Recently retired, when do I spend the money?

[Drake3287]

As crazy as this sounds, my question here is probably quite common and I'm sure many people wish they had this problem. I recently retired in my early 50's from a public agency giving me a guaranteed retirement for life of basically 100% of my final salary ($120,000 a year) including a 2% COLA. My wife and I also will receive free medical and dental for life (I know, unheard of).

Over the course of the years I've been a saver and have a good amount of money in the bank and in investments. This includes about $250,000 in cash and another $600,000 in stock investments (457 plan). My kids college funds are also fully funded and my home is nearly paid off after getting a 15 year loan. ($1,100. per month)

Since retiring I'm still able to save money and live a very comfortable life style including traveling and buying any toys I want. My wife will most likely work until age 62 and she has a 401 plan from her employer.

So I guess my question is, when and how do I spend my savings? Is there a general rule of thumb as to how much you can safely withdrawal without running out to early? I have no reason to upgrade from our nice home and I hate the idea of starting a new mortgage again although I've given the thought to buying a vacation home somewhere.

I've done a great job in planning my financial future, just not in spending it! Any thoughts or words of wisdom?

[jackmiller]

4-6% is the rule of thumb on retirement spending. Of course all of this is up to you and your preferences on leaving a legacy etc.

With your getting 100% of your salary you are in a fine place though and if you do not change your lifestyle and are presently comfortable with your family budget then discard the 4% and do not dip into to your principle at all

[riverwed070707]

Sounds like a good problem to have I think most people here would agree its senseless to spend money just to spend it. The first question you should be asking yourself is what do you want? Is there something you'd like to buy? Somewhere you'd like to go? If the answer is no then don't. Maybe consider increasing your charitable contributions or just do nothing at all for now. Perhaps somewhere down the road there will be something you want, and you'll be fortunate to be able to afford it.

[disneysteve]

Sounds like a good problem to have I think most people here would agree its senseless to spend money just to spend it. The first question you should be asking yourself is what do you want? Is there something you'd like to buy? Somewhere you'd like to go? If the answer is no then don't. Maybe consider increasing your charitable contributions or just do nothing at all for now. Perhaps somewhere down the road there will be something you want, and you'll be fortunate to be able to afford it.

I agree. If your pension covers 100% of your expenses, you may not need to spend any savings at all. You can be more charitable. You can retire your mortgage early. If you decide you would like that vacation home, you can save up and pay cash or take a small mortgage and pay it off quickly. Or you can start attacking the bucket list. Is there something extravagant you've always wanted to do or some exotic place you've always wanted to see? These are all good problems to have.

[snafu]

You've obviously done a terrific job managing your finances. Rather than focus on spending, I suggest focusing on what you like to do. How do you use your time while DW is at work? If you're bored you might consider volunteering where you are very much needed or taking some courses in an area of interest. What's DW's vision for retirement? Have you visited Bali? It's truly very beautiful and language isn't a barrier.

As a young retiree you don't have issues, in your 90's you may find money flying out the door for assisted living, personal care, medical costs and issues not yet developed. What will you need in 2050?

[feh]

I've done a great job in planning my financial future, just not in spending it! Any thoughts or words of wisdom?

Might want to ask this question on another forum:

http://www.early-retirement.org/forums/

[Drake3287]

Thanks for the replies, like most people I don't have a problem spending the money or finding things to buy, it's more about what I can or should safety withdrawal each year without having a problem years down the road. The 4% or 5% per year advise sounds like it makes sense.

[feh]

Thanks for the replies, like most people I don't have a problem spending the money or finding things to buy, it's more about what I can or should safety withdrawal each year without having a problem years down the road. The 4% or 5% per year advise sounds like it makes sense.

Please do some more reading. The best answer for you depends on many factors.

You might want to talk to a fee-based certified financial advisor. I am not one, but I can see taxes being a major concern for you.

[Gailete]

We should all be so fortunate to have your problem. Unless she absolutely loves her job, why is your wife still working and planning on doing it to the 'bitter' end? Kind of hard to do things like travel if you have to work around one person working.

Since what you are getting in retirement, is more than enough to live on, I think I would let that retirement savings sit until something big comes along that you really need or want to spend on like a daughter's wedding, or an anniversary cruise, or even 10 years in a nursing home where if you are self pay you get to pick the home and can probably get a room of your own so no listening to the roommate snoring! As the other poster mentioned, you have to look way into the future. Also be sure you and your wife have good wills and that she is provided for if you go first.

[LivingAlmostLarge]

why is your wife working? And do you need to draw on savings for anything? Do you want to give it to the kids?

[disneysteve]

How much does your wife earn? What is your monthly spending? Do you need more than the 120K you are receiving to cover everything? If so, how much more?

[JoeP]

As much as I hate to say it, nothing is guaranteed, so those benefits you have now and are banking on in the future may not be there as long as you would think...even with your signed and embossed Promise Of Benefits.

Therefore, I would squirrel away some money you won't miss into a "Just In Case" account, its purpose being to be a supplement to your retirement benefits should they ever decrease.

[Drake3287]

For the most part my wife enjoys her job which pays about $60,000 per year and it gives her a ton of paid vacation time because she's been there so long. Taking retirement trips are still doable for the most part but who knows, at some point she may want to retire early.
As for paid benefits going away, I know it's possible but I think because of the agency I worked for and the fact that they have already changed benefits for newer employees, the hand full of older retired members like myself will be left alone. (at least I hope!)

My retirement is with CalPERS so I feel pretty safe that my monthly checks won't be ending anytime soon. I just need to have a better financial plan to use what I have so I don't waste it.

[krantcents]

I will be in a similar situation in just 3 years. I will have a guaranteed income (Social Security/pension) with medical for life which will cover my normal expenses. I have a very sizable 401k/IRA for my wants. My wife and I have long term care insurance too. I plan to withdraw at a 2% rate. I expect to live 30 years in retirement.