Habitual Saver

[foxfirev5]

While planning for my eventual retirement I have discovered a hurdle to finally making the move. From the time my DW and I started out we always saved from every paycheck, bonus, gift ,etc. After 35 years I find it very difficult to reverse this mindset.
I can see us cutting back to the point of pain to save from even our retirement withdrawals. Does anyone feel this way or deal with this?

 

[RetireBy90]

I'm still on-the-job, but I find it difficult to think of spend down phase, first cause we worked so hard and long to stack it up, also because it is a new skill to turn the pile into income. I found the more I plan for spending it is easier. Start thinking of what you will do when time comes. What can you do you don't have time for? Try to dream of doing x and y rather than dreaming of retired. FWIW

 

[W2R]

While planning for my eventual retirement I have discovered a hurdle to finally making the move. From the time my DW and I started out we always saved from every paycheck, bonus, gift ,etc. After 35 years I find it very difficult to reverse this mindset.
I can see us cutting back to the point of pain to save from even our retirement withdrawals. Does anyone feel this way or deal with this?

I am like that, too. I save in retirement. I use the money to pay for bigger purchases. But cutting back to the point of pain? I don't think of my cutting back in that way. I am used to a simple life.

In retirement I buy what I want, but I am happiest when I don't spend my entire withdrawal amount. Also, it's nice to know that the extra money is there if I want to spend it. If anything is left over, I set it aside to perhaps use later. At the end of 2011 I had only spent 2.1% when my planned withdrawal was 3.2%. I sent the excess back to Vanguard.

I was more worried about this before retirement than I am now. Now, I just do what makes me happy (as long as it doesn't exceed my planned withdrawal). You will work it out. Just make sure that you are enjoying your life (simple or not), and that you are being nice to yourself.

 

[Animorph]

I guess I could sell something out of the portfolio and then buy something else with it and consider it "saving". Otherwise, not much saving you can do without a big SS/pension/annuity income that exceeds your spending.

I'm happy to live on my budgeted amount, which I adjust by CPI inflation each year. If the portfolio does better than expected we'll probably travel a little extra. If things go bad we have spending we can cut.

 

[easysurfer]

Don't mean to scare you, but wait until you do retire and then realize no regular paycheck coming in. It does take awhile to get used to that feeling.

I do find myself too in retirement, LBYM and try to spend less than my budget. Old habits die hard.

 

[MichaelB]

You've been saving for a reason. Now it's time to ask yourself why you have been saving all these years. You can enjoy retirement and spend some of your nest egg at the same time.

 

[audreyh1]

Focus on priorities with your spending. It's a little easier to loosen the purse strings if what you are spending money on is really important to you. You'll feel less "wasteful" that way.

And remember: Life is short! then it's over! If you don't spend it - who will get to?

It does take some getting used to!

Audrey

 

[misty57]

DH will retire sometime this year and almost from day #1, we have been savers. Ya, that first pension check is probably going to freak me out.

 

[Nords]

While planning for my eventual retirement I have discovered a hurdle to finally making the move. From the time my DW and I started out we always saved from every paycheck, bonus, gift ,etc. After 35 years I find it very difficult to reverse this mindset.
I can see us cutting back to the point of pain to save from even our retirement withdrawals. Does anyone feel this way or deal with this?

My parents-in-law are like this. They walk around their condo with the lights turned off and the heat (or A/C) at a minimum, complaining happily about how much things cost. Then they put all their assets in CDs and GICs and kvetch happily about inflation. They're in their mid-late 70s but they will never spend the principal.

I suspect that if you've had the personal discipline to save for ER, then you can change your attitude to avoid ending up like them.

You can set your portfolio up to disburse monthly "paychecks". If it makes you feel better you could give yourself 5% extra each month and then "save" it.

 

[Alan]

Fortunately we have been able to give up the saving and start the spending, but not the LBYM habit, in that we stay at or below a 3% WR. Hopefully you will be able to do the same.

the year before we ER'ed was in line with the previous 4 years spending (not including taxes), so using that year as a baseline:

First year of ER our spending was up 27%.

Second year up 31%

Third year (2012) is looking to be up ~20% as all our vacation time will be in the USA.

 

[Shawn]

I know how you feel even though I have yet to retire (hope to do so this year at age 52). In fact, I have a mostly COLA'ed pension waiting for me and will remain in the accumulation phase for many years, perhaps the rest of my life. But this still doesn't seem good enough.

Currently, my paycheck from work allows me to save about 4 times my annual expenses. If I retired today, my pension would allow me to save "only" about 1 times my expenses (this is without even touching my investment portfolio, which has a SWR greater than my pension). So while I'm in good financial shape, the inevitable lowered savings rate in retirement creates a lot of hesitation about pulling the retirement trigger.

I don't know if this is irrational. But it isn't logical and is clearly driven by emotions. I've always been a big saver. It's a way of life. I'm considering ways to mitigate these feelings. For example, even though I'm in the "it's better not to pay off the mortgage" camp, I may pay off my mortgage when I retire. This would allow me to save more each month since I wouldn't have the regular mortgage payment. But this is more of an illusion than anything else.

The psychology of this is interesting.

 

[NW-Bound]

the year before we ER'ed was in line with the previous 4 years spending (not including taxes), so using that year as a baseline:

First year of ER our spending was up 27%.

