Transitioning from Saving to Spending at RE

[daylatedollarshort]

The other side of saving more is lowering expenses and figuring out how to live well for less money. Every $10K you can cut from your fixed, baseline expenses means needing $500K less funding over a 50 year retirement.

If you can keep your O-MAGI below 400% of FPL, you would qualify for ACA subsidies. Many bloggers seem to reasonably achieve $5K - $10K in travel value per year with credit card hacks, which is nontaxable income and would not raise O-MAGI. If you are paying state and federal income taxes now, can you find ways to get that to zero, at least pre-RMDs? Would an HSA health plan allow you to realize more income without impacting your O-MAGI or raising your taxes?

[NW-Bound]

It's not easy to spend from your stash when you have been saving and watching it grow for decades. But I am slowly learning to "let it go", particularly since having a serious illness and been recovering from it. Life's short and you cannot take it with you.

When I include the future SS in the plan, FIRECalc said I can spend into the 6 figure now. I am nowhere near it. Even with the recent unexpected $20K expenses on home upgrade and maintenance, I am still below the 3.5% WR I allow myself.

Still, it is hard to watch myself transferring tens of $K from brokerage accounts into the checking account every so often. And this during a market bull run. Imagine how painful it is going to be when the market drops.

I am telling you, once a scrooge, always a scrooge.

Quote:

Originally Posted by daylatedollarshort ... Many bloggers seem to reasonably achieve $5K - $10K in travel value per year with credit card hacks...

I should find a way to get my wife to spend time on this. She likes to look for bargains in travel, but is falling behind the curve.

[2B]

My plan is to cover my base spending requirements for a "nice, comfortable lifestyle." That includes staying in our retirement home, having normal expenses covered with a bit extra but not too much extra. Then, 5% of the remaining beginning year balance is available for any spending desired. The purpose is to allow nice traveling opportunities and the ability to spend on the grandkids.

Based on current asset levels, it will probably be more than I want to spend (or be willing to spend). After saving for many decades, it's still important to get "value" for the spending.

[jebmke]

Quote:

Originally Posted by 38Chevy454 I joke that the most successful person is the one that dies the day he runs out of money. It is just kind of hard to predict that last day....

Nembutol

[ejman]

Quote:

Originally Posted by Lsbcal Taking SS at 64 (DW took it at 62) reduced the anxiety of spending for me. That and the stock market come back. So for those planning on taking SS later in life, I would say to make sure you don't miss out on enjoying your 60's. You can easily plan to spend a bit more of the stash until you take SS. FireCalc helps in planning this. BUT AGAIN ... for some this is psychologically almost impossible. They can see it on paper but putting it into practice is anxiety producing.

Indeed, that's exactly why I started SS at 62. My natural tendency when there are no regular "paychecks" coming in is to simply rein in the spending to the max (after all had a lifetime of training doing just that). It is also why I'm not converting my IRA to Roth. I know that with my psychological make up once that money is in a Roth it is never coming out in my lifetime so converting would in effect result in a lower standard of living for me.

I figure since I will be forced to take RMD's it will be like a paycheck and then I will spend whatever is leftover after Uncle Sam and Uncle Kitzhaber get done with it.

[Lsbcal]

We did a lot of Roth conversion pre-SS. Now pre-RMD's we are really using the Roth's to get low tax rates.

Had to overcome my natural "savings" tendancy so we could spend heavily from Roth's. Since DW is a spend now type, this made it a happy decision.

[Teacher Terry]

Taking SS early works if you are not earning income (ie p.t. work, etc) but if you are the penalty is too big to make it worthwhile.

[Lsbcal]

One observation, there are many very smart people including well known authors (Bernstein) who would advise taking SS later to get the no risk extra income later. But many of these people making the points are either young (not yet at SS age) or pretty well off.

We are pretty well off but I find the emotional release of having to dip less into savings (lower then 4% withdrawal) to be a winning formula in our case.

For me it's all about getting away from too intense a focus on keeping all that money until the bitter end. What for? Our heirs will probably still have a substantial sum and I didn't work all those years to sit on my duff now.

Sorry, I do not mean to turn this into another endless SS thread.

[shortstop14]

Quote:

Originally Posted by NW-Bound When I include the future SS in the plan, FIRECalc said I can spend into the 6 figure now. I am nowhere near it. Even with the recent unexpected $20K expenses on home upgrade and maintenance, I am still below the 3.5% WR I allow myself. Still, it is hard to watch myself transferring tens of $K from brokerage accounts into the checking account every so often. And this during a market bull run. Imagine how painful it is going to be when the market drops. I am telling you, once a scrooge, always a scrooge.

I can completely relate, being in the same position. My first two years of retirement expenses have been covered by exercising some options that would have expired if unused. But in the next few months I'll be tapping the brokerage accounts for the first time, and it will be a mental twinge. I'm sure the first significant down investment year will tend to push me towards 'miser' mode, even though it's all part of the plan.

It's just a difficult mental transition to navigate, from accumulating to spending. No real pension, and still four years away from Social Security if I take it at 62 (and SS income is completely a buffer, it's really bonus income in my plan.) So the portfolio covers the future, and 100% in FIRECalc maybe hasn't reached my gut yet.

[Lsbcal]

Quote:

Originally Posted by shortstop14 ...So the portfolio covers the future, and 100% in FIRECalc maybe hasn't reached my gut yet.

Yep, it is very hard to take the paper study and follow it in real life. Especially for us scrooges. DW has sometimes despaired at my fears of overspending but she is a good sport and we have learned to compromise quite well.

What would be a shame is if one of us had a health crisis and could no longer go and spend on fun vacations or whatever. I do not want to look back and wish I had planned for more fun!

[ejman]

Quote:

Originally Posted by shortstop14 I can completely relate, being in the same position. My first two years of retirement expenses have been covered by exercising some options that would have expired if unused. But in the next few months I'll be tapping the brokerage accounts for the first time, and it will be a mental twinge. I'm sure the first significant down investment year will tend to push me towards 'miser' mode, even though it's all part of the plan. It's just a difficult mental transition to navigate, from accumulating to spending. No real pension, and still four years away from Social Security if I take it at 62 (and SS income is completely a buffer, it's really bonus income in my plan.) So the portfolio covers the future, and 100% in FIRECalc maybe hasn't reached my gut yet.

Yes, I've been at 100% in most every calculator I've ever run but it's so easy to conjure up all kinds of "what if" scenarios in one's mind that eventually I have to go back to Bernstein's calculator from hell series and decide that life is for the living and if not now at my mid 60's then when - at 95?

[daylatedollarshort]

We have a lot of public parks and activities with free library passes, plus Entertainment books and NARM membership, so every week we go out to eat 1 - 3 times, hike in the Redwoods, walk around local lakes, visit a museum or two, visit a planetarium, take a drive to wine country, etc. and it doesn't cost much at all.

I get a kick out of finding and planning day trips of fun stuff with zero or low cost. I don't feel like we have to spend it all to be happy. I am okay with leaving money to the kids or a favorite charity, like the food bank or an elephant sanctuary.

Tomorrow we are seeing a play at an outdoor amphitheater and on the weekend we have a mine tour, both on free library passes.