Retirees: You’ve earned the right to spend

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 paycheck.

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 savings.

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.