In a recent meeting with a client, we were reviewing the various sources of income available to her when she calls it quits in a few months. Although all of our mathematical projections indicated she would be just fine in her golden years, my experience and instincts lead me to believe her transition to retirement won’t be smooth.
I can see a problem developing that’s a common issue with many retirees.
I’ve never touched on the subject in this column before and I can’t
recall reading about it in any of my various professional journals.
The problem is simply that after years and years of being in the mindset
of accumulation, many retirees find it extremely difficult to switch to
the distribution phase of life. It’s sort of a psychological issue.
Changing a lifelong mindset is a challenge for many people.
As young boys and girls, many of us had piggy banks. It wasn’t uncommon
to hear the old Ben Franklin phrase, “A penny saved is a penny earned.”
Consequently, many learned the importance of saving at a young age.
During the piggy bank years, many were also taught by mom and dad to set
aside a little of everything they earned. So, from babysitting to lawn
cutting and snow shoveling, a few dollars were saved here and there.
After high school, it was much more difficult to save anything during
the college years. Speaking for myself, I worked throughout college and
tried to save. But what little I was able to put aside didn’t last very
long. Before I knew it, a new semester would arrive, and with it the
tuition that took all my savings and more.
So, for most, the college years are neither accumulation nor
distribution years. They’re simply the years you hope you get through
without amassing significant debt.
The working years are when saving begins in earnest. For many, that’s a
thirty or forty-year timeframe and many do put aside a portion of their
Month after month and year after year people receive statements that
show their savings and investment accounts are growing. And for most,
the satisfaction of seeing that growth becomes habit forming.
The accumulation stage of life began with a piggy bank and continued for
a thirty or more year working career. Then, suddenly, at retirement,
the accumulation stage ends.
Many struggle when the accumulation years end, not so much financially
as psychologically. It’s difficult to seeing their savings or retirement
accounts decrease in value.
Sudden downturns in the investment world are a bit more painful. A
withdrawal from a savings account entails a lot of agonizing thoughts.
As a financial adviser, I can’t tell you how many times clients have
complained because of mandated annual withdrawals from their retirement
accounts once they reach age 70.
From experience, I know many retirees struggle with the thought of
tapping their retirement savings. But, remember, one of the reasons you
save is to have sources of income when you retire. It’s okay to tap your
It can be difficult to change mindsets from accumulation of money to
distribution. But, with proper planning, the transition from
accumulation to distribution becomes clearer and anxiety free. A
financial adviser can ease that transition by helping you develop
reliable, predictable income streams.