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You’ve spent decades saving for retirement. Now comes the hard part: spending.

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After decades of squirreling away money for retirement, people can feel incredible anxiety when it’s time to shift into spending mode. Having a strategy for spending money in retirement can alleviate some of that stress.

Major worries among retirees include not being able to spend as much as before retirement, not being able to leave money to beneficiaries, facing unknown healthcare expenses and outliving their money, said Corey Briggs, director of wealth planning at Plaza Advisory Group in St. Louis.

Those fears are understandable. In 2022, the average retirement account balance was $112,572 and the median balance was $27,376, according to Vanguard’s How America Saves report. With only 15% of companies providing pensions these days, according to the Bureau of Labor Statistics, the onus of saving for retirement now falls mostly on individuals. But almost half of private-sector workers don’t even have access to a workplace retirement-savings plan, according to a 2022 AARP study.

“I talk about this daily with clients. Everyone’s reason for the anxiety is different, but the anxiety itself is similar,” said Elijah Kovar, co-founder of Great Waters Financial, a Minnesota retirement-planning company. “Normalizing it — knowing you’re not alone and that other people are dealing with this — can help.”

Read: Vacations, cars and roof repairs: You may be surprised by how much you spend in retirement

The shift from saving to spending “requires some reprogramming,” Kovar said. “If people aren’t conscious of that shift, they feel like they’re breaking the rules. Being able to give themselves permission to do it is important.” 

Read: ‘We stay in two-star hotels’: We’re 70 and have $1.8 million, but my husband insists on living cheap. Don’t we have enough?

Such worries are almost universal, says Michael Arvay, founder and CEO of Marvelous Retirement Planners, based in Michigan and Ohio. “Nine out of 10 people have that anxiety. It’s not so much about money — it’s about safety and security,” he said.

“The first two years of retirement can be rocky and anxiety-provoking,” Arvay added. “Many people are edgy about spending money and figuring out how to make use of their time, as well. After the first two years, you probably have figured out your lifestyle.”

Start with a plan

The key is to create a financial plan that takes into account goals, Social Security strategy and investments, Kovar said. 

“It’s amazing how freeing that plan can be. It can empower and inspire people to have great lives today and in the future, because getting the plan in place addresses the feasibility of their goals,” he said.

Essential costs in retirement should be covered by guaranteed income such as Social Security, pensions, rental income or annuities, Kovar said. Meanwhile, discretionary spending — the things you want but don’t necessarily need — can be covered by distributions from your nest egg, he said.

Meanwhile, it’s important to plan for longevity in order to avoid running out of money, Briggs said. He recommends preparing a financial strategy that assumes you’ll live to be at least 95.

A comprehensive financial plan will run all the scenarios for potential market gyrations, and it should also examine your past three to five years of spending to get a good handle on your living expenses and extra indulgences, he said. Then it should break out the goals you have for retirement, such as traveling, buying a vacation home or paying for a child’s wedding, he added.

“When you’re no longer making money,” Arvay noted, “what you’re spending matters.”

Read: Annuities, Social Security, inheritance: How much money do I need to retire?

What’s your Social Security strategy?

One important step is to plan your strategy for Social Security. You can claim as early as 62, but in doing so you’ll get reduced benefits for life. The full retirement age for people born in 1960 or later is 67, and waiting until age 70 will give you the largest monthly payout.

“For clients who have $1 million to $3 million, Social Security can be a big determinant of their plan,” Briggs said. “Taking Social Security at the right time is crucial. Even taking it two years earlier can affect your overall retirement success.”

Of course, not everyone is able wait until age 67 or 70 to start claiming Social Security. About 20% of people claim Social Security before their full retirement age of 67, according to the Schwartz Center for Economic Policy at the New School, and over 90% claim before the maximum age of 70.

In some cases, according to the center, it may be wise to use a bridge strategy, in which a person uses their savings to cover expenses for a few years until claiming the larger Social Security payout at a later date.

Another strategy to ease anxiety over spending in retirement is to set up a monthly allotment that arrives in your bank account like a regular paycheck, Kovar said. 

“People’s happiness in retirement rises with guaranteed income,” he noted.

Meanwhile, keeping a portion of funds in a protected asset base such as fixed-income annuities, money-market accounts and CDs will give retirees a little peace of mind about stability, Arvay said.

A general rule of thumb is to set your asset allocation roughly proportional to your age, said Steven Conners, founder and president of Conners Wealth Management in Scottsdale, Ariz. For example, if you’re 70 years old, consider having 70% in bonds and 30% in equities. If you’re 50 years old, have 50% in bonds and 50% in equities.

Other things that can help retirees worry less include earning some extra money through a part-time job or consulting work, or giving their budget a little extra wiggle room by downsizing or moving to a less expensive area, Conners said.

But most important, don’t forget the reason you saved for so long.

“The overarching thing is to ask, why did I start putting money away in the first place?” Kovar said. “The purpose of that money is to spend it. We forget that’s why you save the money in the first place.”

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