I’m a saver. I find it immensely gratifying to save a little each paycheck for something special. It makes that something – a trip, a new camera, a tech gadget – feel even sweeter, knowing how I worked to earn it.
There’s nothing I’ve been saving longer for than retirement. I’ve been socking away money in 401(k) accounts almost since they were invented. When my balance rose, I felt more secure about my future. When it plummeted, as in 2008, the feeling was uncomfortable even though I was years away from retirement age.
Recently I’ve been tracking those balances more keenly, trying to decide how I’d feel about giving up my steady paycheck along with my full-time career identity. This year, it was all systems go. Next month, I’m going to flip the switch from “saver” to “spender”.
And that’s going to take some getting used to. After a lifetime of pride in my savings discipline, I’m about to stop cold turkey. Eek.
The act of drawing down savings in retirement can feel counterintuitive or even reckless.
— financial planner Stephanie Bogden
“Too often, the same personality traits that facilitate saving for retirement become impediments when it is time to spend that money,” Santa Clara University finance professor Meir Statman wrote in the Wall Street Journal. “The mental tricks we employ while working become mental mistakes when we move into the next phase of our lives.”
He adds: “Imagine spending a lifetime acquiring habits that offer the promise of a longer, happier and more fulfilling life. Then imagine that to have that fulfilling life, you suddenly must abandon all those habits.”
Deeply ingrained savings habits “can make the act of drawing down savings in retirement feel counterintuitive or even reckless,” according to financial planner Stephanie Bogden.
For me, those “habits” include viewing savings for special treats or emergencies. My retirement is neither. I chose when to retire as opposed to losing my job or facing a personal crisis, so it’s not exactly an emergency. And it hopefully will last way too long to be a “special treat.”
I need to radically change my financial world view in addition to forging a new post-career identity. In my upcoming next chapter, it will be totally OK if my retirement account balance goes down (just not too much faster than planned.) That’s a big change.
Yes I’ve had savings accounts where balances have gone up and down, whether because of planned expenses or emergencies. But there was always at least the possibility of replenishing them while I was working.
Another unnerving difference between retirement savings and all the other planned savings I’ve done: I have no idea how much retirement will cost. I mean, not even in the ballpark. There are people in my family who died younger than I am and at least one who lived to be 100. If you’re someone who likes to have tight control over your finances, how do you possibly plan for that?
The best I can do is live with calculated probabilities, which many financial advisors can provide based on a family’s savings, investments, and basic life expectancies. As someone who’s spent years analyzing data, I need to feel OK about spending what the numbers say most likely is fine. (And try to ignore political attacks on Social Security, a government insurance program I’ve paid into for almost 45 years. I’m still planning to receive what I’ve been promised for all my premiums.)
Ultimately, this is a matter of psychologically re-orienting myself – and, like much of what I’m finding as retirement nears, letting some things go. I do realize it is an immense privilege to be facing this “challenge.”
“We often get advice from family and friends to spend more while we can. Spend at fancy restaurants, they say. Go on a cruise. But the better advice is to identify what can bring us joy, even if it departs from what brought us benefits in the past,” Statman wrote.
That will be a delightful project to start investigating.
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