Can I make the transition?

[WhiskeyJack]

Hi,

I am 53.5, married, kids out of college starting their own lives, no debt including house and cars. The company I have worked for the last 26 years offered a voluntary separation package which I have accepted. I will continue to receive my salary and full benefits for another year at which time both will stop. I qualified for special early retirement which reduced the discount rate on my small non COLA pension.

My job experience is in financial planning. I have used Quicken to track income/spending/investments for the past 15 years or more. I have run (and re-run many times) every retirement planner I can find including Firecalc. I have four excel files created on my own that I use to model different scenarios.

Everything says that I can retire after my one year severance ends and make it with room to spare. The only real variable to me is spending. Which brings me to my title point (finally some of you might say).

After all these years of saving and watching the investment portfolio grow can I really make the transition to start spending it?

I know that this will have to come eventually but just making this change now (or more accurately a year from now) is a change we know will be very difficult to make.

Over the past 26 years we have definitely lived below our means and I don't see that changing in retirement. However we have never really worried about what we were spending. If we believed we needed (or maybe wanted) something we spent the money and bought it. But already a change has come over us and we are now starting to question do we really need (want) this item.

Thanks for reading and any advice/comments regarding making the transition from saving to spending you can offer will be appreciated.

 

[Pilot2013]

I'd like to know, after running every retirement planner you can find, how did Firecalc compare?

 

[karen1972]

The positive thing is you have a year to figure it out. In the mean time, I'd start tracking and use your calculators to do the comparison. Do you now find yourself eating out more? Are your investments making enough to actually generate the revenue stream and can you tap into them? I'm actually doing a kind of Pre-retirement trial right now. We downsized, moved states, cut back to where we "think" we are comfortable in a retirement like setting, and now running our budget accordingly...Found a bunch of surprises with the move as water is way more expensive here, food, and DMV took a chunk. If your not moving, you'll have to see if your entertainment needs change, etc and then hopefully you are fine.

 

[38Chevy454]

Welcome to the forum. You certainly have the financial understanding, and it seems the root of your question is the emotional change. Switching from an accumulation mode to a withdrawal mode is a definite change in your perspective and emotions. I don't have any magic solution, besides the obvious you have one year to figure out the new non-working lifestyle and expenses while you still have the same income stream as working.

I am working on my own transition and understanding what I need to do, approx one more year for me until I make the switch from saving to spending.

 

[MBAustin]

You are not alone, WhiskeyJack!

There have been a number of threads on related topics including:

http://www.early-retirement.org/forums/f28/overcoming-my-resistance-to-spend-64449.html

http://www.early-retirement.org/forums/f28/decumulation-73596.html

http://www.early-retirement.org/forums/f28/poll-below-within-or-beyond-74850.html

Anecdotally, a lot of folks seem to start off retirement spending very conservatively and then loosen up as they get more comfortable. But waiting too long to spend has its own problems, mostly that as we get past a certain age, we do not have the ability and/or desire to do some of the more expensive things. So best is to figure out what will work for you to start with and then re-evaluate every 6-12 months.

 

[racy]

... The only real variable to me is spending. ... After all these years of saving and watching the investment portfolio grow can I really make the transition to start spending it? .... we have never really worried about what we were spending. ... But already a change has come over us and we are now starting to question do we really need (want) this item.

Hi Jack,
I hear ya. I've been retired 2 years and, like you, a change came over me on spending. For me, it wasn't so much about conserving money but more about a change in my values about what's important in life. Buying something just doesn't bring that much satisfaction. We'd rather spend for experiences/travel.
What do you think is causing your change?

 

[Ronstar]

I didn't notice much of a transition. While working, I funded my expenses from my checking account through atm withdrawals and credit card purchases. I do the same in retirement. The only difference is how the checking account is replenished. And I feel ok in the withdrawal stage as long as my spending is within budget limits that I developed from years of monitoring expenses.

So over the next year while you're receiving a salary, operate as if your are retired living off of your savings. Withdraw $ for expenses while meeting your targeted SWR.

The key is to have your spending tracked and retirement budget developed, and that your proposed spending is supported by retirement calculators like Firecalc.


Sent from my iPad using Early Retirement Forum

 

[WhiskeyJack]

I'd like to know, after running every retirement planner you can find, how did Firecalc compare?

It has been a little while since I have used the online planners. I mostly rely on my spreadsheets now. I know that even though all are different in their level of specificity and assumptions I did not notice any large discrepancies in the outcomes, including Firecalc.

 

[WhiskeyJack]

... The only real variable to me is spending. ... After all these years of saving and watching the investment portfolio grow can I really make the transition to start spending it? .... we have never really worried about what we were spending. ... But already a change has come over us and we are now starting to question do we really need (want) this item.

Hi Jack,
I hear ya. I've been retired 2 years and, like you, a change came over me on spending. For me, it wasn't so much about conserving money but more about a change in my values about what's important in life. Buying something just doesn't bring that much satisfaction. We'd rather spend for experiences/travel.
What do you think is causing your change?

