting position in addition to the severance still coming in, we had too much income for a subsidy. Between the two of us we paid almost $2000/month for health insurance in 2016. By the following year our income had dropped enough to get a partial subsidy for a silver plan, and then he was eligible for Medicare. I am 2 years younger and stayed on an ACA plan but I finally wised up and got a bronze plan, which meant that we were almost completely subsidized. I became eligible for Medicare this year, thank goodness.
    My husband receives 2 pensions that cover utilities, food, gas, church contributions, and his regular cash withdrawals. Sometimes they cover a little more, rarely a little less. We are very fortunate to have those pensions but they do not cover property taxes, medical insurance, car repairs, house maintenance, clothing, travel, gifts, or any of the other thousand things that seem to come up on a regular basis. We have no debt. We are currently drawing down savings to supplement the pension income. So far we have been able to use mostly dividends and capital gains from various investments we have, although we have dipped into principal a little. Last year we refaced kitchen cabinets, replaced the counter, backsplash, and appliances and bought a new CRV, and the dividends and capital gains did not cover all that.
    Having said that, however, our net worth has not taken much of a hit. We don’t have that much in stocks, about 25%, because we took some out about 3 years ago when we feared that the stock market was getting too frothy. But even with that we have been able to maintain the balance pretty well. Our plan is to wait until my husband is 70 to take his SS. In the meantime, next June I turn 66, FRA, and because my husband was born before Jan. 1, 1954, he still has the option to file a restricted application and collect half of my benefit once I file for my own, which I will do at that time. My benefit is not that great but between the SS coming in and the pensions we should be able to take care of the monthly spending needs (not wants) and Medicare Part B premiums. Then when my husband turns 70 he will switch to his benefit and I will switch to half of his FRA benefit and we should have to withdraw almost nothing from our portfolio for anything, including travel. Of course if some terrible medical problem comes up that requires expensive drugs that would be a drain, or nursing home costs since we don’t have nursing home insurance, but other than that we should be fine.
    We are, like many people, averse to spending when we have spent our whole adult lives saving, and my husband in particular has a hard time with that. And we would like to leave a substantial inheritance to our kids, who both are educated with good jobs but will not be getting pensions, so we worry about their retirements. But even last year when we had the elevated expenses because of the new car and kitchen redo, we only withdrew 4.65% of our portfolio. In the previous years it was less than 4% and this year it should be less than 3%. After my husband starts to take his own SS the percentage should drop way down, possibly to zero. It seems worth it to us to wait for the maximum SS amount like it was worth waiting until he turned 65 for the maximum pension amounts. The portfolio withdrawals just have not been high enough to cause anxiety, and three years from now we shouldn’t have to worry about it at all.

    1. Thanks for writing Kay. Whether you retire at 40 or 70, a lot of the emotions are the same and must be dealt with. Having some fear and apprehension is healthy and keeps us on our toes. It becomes a problem when we have so much anxiety that we can’t enjoy the fruits of our labors that we’ve worked so hard to accumulate. Best wishes on finding your worry free retirement.


  14. Thanks for yet another interesting topic. Everyone has their own special circumstances as to how much is enough before they can retire, whether to work while “retired”, and when and how fast to spend down.

    I had to pause to think about, “Saver to Spender”. I retired early at age 56 and am now 59 1/2. I think of myself as a “Saver”, but guess I would now be in the “Spender” category as I have no job, Realty income, social security, pension, etc. I have mostly been using long held, non-tax advantaged investments where I already paid most of the capital gains, such as mutual funds, DRIPs, stocks, savings, etc. to pay the bills. I have been making extensive use of spreadsheets to figure out how to get to age 59 1/2 so that I can take money out of my IRA and 401k without a tax penalty. I also have Roth IRAs that I am not touching and may even convert some IRA money to Roth IRA.

    My angle has been one of thrift because I never made it to the 25 times annual spending. Hence, the “Saver” mentality. Also, I have not paid off the house mortgage (but have no other debt). Yet despite that, I have decreased the mortgage and increased my investments (thank you record high stock market) since retiring. The key is understanding where the money is spent (budgeting) and having some flexibility. If I had to, I could downsize the
    house or take social security early. But even if the stock market halved in value I would at least make it to full social security age.

