All true, but getting back to the subject line, there is something psychologically painful about having to pull out a big chunk of money just after retiring.
TJ
I dunno, but that sounds like twisted psychology to me. How is taking a planned $X out right before retirement or right after retirement any different? It leaves you in the exact same place. Is it
really that hard, psychologically? I'll agree with W2R's response...
Not necessarily, at least if you plan for it ahead and set that money aside. That is how I bought my Venza in cash right after retiring. .... buying my retirement car was part of my plan so I completely enjoyed the experience and there was nothing painful about it at all.
It's like when I hear people say they can't retire until the kids are out of college. Really? Maybe they mean ' I can't retire for X more years because I need to save up some more $', but the college costs are the same retired or not (ignoring tax and aid issues).
It's better than having to get a loan
...
Why? If the loan is on good terms, why not? People act like 'debt' and 'loan' are four letter words... oh
. More seriously, a loan is just a financial decision with pros/cons, it's not voodoo demon magic. Although I've always paid cash for cars, when I look at the rates now, I might consider a loan. It's money - do the math.
Here is my plan. I'm going to do it early next year.
1. I have 10 yrs living expenses in cash equivalent accounts. I am 62 yrs old. The rest in equities & MFs which will give me some time to move in the cycles.
Using the round 4% WR number, that is ~ 40% cash equivalent accounts. Your choice, but take a look at what FIRECALC reports about having that much cash sitting around. And can you keep it all FDIC insured? There are times I've been more concerned about my cash holdings than my stock holdings.
5. I will buy certain hobby stuff while still working as I will have difficulty buying it during retirement. (Camera lenses and target pistols)>
...
7.Will buy only on sale or discount.
Actually, it won't be harder to buy hobby things pre or post retirement, all other things being equal, so buy these things when it is the best time to buy them.
Remember, if you don't buy the camera lenses or target pistols pre-retirement, that money goes into your retirement savings and those exact same dollars will be there for your post retirement hobby purchases......
I only mention this because I watched a friend load up on hobby and personal entertainment items during his last couple of years working in prepartion for RE. A couple of years into RE, he found that some of the stuff wasn't as important to his retirement lifestyle as he'd anticipated. He should have just set the money aside in savings and then purchased the items at the time of need and when he could be confident that they would be an important part of retirement.
A big +1 to
youbet. If you look again, you'll see that
Birchwood is actually contradicting himself in #5 and #7. You will very ikely spend this more wisely after retiring. In addition to matching it to your post-retirment needs, you'll have more time to shop out the bargains.
If this is really that hard for you psychologically - take the amount you would spend pre-retirement, put it in a separate account. You are then 'free' to spend that to zero after retirement with no guilt issues. Personally, I can do this on a spreadsheet (or just in my mind) easier and cheaper than with separate accounts, but to each their own.
-ERD50