Should You Spend Money? Keep Perspective

I’ve spent a lot time over our four years together, writing this column, talking about saving for the future. I have covered topics such as budgeting, stashing money away for an emergency fund, contributing to retirement plans, investment strategies and the importance of downside risk management, estate planning, ensuring we have enough money to retire, and strategizing to keep all we can from Uncle Sam. Folks, you and I all know these topics are incredibly important, but my girls tell me that all of that stuff is, well, borrrrrring!
 
So, at supper the other night with Jill and the girls, I asked them what they think is interesting. All three of them looked at each other. Then Phoebe looked at me, smiled and said, “Dad, write about spending money, I love to spend money . . . especially yours!” Oh my, Phoebe.
 
I thought I would mix it up today and talk about something new, something that I believe to also be important, spending money. You might think there’s not much guidance or advice needed on the topic. And living in a household of four women, I know spending money can be incredibly easy. But, believe it or not, it is something that a lot of retirees struggle with.
 
For the majority of people entering retirement, running out of money, or outliving their money, is a huge fear. Now, many of you know that I have written plenty of articles with advice on how to ensure that you have an accumulation, distribution and estate plan that gives you confidence in knowing your financial future is secure. If you have followed that advice, follow this advice…
 
You cannot take it with you: so let your money bring you joy while it can.
 
When we are in the accumulation years of our lives, our goal is to acquire as many assets as we can. Initially, it’s for our first home, then to start a family, then maybe a boat or some other “toy” (I wish), then for college, and then for retirement. Each and every stage of life brings a new financial hurdle to save and budget for, and for many retirees, that good old habit dies hard. But it’s important to take a step back, look at those things that bring you happiness, and your retirement budget, and find a middle road.
 
Another topic I have covered in these articles over the years, is planning for longer life expectancies. As I have said before, we are living longer than past generations did, and this only adds to that underlying fear of outliving our money. The Social Security Administration found that men who are 65 today have a life expectancy of just over 84. Women of the same age will live to about 86 and a half.
 
But, unfortunately, we aren’t all going to live quite as long as many of us believe we will. In fact, a Wall Street Journal article states that we often believe that we will live longer than we think, especially as we get older. For instance, 68-year-old men have a 71 percent chance of living to 78 but believe, on average, that they have an 82 percent chance of reaching that age.
 
So, what does that mean? Well, we certainly want to use financial strategies that will give us sustainable income until our time comes. But . . . we also should all live a little—while we can. Now, I’m not advocating to throw caution to the wind and spend all your money early, because 10 percent of 65-year-olds today will live to 95, but we must be realistic in our longevity plan.
 
When we consider longevity, we must also think about our health. The status of our health will often dictate how we can enjoy our money at different ages. For example, if you want to take a trip to Europe when you’re in your late 60s, if you can afford it, do it! Because if you wait around to make sure you have enough money, you might not ever have the chance. In fact, we naturally spend less money as we age, because we have less opportunity and ability to spend money. Knock things off your bucket list before it’s too late. Otherwise, you may be left with plenty of money, and a long list of things you aren’t young enough to do anymore.
 
I actually have been happy to see more and more retired clients coming into my office for advice on how to give away some of their money, while they are still alive. You see, if you build the right investment and income plans, it gives you a higher probability of instituting a legacy plan . . . while you are alive and able to see the recipient appreciate your gift. Wouldn’t you want to see your kids enjoy the money you give them, and see it put to good use, rather than give it all away after you have died? I’ve had people gift money to help their kids with a good down payment on a home, to help contribute to their grandchildren’s college funds, and simply to provide a boost for their family when they need it most, rather than waiting to pass a lump sum on when they die. I can always see the joy that these older parents feel when they are able to help their children, even as adults. Of course, I’m glad these folks come in to discuss these decisions, so we can make sure they are taking this money from the right places, and doing it in the most advantageous way.
 
In our four years together, this is my first column written about spending money. I’m not sure what has gotten into me, and I might have an out-of-body experience when I read this in the newspaper in a few days. But honestly, folks, it’s important to keep perspective. Maybe Phoebe is right. We sometimes become so hyper-focused on saving money, that we forget why we do it: to be able to enjoy it.
 
As I always say, and as you should say to yourself when you are in your retirement, be vigilant and stay alert, because you deserve more.
 
1. http://tinyurl.com/pak4ca8; 2. http://tinyurl.com/n7zh7k3