First Month of Retirement - Still in Savings vs Spending Mode

[cyber888]

Questions: How long did you shift from savings mode to splurging/spending mode after you retired?

So, retired and FIRED last June 30, 2023.
I have not really spent much money, just ate/cook at home, have not gone out really.
Asked wife if she wants to go out and see the Indiana Jones movie, and she's in no rush. She does not feel it - the weather is also too hot.

So planning to go out next week - have lunch and go see this movie. There's no push on my part, I just like to go to the gym in our community club house, and then couch potato on my 85 inch TV screen, and read stuff and do some house work and lawn maintenance.

I'm still trying to crunch on my Excel spreadsheet how much I could pull and withdraw starting next year from my nest egg, since this year I'm just using my cash reserve. I have no pension and still 2.5 years away from getting social security. So, I need to start shifting from savings to spending. Firecalc says I'm 100% in all scenarios. But still unsure. How long did it take you to be comfy with spending?

 

[Souschef]

I retired on Friday, and on Sunday we left for a 2 week tour of South America.
We are a little older, and each had SS and small pensions, which acted as the base for our spending. Firecalc gave us a 100% result.
DW is 5 years younger so she did not get hit with the RMD's like I did.
We have always LBYM, and do not need the fancy cars, clothes, or whatever else the supposed trappings of wealth bring.
It is difficult to change one's mindset from saving to spending, but we have managed to do it.

 

[gauss]

Questions: How long did you shift from savings mode to splurging/spending mode after you retired?

So, retired and FIRED last June 30, 2023.
I have not really spent much money, just ate/cook at home, have not gone out really.
Asked wife if she wants to go out and see the Indiana Jones movie, and she's in no rush. She does not feel it - the weather is also too hot.

So planning to go out next week - have lunch and go see this movie. There's no push on my part, I just like to go to the gym in our community club house, and then couch potato on my 85 inch TV screen, and read stuff and do some house work and lawn maintenance.

I'm still trying to crunch on my Excel spreadsheet how much I could pull and withdraw starting next year from my nest egg, since this year I'm just using my cash reserve. I have no pension and still 2.5 years away from getting social security. So, I need to start shifting from savings to spending. Firecalc says I'm 100% in all scenarios. But still unsure. How long did it take you to be comfy with spending?

Probably not until 10 years later when some inheritance money came in -- but I did ER early at ~ 48 years old (DW followed me 6 years later).

-gauss

 

[Exchme]

Questions: How long did you shift from savings mode to splurging/spending mode after you retired?

So, retired and FIRED last June 30, 2023.
I have not really spent much money, just ate/cook at home, have not gone out really.
Asked wife if she wants to go out and see the Indiana Jones movie, and she's in no rush. She does not feel it - the weather is also too hot.

So planning to go out next week - have lunch and go see this movie. There's no push on my part, I just like to go to the gym in our community club house, and then couch potato on my 85 inch TV screen, and read stuff and do some house work and lawn maintenance.

I'm still trying to crunch on my Excel spreadsheet how much I could pull and withdraw starting next year from my nest egg, since this year I'm just using my cash reserve. I have no pension and still 2.5 years away from getting social security. So, I need to start shifting from savings to spending. Firecalc says I'm 100% in all scenarios. But still unsure. How long did it take you to be comfy with spending?

There is no rush to change your lifestyle. Working out and puttering around is OK. If you really were champing at the bit to do exotic things, you would be doing them. Instead, it sounds like you really wanted time to decompress and create a "new normal".

Financial points to ponder:
You are already drawing on your nest egg, it just happens to be the cash portion. Make sure you have done a look ahead on taxes and cash flow, cash can be your best friend when waiting for SS as it may help you get an ACA premium credit or avoid a high marginal tax bracket, say by staying below the LTCG tax phase-in.

Have you looked at optimizing your combined SS benefits at opensocialsecurity.com?

Do you have enough tax deferred that you should be looking into Roth Conversions?

 

[Blue Poles]

I'm still trying to crunch on my Excel spreadsheet how much I could pull and withdraw starting next year from my nest egg...

Did you not already do this before you decided to retire? You used Firecalc so you are comfortable with retirement, but yeah, it takes some more work to figure out the income streams you have available and when to turn them on, in addition to how much to withdraw.

I retired a little over three months ago and it took two months for my income sources to start hitting my bank account. I suggest getting past this transition period and letting things stabilize a bit. Once you see how much money is coming in, you'll become comfortable spending it. I'm starting to get there myself.

Oh, and congratulations!

