You have read about what Your Survival Guy calls “spending your money somewhat foolishly,” but new Vanguard research shows that retirement isn’t always easy. Even spending your money can be hard. Vanguard wrote in a recent report:
Retirement savings are rarely translated into steady income. Many retirees with financial wealth below $1 million treat their portfolios as a backstop for specific needs such as debt repayment and unexpected expenses rather than as a source of regular income. Notably, only about 1 in 10 retirees draw consistent income from their retirement accounts.
Required minimum distributions (RMDs) can function as an accidental default, leading retirees to underspend and potentially face higher lifetime taxes. Many retirees delay withdrawals until RMDs begin because they misunderstand the rule’s purpose and flexibility. This can restrain spending early in retirement, and the pattern may persist later for many retirees who reinvest their RMDs rather than spend them. Backloading income into later years may also increase lifetime taxes.
Action Line: In retirement, you need to find a new balance. One that respects your savings but recognizes that you need money to live, and maybe you want to take that trip to Paris or spend somewhat foolishly. When you want to talk about your retirement plan and your withdrawals, including your required minimum distributions, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
