Ask a Retirement Plan Advisor: 5 Ways to Outspend Your Savings

By Teresa Conley | May 31, 2016

Our clients often come to us with worries about retirement; running out of money seems to be on the top of everyone's list of retirement-related concerns.

Teresa Conley is a CFP, Certified Financial Planner and a 401(k) Financial Advisor with Premier Financial Group in Eureka Humboldt CountyAnd given that only about 13 percent of Americans feel "very confident" about the amount they've saved for retirement, these worries are easy to understand. While anxiety about retirement is common, unfortunately, these 5 pitfalls are common, too. In order to achieve that balance between spending enough to enjoy your life now and saving enough to enjoy your life later, avoid these common traps.

1. Your Comprehensive Financial Plan Doesn't Include a Spending Plan

Hands down, most retirees run low on resources because they simply spend more than their assets can bear. Often, overspending is due to issues related to health care costs, miscalculated tax burdens, or providing financial aid to adult children.

Fortunately, there's a way to help avoid this trap: Creating a spending plan. First, list your monthly and annual living expenses; include funds for healthcare, taxes and enough for some fun, too. Next, tally up your guaranteed income, such as Social Security payments. If your living expenses are more than your guaranteed income, you'll have to make up the difference from your savings and your investment accounts. 

Create a projection using your desired withdrawals; how long will your savings last? Play around with the numbers until you find a scenario that provides the right balance.

Teresa Conley is a CFP Certified Financial Planner and Financial Advisor with Premier Financial Group in Eureka Humboldt County2. Your Financial Planning Process Comes Without A Fuel Gauge

Picture the anxiety you'd feel if you were driving a car without a working fuel gauge. There's a lot of pressure associated with keeping track of each mile driven, and a lot of stress associated with worry about running out of gas and getting yourself stranded beside some desolate highway.

As your retirement planning advisor will undoubtedly tell you, you need a way to monitor your retirement saving, spending and income, as well. Your retirement fuel gauge should measure:

  • The amount of income you need to maintain your desired lifestyle
  • The amount of savings you have left

Your monitoring system should be based on your remaining life expectancy and a conservative rate of return that's grounded in the reality of your investing style. It should tell you when you need to pull back on the throttle, as well as when you can speed up a little.

3. Investment Planning is Key to Financial Freedom

When you're investing for retirement, your goal shouldn't necessarily solely focus on maximizing returns or even in preserving principle -- rather, you want to gain sustainable lifelong income. Ask your retirement investment advisor about the financial strategies available to you, such as:

  • Income-only: Spend only interest and dividends generated by your investments
  • Systematic withdrawal: Withdrawing specified amounts on a regular basis
  • Time-segmentation: Invest based on future cash flow needs
  • Guaranteed income: Annuities provide lifelong income

Whatever approach you choose, stick with it. Changing approaches can cost you money in the long run.

4. Your Comprehensive Financial Plan Doesn't Include A Back-Up Plan

Teresa Conley is a CFP, Certified Financial Planner and a 401(k) Financial Advisor with Premier Financial Group in Eureka Humboldt CountyWhen the unexpected happens, such as a serious injury or illness, you need a back-up plan to avoid draining your retirement savings. Keep some of your assets in reserve -- such as home equity, cash or land -- and don't include them in your spending plan. 

5. Avoid Scams and Stick with a Trusted Wealth Advisor

If someone is promising you returns that seem too good to be true, they probably are. Retirement isn't the time to be taking unnecessary risks; avoid falling for "get rich quick" schemes and stick with the services of a trusted retirement plan advisor. If you receive an offer that's tempting, but seems a bit off, enlist the help of your advisor to help you decipher its legitimacy.

Though the retirement planning process may seem overwhelming, consider it an investment of time in your future well-being. 


Posted in Retirement Planning