Money management changes at retirement

[bikeknit]

DH and are a second marriage household and have managed our retirement accounts and other money separately while looking at and planning on the combined picture. We have multiple 403B accounts, and a couple of savings accounts plus a chunk of savings bonds from an inheritance. We're wondering what kinds of financial management adjustments people make around the point of leaving the workforce and why. Thanks for your combined experience.

 

[Paddy]

I'll try a quick reply. The major "adjustment" I've become increasingly aware of is how important it is to understand the money part is a joint responsibility. What I or my wife spend or save does affect the other whether we like it or not. We are a team. I bought an expensive camera from "my money". DW was truly OK with my decision. It was and is important to involve her in spending/saving decisions that are "significant" no matter who's money it is. Vice versa too. (Could have taken her to Cuba instead!)

 

[Lsbcal]

There are books written on this that are probably quite thorough. Here is a short list of my thoughts:
1) Be able to combine all money in one synopsis. All the accounts should play together to make a coherent stock/bonds/cash picture. Try to combine accounts at as few financial institutions as possible.

2) Start a simple spreadsheet (or paper/pencil, Quicken, whatever) to total your monthly spending. Choose broad categories. At least understand what your spending habits are and your obligations. It may take a few years for this to become clearer.

3) Select an asset allocation based on your guess at your ability and need to take financial risks. See a fee only planner if you don't want to do this stuff yourself.

4) Understand your financial situation at least to the point you can run FIRECalc (retirement simulator, see threads on this ER site).

5) Select a spending plan that will work for you into your distant old age.

6) Try to get your overall expense ratio down. If you are living off of 4% of assets, then paying 1% for management is quite a hit. Aim for an overall ER = 0.20%.

 

[Animorph]

We have always budgeted by allocating for retirement, then for common expenses, then for individual expenses, then for individual savings. As soon as we're both retired (DW has been kind of slow in that respect), we'll eliminate the individual savings part of the budget. Mostly because we each have enough to cover ourselves with 4%/year of our current individual balances. Also, and we started this a few years before I retired, budget increases are now tied to CPI inflation, same as for Social Security, instead of W2 income. Starting early gives you a chance to try it out, keeps big late W2 income increases from increasing your budget and delaying your retirement, and funnels any extra income into your retirement funds.

Other than those minor changes, everything stays the same. I treat all assets as part of a single portfolio. I'll be withdrawing/Roth converting from my IRA first since I'm 5 years older than DW and my RMD's will always be higher than hers.

 

[bikeknit]

I think we're fine on Lsbcal's list with some tweaking needed for #3 (how might this change in retirement?) and combining accounts (#1). I'll probably pick one of the 403B companies and combine with them when I retire. My husband is in the process of doing that with his now. It should make it easier to keep track.

We've had a combined spreadsheet for quite a few years so we know where that all is. And I put together an expenses spreadsheet a couple of years ago.

Thanks.