It is really based on emotions vs logic. We logically know if we stick to the plan and monitor the results we should not have any issues. However just knowing that the salary will stop and now we will have to start spending the portfolio vs saving and growing it is a life changing event and one that I guess make us nervous. That nervousness must be translating into becoming more conservative financially. Thanks for sharing your perspective.

 

[WhiskeyJack]

Thanks to all that posted your comments/advice and links. Helpful to read that others have had same thoughts as we are having now.

 

[pb4uski]

What you're feeling is typical. We are creatures of habit and change is hard and even though you have analyzed your situation twenty different ways and all give you a green light there is still uncertainly.

MBAustin's observation that most people start out conservatively was true for me. After a couple years and realizing that the sky was not falling, I am more relaxed about spending now. Investment performance over the past few years has helped as well.

One thing I did since after stopping work I now had the time to do it was to look at each monthly bill and ask if we were getting that service in the best way. We ended up making some changes, like dropping our landline and going with VOIP (Ooma in our case) for our home phone, dropping our cellphone plans with a major carrier in favor of less expensive pay-as-you-go plans that still met our needs, etc. If anything, I think we are perhaps a little wiser about what we spend on since we retired.

One thing I did that was helpful psychologically is that I have a regular monthly transfer from our online savings account which I view as part of our retirement to our local bank account from which we pay our bills. While I know that money is fungible, for some reason knowing that monthly "paycheck" will be coming into our local bank account to cover our regular monthly bills is comforting. Silly I know, but nonetheless comforting.

Welcome to the club and best wishes.

 

[robnplunder]

Welcome to the forum.

I have been splurging a little leading into ER which is likely in this year or the next (yup, OMY casualty). After so many years of LBYM, I let loose a bit b/c when I RE, I figure it would be much harder for me to spend money b/c of my LBYM instinct and lack of income. So far, I am enjoying the splurging, and learning to transition from hard LBYM level to a reasonable LBYM level. We saved so much for a better life, and that life is here and now for us. So, if your finance can withstand it for sure, start unwinding your (extreme?) LBYM ways and start splurging a little. My 2 cents.

 

[wanaberetiree]

@WhiskeyJack

Welcome to the forum.

I've used QW for years and several years ago had a similar dilemma. I do think it's mostly emotional, but the way I addressed it was - I asked myself "how much do I really spend?" and I had no good answer at that time .

Then I added a tag in QW "Bare Necessities" and started assigning it to all spending transactions, in awhile I got my answer... Maybe you can try it too.

 

[WhiskeyJack]

Thanks for this suggestion. I really like this idea. I think it would make this feel like a less drastic change, which for now at least would be good for us.

 

[WhiskeyJack]

Welcome to the forum.

I have been splurging a little leading into ER which is likely in this year or the next (yup, OMY casualty). After so many years of LBYM, I let loose a bit b/c when I RE, I figure it would be much harder for me to spend money b/c of my LBYM instinct and lack of income. So far, I am enjoying the splurging, and learning to transition from hard LBYM level to a reasonable LBYM level. We saved so much for a better life, and that life is here and now for us. So, if your finance can withstand it for sure, start unwinding your (extreme?) LBYM ways and start splurging a little. My 2 cents.

We have been debating doing exactly this. We have been in our current house for about 25 years and have a long list of perhaps needed replacement/remodels. Doing these within the next year while i still have a salary might be best. Thanks for sharing.

 

[WhiskeyJack]

@WhiskeyJack

Welcome to the forum.

I've used QW for years and several years ago had a similar dilemma. I do think it's mostly emotional, but the way I addressed it was - I asked myself "how much do I really spend?" and I had no good answer at that time .

Then I added a tag in QW "Bare Necessities" and started assigning it to all spending transactions, in awhile I got my answer... Maybe you can try it too.

Thanks for the idea. I have been doing q similar process using categories and sub-categoriesand find it helpful.

 

[robnplunder]

We have been debating doing exactly this. We have been in our current house for about 25 years and have a long list of perhaps needed replacement/remodels. Doing these within the next year while i still have a salary might be best. Thanks for sharing.

BTW, I don't call the remodeling a splurging. It's a necessity or investment, isn't it? My definition of splurging is something that gives me pleasure - traveling (Costa Rica, Alaska), buying toys (recently 4k TV & video cameras), better wines, fine dining, giving/donating, etc.. These are the ones that I held off or did less of when I was deep into LBYM'ng. I still do LBYM but opened up my purse a bit to "buy" little bit of joy, happiness, new experience.

 

[bclover]

Lol, I guess I'm the odd duck in the group. . My husband and I were very frugal throughout our lives, always worried about a rainy day or retirement and then he died young at 55 without ever enjoying a dime. Then I lost my baby brother to cancer at 50. living below his means didn't help him much either

So I'm sooo past the "worrying about what will happen when I'm 90" mentality, maybe it's emotional right now as I'm a new widow but I have every intention of spending my money and enjoying life.

This year I've got a European cruise the end of May and a 2 week Disney trip planned. I'm retiring next October (2016) and plan on spending two months in Spain and Portugal.

I know things will probably settle down as I get back on even keel but as of right now, lol if I want to remodel, I'm remodeling.