3 Retirement Spending Tips for the Road

Our principles thus far have been largely about preparing for your retirement journey, but this last one includes information about managing your money before and after retirement. By the time you’re finally enjoying the retirement journey that you’ve carefully mapped out, you will still need to pay attention to your spending. Once you retire, it’s important to continue to focus on long-term goals. Otherwise market fluctuations or last minute decisions you make could become a serious roadblock for your retirement plans, forcing you into a detour that you don’t want to take.

Here are a few basic tips for managing your money and appropriate spending in retirement:

1. Invest According to Your Desired Spending Habits

One thing to consider before retirement is the amount of money you can spend then is intimately tied to how you invest now. That’s why we believe so strongly in the importance of setting retirement goals before you start investing. Once you have goals in place, you can decide how to balance risk and protection in your investment portfolio.. Just remember: while excessive risk is to be avoided, it is also possible to be too conservative and end up far away from reaching your goals. If you keep this first tip in mind, the others will logically follow.

2. Remain Flexible

This second tip might sound simple, but most people find it quite difficult, and rightfully so. Once you have a plan in place that’s working, you might find it hard to deviate from that plan. But flexibility is a must for retirement spending. When the markets are volatile, adjusting your spending rate or your retirement income source can be the difference between maintaining a healthy portfolio and letting it drop to levels that cannot sustain your expenses in retirement.

That’s the beauty of working with an experienced financial guide: they’ve traveled this road before and they can help you navigate it safely, letting you know when to stay the course or when a short detour may be necessary to keep you from altering your route altogether.

A certain amount of flexibility will be necessary to accommodate changes in your life and the market when it comes to investing for your retirement journey. Likewise, you’ll want to account for changes in spending needs throughout retirement. For example, although your early retirement years may feature lots of travel, you may find that you want to consolidate your travel the further along you get. If you’re looking forward to entrepreneurial pursuits in retirement, you may find that your initial involvement in those aspirations requires greater spending up front and less as the business matures. What’s important is to keep this need for flexibility in mind and not think of your retirement as a straight, narrow path.

3. Choose an Appropriate Withdrawal Rate

Simply put, if you end up investing too conservatively, your retirement journey could come to an abrupt stop while you still have a long way to go, even if you only withdraw 4 percent, which is widely considered to be the minimum safe withdrawal rate. The key to choosing an appropriate withdrawal rate is that it needs to be addressed inside of your personalized retirement journey map. If you haven’t created one, today’s a great day to get started.

Any number of factors might become a roadblock as you follow your retirement path: a down market early on, unexpected costs in retirement, or a new personal goal that emerges. The important thing is not to abandon an ideal spending rate altogether, but to realize that your spending and investing in retirement are subject to change. By working with your advisor, you won’t have to react to changes you can’t control, like market fluctuations. More importantly, you will have the information you need to control the things you can, like your withdrawal rate. By making well informed financial decisions, the detours you take won’t derail your retirement journey completely.