Outliving Your Money

How do I make sure I don’t outlive my money? How much can I withdraw in retirement?

When talking with clients planning to transition into retirement, the most common concern we hear is running out of money. During these discussions, we often hear words such as preservation, stewardship, prudence, or legacy. All of this leads to the common theme of making decisions today that allow us to maintain our lifestyle and accomplish what’s most important with a high likelihood of having leftover money. With this concept in the front of our clients’ minds, I wanted to share a story about good decision-making when balancing enjoying life today against protecting our future.

My grandmother was an exceptional person. She always seemed to find a way to be empathetic, inspirational, and encouraging, no matter the circumstances. My brother and I were fortunate to have her as a babysitter frequently when we were young, and she taught us many lessons about being a good person. I’ll never forget when I was around eight years old, and she asked me if she could borrow five dollars because she was in need. At that age, I imagine I felt the same way I would today if someone asked me to borrow $10,000! After considering the request and weighing my options, I hesitantly decided to give her the money. About thirty minutes later, she asked how I felt about our transaction, and I expressed my reluctance at first but then felt content about helping her out. After acknowledging I learned the intended lesson, she handed me a twenty-dollar bill and said never to turn a blind eye to someone in need. She stuck by her values and “walked the walk” better than most people I’ve known.

When I began working in personal finance in 2012, she would often engage me to help her make decisions that she had spent a lifetime making on her own. She gradually involved me more and more in her finances, and when I began filing her taxes, I was in awe at her ability to live well below her modest income and means. This lifestyle choice led her assets to increase in retirement rather than being depleted, essentially eliminating her risk of running out of money. Even though her minimalist lifestyle paled in comparison to what it could have been, she was happy. You may know people on the other end of this spectrum – those who have difficulty living within their means; spending more today can sacrifice their future. I believe most of us fall somewhere between these two extremes, and that is where we can provide significant value when it comes to prudently live off the assets we’ve worked many years to save.

The process begins with having deep conversations, many of which have little to do with numbers and calculations. Discussions like this establish a meaningful plan that will provide peace of mind regardless of what is going on in the news or markets on any given day. By having your wealth tied to these conversations and your family’s values, we’ve found it is much easier to stick with it and make good decisions when times are scary, which is precisely when those decisions matter most.

Skee Orr, CFP®, AIF®,AFC® , is an Adviser with Rather & Kittrell. Skee is available at [email protected].