 

[cyber888]

Did you not already do this before you decided to retire? You used Firecalc so you are comfortable with retirement, but yeah, it takes some more work to figure out the income streams you have available and when to turn them on, in addition to how much to withdraw.

I retired a little over three months ago and it took two months for my income sources to start hitting my bank account. I suggest getting past this transition period and letting things stabilize a bit. Once you see how much money is coming in, you'll become comfortable spending it. I'm starting to get there myself.

Oh, and congratulations!

Thanks. Yes, I did the crunching before,
but it was way more conservative.
Now, I think I can withdraw more than I originally planned, because ACA healthcare came in cheaper (I'm paying $0.00),
and my portfolio gained more with the stock market increase.

 

[Koolau]

18 years in and I'm still careful about what I buy and what I spend. Having said that, I spent big soon after retiring because I had to rehab the town house we moved to. Sometimes, your circumstance decide your cash burn.

I wouldn't worry too much about it. You'll find your way soon, I would guess.

And congratulations on your retirement!

 

[5Miler]

Retired for 11.5 years, beginning at 58. I had to ease into it as there was no pension of any worth so had to live on my severance and other cash holdings until I hit 59.5 and could tap my IRA. Even so, the day after quitting my j*b, we left on a 7 day cruise and I continued my normal spending habits. I think we took 5 vacations that year. We always planned our trips at least a year in advance so there was no sudden increase in spending for anything. I also paid off my mortgage 6 months after retiring but its not like it was a huge amount ($17K) after paying for 23 years including extra principle payments.

DGF was still working (retired at 55 two years after me due to my nagging) so essentially life went on for a while the same as normal except I didn't w**k anymore. The second year when I turned 59.5 (January 1 to be exact) it was surreal and took a bit of mental effort to setup monthly distributions from my IRA at Vanguard. It was a phycological hurdle for me to make the transition from saving to spending even though I had already been doing it outside my IRA. I got over it pretty quickly though.

SORR worked in my favor as the long bull market kept my nest egg increasing despite over 9 years of distributions quickly taking the sting out of the withdrawals. I stopped the withdrawals about 18 months ago (Jan 2022) when I started taking SS. SS goes a heck of a long way when you don't owe money to anyone.

 

[cyber888]

Retired for 11.5 years, beginning at 58. I had to ease into it as there was no pension of any worth so had to live on my severance and other cash holdings until I hit 59.5 and could tap my IRA. Even so, the day after quitting my j*b, we left on a 7 day cruise and I continued my normal spending habits. I think we took 5 vacations that year. We always planned our trips at least a year in advance so there was no sudden increase in spending for anything. I also paid off my mortgage 6 months after retiring but its not like it was a huge amount ($17K) after paying for 23 years including extra principle payments.

DGF was still working (retired at 55 two years after me due to my nagging) so essentially life went on for a while the same as normal except I didn't w**k anymore. The second year when I turned 59.5 (January 1 to be exact) it was surreal and took a bit of mental effort to setup monthly distributions from my IRA at Vanguard. It was a phycological hurdle for me to make the transition from saving to spending even though I had already been doing it outside my IRA. I got over it pretty quickly though.

SORR worked in my favor as the long bull market kept my nest egg increasing despite over 9 years of distributions quickly taking the sting out of the withdrawals. I stopped the withdrawals about 18 months ago (Jan 2022) when I started taking SS. SS goes a heck of a long way when you don't owe money to anyone.

Great story. I hope SORR also works in my favor, after the big dip of 2022.
I can't wait to get SS when I turn 62.

 

[COcheesehead]

They’re a lot of ways to approach spending. Some take out a year’s worth of expenses and then just draw off that. I have a bond ladder that throws off more than we spend each month so I treat the interest like a paycheck.
Once you have a handle on what you can spend and you reasonably watch expenses not to the penny, but generally, a comfort level sets in and you live your life.
We also created a funny money or blow money amount that we spend without thought. It’s just the extra money we will never need and it goes towards whatever we want.

 

[SecondCor521]

It probably varies a lot by personality type.

I retired about 7 years ago, and have probably spent less than 2% of my stash each year. So that's -14%. I've been over 90% stocks that entire time, and the market is up about 250%. So that's +225% or more.

I'm still getting used to it. At first I would stop and think about it if something was going to be over $50. Now it takes about $200 or so for that same pause to occur.

Things I would do to get used to it:

1. Just doing an action repeatedly makes it seem more normal and safe. It was hard for me the first time I sold in taxable; after a few years it seems more routine. I'm sure it will be hard to start tapping my IRA when that time comes.

2. I still use a "pull" system where I only draw from investments as needed. Others here use a "push" system where they set up automatic withdrawals of $X each month to recreate a paycheck. The "push" system probably would make it easier psychologically because it's automatic.

