If retirement is calling, you must address a difficult question: how much can you realistically afford to spend in the coming decades? That is a difficult statement to make, and believe it or not, many people, particularly high-net-worth individuals and families, end up playing it too safe.

According to a recent study published in the Journal of Financial Planning (Spending In Retirement: Determining The Consumption Gap), rich retirees who rely on their portfolios spend far less than the level that would put them in danger of running out of money. In fact, for some people, spending actually begins to drop in retirement, owing to apprehension about spending down retirement resources. Playing it too safe in retirement, on the other hand, can limit your possibilities and make life less rewarding. Let us first look at why people underspend and then how to think bigger in order to see all of your possibilities.

To choose optimal spending rates for each period of your retirement, you must put numbers on variables that are difficult to assess or even consider: how long you are likely to live, your long-term investment returns and estimates of other income, total living expenses, healthcare costs, and any gifts and inheritance you wish to leave behind. There are a few knowns, such as Social Security and possibly pension payments, but calculating the rest can be difficult. The natural reaction is to be cautious and spend less, especially in the early years of retirement, when you have the most opportunities to do fascinating things.

How We Build Conviction

Giving yourself permission to imagine bigger – to apply more of your wealth to the life you want to live in retirement – requires conviction, and conviction can only come from being informed - via rigorous analysis and forecasting. This is where we come in – as a competent and unbiased third party, we can run the figures and provide the assurance you require. One of the most important things we undertake for clients is an income sustainability analysis (a financial plan) that gives appropriate spending rates based on your needs, goals, inflation, expected investment returns, and a variety of other factors. We provide this research and forecasts up to and beyond the age of 90, including "what if" scenarios.

For example, if you spend 20% more, how confident can we be that your money will last to the age of 100? We also assist you in determining which income streams to pursue based on the tax effects of withdrawals as well as mandated IRA distributions, and we determine the ideal time to begin Social Security (especially for couples). This strategy is regularly evaluated and fine-tuned by us, and it is reviewed with you each time we meet.

As a result, you may make the most of the assets you've worked hard to accumulate and explore all of your possibilities for realizing your dreams. Perhaps you've always wanted to live abroad for half the year or assist a child in starting a business. It is possible to think large during retirement, and we can assist you in doing so.