After decades of strict saving, people usually think that retirees are likely to overspend when they finally get access to their retirement funds, but recent research reveals that it is actually the opposite.
According to a study done by Ameriprise Financial, 68% of retirees have yet to take money from their savings, other than for required distributions, despite having access to their retirement funds or feeling that they have enough to last their full retirement.
The study found that only 21% of retirees feel confident that they can efficiently spend their retirement funds and map out a retirement income plan. This anxiety regarding spending can negatively affect a retiree’s quality of life.
Financial experts like Marcy Keckler, who serves as the vice president for Financial Advice Strategy at Ameriprise Financial, told Time that this lack of confidence and reluctance to spend among retirees is often because of the perceived complexity of the process of drawing down their assets in the long term.
Here are some things that may help to make the process easier:
Drawing up a budget
If you find the entire process daunting, reach for help. Family members can get involved to assist retirees in drawing up a budget plan to help keep spending in check without too much compromise on the things that make life enjoyable.
Breaking the income pool into buckets
This process is similar to budgeting, except that it involves dividing a retiree’s entire retirement fund into ‘buckets’ of three major expenses. These three buckets include (a) basic living expenses, (b) lifestyle spending, and (c) long-term healthcare.
Continuing to ‘pay yourself first’
Continue saving or ‘paying yourself first’ in short-term cash accounts. One significant way to alleviate anxiety about spending savings is to continue to add to those savings.
Mapping your finances with a professional
It is still best to consult a financial advisor to guide you in mapping out a sustainable spending strategy that can offer peace of mind, so you can finally enjoy the fruits of your labors and have a worry-free retirement.
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