Chicago Five Star award winner

Moving from Saving to Spending

I have the privilege of working with clients who have made smart financial choices and are at the point in their life where they can stop working.  However, one of the biggest problems that I see for them is the transition from being a saver to being a spender.  Many of my clients have gotten to a comfortable financial place primarily because they were thoughtful and disciplined with their money.  Experience has shown me that there are numerous actions that can ease the transition.

Have a financial plan  

A financial plan will project your asset balances over the rest of your life based on the assumptions that you have used.  When our clients see their projections they have a higher level of confidence that they will not run out of money.  More importantly, they can “see” that they will not run out of money. However, projections are only as good as the assumptions and input used.  Make sure they are reasonable.

  • Growth Rates – Use conservative growth rates so that you are not overestimating the potential for asset growth.
  • Expenses – You need to have a good understanding of how much money you will really spend.  Don’t forget things like home repair and gifts.
  • Health Care and Medical – The biggest missing piece in many projections that I have seen is not including enough for future medical costs.
  • Inflation – Use a reasonable number for inflation.  3% is a fair number

Make it monthly

Most people are used to having a paycheck and knowing what they can spend on a monthly basis.  You can do the same in retirement.  Once you know how much you will get each month for social security and any pension source, the rest will need to come from your assets.  Set this up to be a monthly distribution into your checking or savings account.  Just like making savings automatic when you were working, making your funding automatic during retirement will make things easier too.

Bucket your assets

Have your assets in distinct buckets that are available for different time periods.  There are many ways to bucket your assets but for a simple view consider the following options that may work for you.

  • Spending for the next  1-2 years – Keep this amount liquid, such as in a savings or money market account.  Your money will not be subject to market fluctuations and you can continue to spend normally.  Replenish these accounts on an ongoing basis.  Clients often worry that they may be missing out on “gains” in the market but I think the losses have a worse impact.  This money would include your regular monthly spending as well as spending for “goals” such as a wedding or large trip.
  • Your remaining assets can be invested for your long term growth horizon and risk tolerance.  This will usually mean a Fixed Income/Equity split that makes sense for you.  This number is really different for everyone.  However, don’t forget that we are all living longer and you most likely want to plan on your money lasting 30 more years.

Being a lifelong saver may make it very hard to transition to spending, but the strategies discussed should ease the stress and psychological challenge of doing so.

Your goal should be to enjoy your extra time, not to stress about how to fund it.  Enjoy!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield  positive outcomes.

Equity investing involves risk including loss of principal.

Fixed income investments are subject to market and interest rate risk if sold prior to maturity. Values will decline as interest rates rise and investments are subject to availability and change in price.

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Securities offered through LPL Financial. Member FINRA/SIPC.  Investment advice offered through HighPoint Advisor Group, LLC, a registered investment advisor.  HighPoint Advisor Group, LLC and Aspire Planning Group are separate entities from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes.

Equity investing involves risk including loss of principal. [add line space] Fixed income investments are subject to market and interest rate risk if sold prior to maturity. Values will decline as interest rates rise and investments are subject to availability and change in price.

*Winners appearing on this page do not pay a fee to be considered or to win the Five Star Award. Professionals with a digital profile have paid a promotional fee.
The Five Star Wealth Manager award, administered by Crescendo Business Services, LLC (dba Five Star Professional), is based on 10 objective criteria. Eligibility criteria – required: 1. Credentialed as a registered investment adviser or a registered investment adviser representative; 2. Actively licensed as a registered investment adviser or as a principal of a registered investment adviser firm for a minimum of 5 years; 3. Favorable regulatory and complaint history review (As defined by Five Star Professional, the wealth manager has not; A. Been subject to a regulatory action that resulted in a license being suspended or revoked, or payment of a fine; B. Had more than a total of three settled or pending complaints filed against them and/or a total of five settled, pending, dismissed or denied complaints with any regulatory authority or Five Star Professional’s consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority or complaints registered through Five Star Professional’s consumer complaint process; feedback may not be representative of any one client’s experience; C. Individually contributed to a financial settlement of a customer complaint; D. Filed for personal bankruptcy within the past 11 years; E. Been terminated from a financial services firm within the past 11 years; F. Been convicted of a felony); 4. Fulfilled their firm review based on internal standards; 5. Accepting new clients. Evaluation criteria – considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Award does not evaluate quality of services provided to clients. Once awarded, wealth managers may purchase additional profile ad space or promotional products. The Five Star award is not indicative of the wealth manager’s future performance. Wealth managers may or may not use discretion in their practice and therefore may not manage their client’s assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. For more information on the Five Star award and the research/selection methodology, go to fivestarprofessional.com. 3781 Chicago area wealth managers were considered for the award; 438 (12 percent of candidates) were named 2017 Five Star Wealth Managers. 2016: 3411 considered, 725 winners; 2015: 5833 considered, 716 winners; 2014: 8161 considered, 744 winners; 2013: 3998 considered, 772 winners; 2012: 2970 considered, 780 winners.