3. Repeating aphorisms like "I don't want to be the richest person in the graveyard" or "Fly first class or your kids will" helps a little.

4. Just in general seeing the plan work just fine for the past seven years (better than expected actually) helps.

5. Running "Rich/Dead/Broke" (https://engaging-data.com/will-money-last-retire-early/) with my numbers and comparing the grey triangle to the non-existent red sliver helps me put the $ vs time into better perspective.

6. Giving, if you're into that sort of thing, helps. (It can also help with estate tax avoidance.)

I think it's very normal to still struggle with how much is OK to spend in retirement. There will always be big unknowns, particularly how much time we have left and how expensive our final conditions will be, which makes planning difficult.

 

[Al18]

I took 3 vacations my first year of retirement - that get’s you into spend mode.

 

[tmitchell]

I'm 1.5 years into RE, left work at 54. I've just started increasing my spending after feeling very conservative at the start. But now that I'm getting used to the "fake paycheck" I'm starting to experiment with loosening my grip. We don't have kids and I don't want to die with a ton left over. I also met a woman who had a financial advisory business that she sold to RE, and she told me she instructed her advisors to front load all her spending while she's relatively young. That made a big impression on me.

 

[pacergal]

First year of retirement, we went on four trips. Just before retirement, first grand baby born, second year of retirement, daughters wedding.
So we started out BTD, but have mellowed!

Someone here on the forum once posted a quote I have at my desk:
"You are no longer in a savings mode. You are now in a slow spend down mode."
Helps me when I feel a bit anxious to withdraw.

We still live by a budget, but do plan some BTD moments.We are blessed to have pensions also. I have run firecalc and am comfortable with what it says we can spend. We have spent a little less most years.
Despite what we have taken out, we have a bit more than when we retired. I am OK with that.

 

[cyber888]

Thanks for all the Feedback about your first few years of retirement.

I already start spending for hotels for our trip to the Amalfi Coasts this September. I bought our plane tickets months ago. I also bought a new Camera.

Actually, I've been on 3 vacations during the 1st half of this year, before retiring, so the vacation to Italy in September will be the 4th one. I also have to pay for 6 months of car insurance and my realty tax in August. So, will be spending 'saved money'.

 

[Spock]

It's been 7 years and I'm still not splurging. Just when I thought the numbers would allow some loosening of the belt inflation blasted off.

 

[Midpack]

It certainly takes more than a month to adapt to retirement, saving/spending just one of many. It took me at least a year to get comfortable with no paycheck, and it was gradual. Even though I’d calculated in advance, seeing my first actual tax return after retiring was helpful - lower effective rate than any time while working!

And guess what, your comfort level will continue to vary with market conditions along with other milestones like Medicare, Soc Sec, inflation, returns, unexpected expenses or surpluses, family, etc. Life is still ”a box of chocolates” after you retire…

 

[DrRoy]

We started spending heavily on travel in 2-3 years, did several projects on the house, and bought a new car in year 5. This year we have no big things going on besides the travel, and I spent $2500 on a massive quartz crystal for my collection because it was so cool!

 

[Badger]

It has been 11 years since we retired and have yet to change anything in our lifestyle. Spending is about the same even though we can afford to spend more but then we have most everything we want and have always been frugal. We have taken a few international trips as well as road trips but that isnt' any different than pre-retirement. We did buy new cars (one for each) which was about the only change. The money was quickly replaced with dividends. I get more enjoyment out of doing things than spending money. Since retirement I get to do more things more often.

Cheers!

 

[BruinBones]

Retired in 2020.
OMY syndrome gave us extra cushion before then.
Then pandemic immediately afterward gave us another year of not much spending.
Since 2021 however, we have resumed international traveling, remodeled and updated a lot in the house, and daughter has decided she wants to spend more years in college.

 

[cyber888]

We started spending heavily on travel in 2-3 years, did several projects on the house, and bought a new car in year 5. This year we have no big things going on besides the travel, and I spent $2500 on a massive quartz crystal for my collection because it was so cool!

wow, $2500 - cool
Yeah, I project a new car at least 5-7 years after I retire.

 

[Palmtree]

Give yourself so grace. It takes time, sometimes a lot of time to get comfortable with drawing FROM your assets and not contributing to them. I retired 8 years ago at the age of 55. It's only in the past 6 months that I've been comfortable spending as much as the calculators tell me I can. The wife is turning 60 this year and we live on a lake. She wanted a pontoon boat for her 60th so we bought on. Last year it would have freaked me out. This year? Nah. No big thing.