    My plan is to spend more next year but still keep budgeting. I hope to eventually hit the 25 times or greater annual spending. I try to plan for several years at a time for both budget and investments. If possible, I will wait
    until age 70 to maximize social security (mine and my wife’s spousal benefit).

    Just recently, I updated my plan on the ACA and there is a question asking your income. I had a thought that I thought was funny. What do you want it (income) to be? I actually had to do several hours research to answer this one question. A low number gives a zero premium. But that is too low to maximize taxes. A high number can make you fall off a subsidy cliff. So the answer is somewhere in the middle. But where in the middle is what took me so long.

    Perhaps I don’t fit the subject matter referenced as a retiree having trouble spending “down” retirement assets. But there may be others reading this that are in a similar situation.

    Sometimes I think that early retirement is just some big equation. Everyone has to find the equation that they find suitable, plug in their numbers, decide on what makes them comfortable, and ultimately give it their best shot. Since you don’t know what tomorrow brings, try to have contingencies.

    1. Well said John G. I think the key is finding balance. Most of us incorporated frugality and creativity to reach this point in life to be having these conversations. You don’t want to throw the baby out with the bathwater, but we do have to change mindsets and practices when they no longer serve us where we are. It certainly sounds like you’re doing a great job of remaining flexible and figuring it out as you go, which is ultimately what we all have to do.

      Best wishes!

  15. My story and spending is different than most, maybe a lesson here? My parents were conservative spenders, yet Dad was businessmen with good money management skills. They had managed Great Depression and wartime eras well and went into retirement with high stock account balances. Problem was with their retirement investing my inlaws and Dad was they got a little to selfish and during down turn loss a large chuck of savings. Not good when in the early stage of retirement. Ruined Dad’s retirement as he was stricken with cancer and in laws just quit stock market investing. In Laws more than made up for problem with fantastic sales of real estate. My Mom recovered losses by taking advice of financial advisor.

    Personally, I wasn’t of a FIRE mindset, just invested to save tax money and take advantage of company matching funds. I bought rental property over time and learned the lessons of hard knocks. My first property ’79 continues to be excellent investment. My later buildings not so much given the lack of good appreciation and the higher labor/time to improve and manage. Failures- bought a really poor active fund and held for a long time not keeping track of performance. This was an early career mistake. Took the advice to forget the investment as they all do good eventually. Dodge & Cox stock fund never did me much good either. It really tanked during GR. I jumped ship at Brexit scare. Left money in cash over a year not smart either. Now S&P and Wellesley 60:40. Also, I may have accomplished the FIRE status in 40’s with major change in employment. Left great stable job to accomplish my dream. Bought nice industrial building and CNC machining for manufacturing. Would do machine shop production and develop products. This was just before GR. MIchigan economy went to Great Depression status. Lost count on how many machine shops and businesses went bankrupt or out. I had to conserve and budget to get by. Wife went to work even before the downturn to offset some of the income loss. The real estate was leveraged to get my business going so we had max payments. 15 years of cramped lifestyle I wouldn’t want to repeat. We managed to pay down debt, swap some debt, refinance, and improve finances. Soon after the compound interest swung to my side with loss of debt. We went into retirement with everything paid off. We did rent part of the machine shop out and that person gave us a good purchase deal. Now we have an excellent foundation given the matching funds of Wife’s job and investments. We lucked out with picking Contra Fund for her 401k that pushed a 16.8% compound growth from ’09 to ’17. It did o.k early on, but really did good after ’09. Our rental income matches our basic living expenses. We spend $12-$24 above this. The IRA’s haven’t loss account balances yet. We will take SS at 70 to ensure better long term finances. My rationale is the federal guaranteed investment is high security given the backing. An investment that has little volatility and is inflation adjusted benefits. I don’t mind losing some upon death when estimating expected lifespan. Actually, not worried of anything at that time. The high monthly payment will work to decrease worry of long term finances. It tempers cost of long term health care, so it’s a no brainer for me. The payment will match our current spending rate. We have a HSA with $40K. I love the account invested in VTI. We plan on letting the account run until needed for long term health care expenses. Twenty plus years should add some value to account. We will sell rentals before taking SS and just stick proceeds in VTI as well. No need for the money other than tapping it when P/E ratio is high for something or other. After SS benefits will go Wellington for IRA and VTI for non tax benefit accounts. Simple and effective. Yes, I will keep track of markets, investments as I’ve learned my lesson.

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