Second year up 31%

Third year (2012) is looking to be up ~20% as all our vacation time will be in the USA.

Are these 3 ER annual increases relative to the year before ER, or are they incremental from the immediate prior year?

If the latter, you will be spending 2x what you did while working!

 

[Alan]

Are these 3 ER annual increases relative to the year before ER, or are they incremental from the immediate prior year?

If the latter, you will be spending 2x what you did while working!

The former -using the year before ER as a baseline.

For completeness, the latter would be:
27%
3%
-8%

 

[NW-Bound]

OK, thanks.

I didn't think it was the higher spending, but just got to be sure. You see, I am afraid that if I quit working completely and fully retire, I might just fall into your footsteps.

Now, that's scary, doubling expenses every 3 years! FIRECalc does not have that "Alan's spending model", but I already know the success rate without it.

 

[jclarksnakes]

I know about this problem myself but I do not know what the solution is. We have always saved and so we want to continue saving. Who among us would have thought that our LBYM mentality could eventually become a curse?

 

[NW-Bound]

I know about this problem myself but I do not know what the solution is.

If it is not a problem, then why the need for a "solution"?

 

[obgyn65]

I am in the same situation. And this is one of the reasons why I keep coming back to this website - to read messages from other like-minded people...

Currently, my paycheck from work allows me to save about 4 times my annual expenses. If I retired today, my pension would allow me to save "only" about 1 times my expenses (this is without even touching my investment portfolio, which has a SWR greater than my pension). So while I'm in good financial shape, the inevitable lowered savings rate in retirement creates a lot of hesitation about pulling the retirement trigger.

 

[foxfirev5]

Thanks to all for the replys. I have thought about managed payout funds and heaven forbid, annuities. However, if I get my act together I know I can manage the drawdown myself. Looking back over the years we've had considerable swings in income yet always saved. I guess I'll have to learn to do the reverse with swings in portfolio value in retirement.

 

[Danmar]

Seems a little irrational to save all your life and not spend it at some point.
@ Nords great story. My inlaws are like that. I sure don't want to end up that way.
However, a derivative of this "problem" is the fear of spending principal. That is we live (nicely) on dividends and pensions. My DW often says if things go well we can spend part of the portfolio over time as well. Not sure I feel comfortable doing that. We'll see.

 

[H2ODude]

Same boat really. I see from the responses there are a lot of like minded folks. To have saved all these years and then be frozen by a fear of depleting assets is pretty irrational if not predictable. How many times can you run how many calculators to establish some level of comfort? Hmmm.

Having started taking my pension, but restarting a likely soon to be short new career, I have set up goal based on I guess the bucket method. I've used the Fido calculator to establish safe yield (assuming no income from this new gig) and then dialed that to 75% (hey, I'm an engineer and we're supposed to be conservative!). So at beginning of each month when pension comes in I add the amount from the investments buckets to checking account. End of month, what's left over goes into the LOCAL (not investment) savings account. After 5 months of this I've accumulated about $15k in the savings. Under no circumstance do I intend to allow myself to return any of this to the investment bucket; it's for travel or other significant things we can enjoy...now.

I figure if I had the discipline to accumulate this, I can use that same discipline to move funds out to use them. I know, $15k is a lot but we are planning some significant travel this summer. I WILL spend it, not return it!

 

[misty57]

Fortunately we have been able to give up the saving and start the spending, but not the LBYM habit, in that we stay at or below a 3% WR. Hopefully you will be able to do the same.

the year before we ER'ed was in line with the previous 4 years spending (not including taxes), so using that year as a baseline:

First year of ER our spending was up 27%.

Second year up 31%

Third year (2012) is looking to be up ~20% as all our vacation time will be in the USA.

That's exactly what we're planning for our retirement. Increased spending, but still LBYM with a ISWR of <3%.

 

[bizlady]

I was scared to death about the same thing. Though we had lived the previous 4 years comfortably on the returement budget. Every model we ran said we were good to go. DH retired last April and I can honestly say I have not lost a night's sleep.

We were use to weekly paychecks, so we sweep our money from a savings account that holds the years spending to the checking account weekly. Works fine for us.

We saved, we planned, we tested, now we enjoy! Really enjoy!

 

[Khan]

I find it difficult to cease frugality.
Have found it easier to give away money than to spend it.

 

[sheehs1]

I think, come 2013 (when I will be 58 and technically retired), I will find it very hard not to continue saving. So, I probably will and will feel fortunate in being able to do so (knock on crystal ball). Granted, it will not be at the current level but it won't be pennies either. "Saving some percentage of income", at least for me, may prove to be a hard habit to break.

 

[RetireBy90]

So some like Nords have spoken of parents, and others have more income than they need or spend. My mom is in a situation where she gets 2 checks each month, one from pension and one from SS. She also has paid off her home and has about $450K in investments.

Each month she spends one check and deposits the other into a savings acct. She has asked me to watch over her investments so every 6 months or so I sweep savings into her investments and invest according to AA I set up for her with her broker. She is worried she will need long term care and spend her savings and end up needing help.

She is happy, but it pains me to see her saving at the age of 80 and not enjoying her assets. But she is happy, so why screw with it. Just another example FWIW.