David D. Greene, CFP®
David D. Greene, CFP®CEO, Financial Adviser, Principal

Most of us would agree that financial planners typically do not “encourage” spending amongst their clients.  The immediate reasons are obvious.  Many of us can spend freely on our own without encouragement (thank you very much).  Many of us also understand that the more we spend in our earlier life stages, the more we feel we “need” in the later life stages.  In fact, many of our clients who have reached that highly sought after goal of financial independence credit their more frugal lifestyle in their younger years as a primary reason they got there.  Therefore, for our wealth accumulators out there, please listen to those in retirement nudging you to spend less and save more, …it actually works!

Nevertheless, what happens when clients are actually in retirement?  Does the same savings-oriented approach hold true?  Certainly, those seeking “early retirement” need to be highly cognizant of NOT spending too much in the early years so that the money will last.  However, many of our clients in their sixties, seventies, and beyond have been surprised to hear us tell them to spend more.  What?!?  This sounds counterintuitive but it can be true…in some cases.  Let’s dig deeper.

Some of our clients have found themselves in their mid to late seventies with a substantial net worth and highly ingrained habit not to spend.  So much so that their portfolio withdrawal rate is somewhere close to zero.  While we absolutely applaud the ability to manage your lifestyle/spending, at some point we want you to realize that:

1) Your good health does not last forever and

2) You cannot take your net worth with you.

Balancing the laudable habit of saving with the enjoyable habit of spending wisely is something many of our clients actually have to work on.

If done prudently, “spending” later in retirement allows for some amazing memories.  We have heard of incredible multigenerational family trips to places like Costa Rica or Europe.  We have seen first-hand a gift from a parent or grandparent turn into seed money for a child or grandchild to purchase a home that they and their family really needed and deserved.  Our favorite stories are of those retirees who worked so hard and saved so well for decades learn to enjoy that savings and maximize their “golden years”.

Please do not take this public service announcement as encouragement to spend as much as you want. Remember, one of the main factors in reaching financial independence is one’s ability to handle their “needs” first, defer many of their “wants”, and save the rest.  The vast majority of our clients in retirement know the wise spending habits that got them there.  I am only encouraging those individuals who have created that nest egg to enjoy a bit of it themselves while life offers them the ability to do so.  Happy spending!