It’s Not Your Retirement Savings—It’s You

On this episode of The Long View, Dana Anspach, founder and CEO of Sensible Money, and Fritz Gilbert, retirement blogger, creator of The Retirement Manifesto, and author of Keys to a Successful Retirement: Staying Happy, Active, and Productive in Your Retired Years, break down how retirees can give themselves permission to spend, plan for the different phases of retirement, and find a safe withdrawal rate.

Listen to the full episode of The Long View Dana Anspach and Fritz Gilbert: ‘This Is What a Joyful Retirement Could Feel Like’

Here are a few highlights from Anspach and Gilbert’s conversation with Morningstar’s Christine Benz and Amy Arnott.

What ‘Die With Zero’ Can Teach Retirees, and Other Hacks to Give Yourself Permission to Spend

Christine Benz: Dana, I wanted to hear about your experience working with clients as you help them figure out how much they can reasonably spend in their retirement. Anecdotally, and speaking to a lot of retirees, this is something that retirees struggle with, that the numbers suggest that they should be able to spend X, but they just can’t give themselves permission to spend that amount. Can you talk about that experience with your clients, and also whether you have any hacks to help them? I know you’ve said you just mail them the check, but let’s just talk about that issue with your clients.

Dana Anspach: Yeah, I have tried so many hacks, but when I talk about a bell curve, I would say, I see the majority of the type of client we work with do fall in that category where they have sufficient assets but really struggle with spending. And we have tried numerous things. One of those is mailing the book, Die with Zero, and using that as an introduction to have conversations around meaningful spending to emphasize that we’re not just encouraging frivolous spending, but meaningful spending.

One of the coolest stories we had was a client who read that book and really they felt completely comfortable as they shared, “We’re the kind of people who still share a single Coke at dinner.” And so, they were comfortable with their own spending, but they had a family member who had always been scraping by, and they said they were giving him $10,000 and he was shocked and why are you doing this? And they explained, they had read the book, and he shared the whole thought process and what he was going to do. And the number one thing that he wanted to spend the money on was prescription glasses. He’d never had the money for prescription glasses. And I think about that story and the difference that you can make in people’s lives. So many of us would take prescription glasses for granted. And to this person, that money was so meaningful and could make such a difference in some daily things that they were struggling with.

And so, those are things my husband and I have talked a lot about. As we don’t have children, how do we find people who are really working at it and trying hard and are there ways we can contribute to their lives now that can really make a difference for them? Maybe they simply need a laptop to be able to get to work or transportation or there’s so many people struggling that the tiniest little boost can make a difference for them. And so, we try to talk about those kinds of things with our clients. It’s not just spending to spend but on things that can make a difference.

And yes, as you alluded to, we’ve tried just setting up a direct deposit to them. We had that once and a client turned around three months later said, “No, stop that. I don’t need that.” So, we’ve tried all kinds of things. And Fritz mentioned running the numbers numerous times doesn’t really add a lot of value. And I agree. And yeah, we’ve had clients that needed to run the numbers eight, 10, 12 times just to feel comfortable. And so, we’re all just wired so differently. Hearing all these perspectives I think is what can really help.

If You’re Struggling to Spend in Retirement, Try Mailing Yourself a Check

Amy Arnott: And Fritz, you’ve also written about this issue of giving yourself permission to spend. And it sounds like maybe that was a little difficult for you at the beginning, but that it has been getting easier. Have there been any strategies or ways of thinking about things that have made spending more comfortable for you?

Fritz Gilbert: I applaud you guys for bringing this up because I think underspending, it’s a big problem and people don’t really talk about it because it’s so counterintuitive. But yeah, I struggled with it. And I think the reality of it, as I said, I retired at 55. So, by definition, I was a pretty aggressive saver. We always saved every time I got a raise, we’d take a little bit more of it into savings and just spend half the raise or whatever, so that we were avoiding lifestyle inflation. We were always very careful about it. So that was an ingrained habit of being careful with the money. And in retirement, you’re finally at the stage where you’re free to do these things with your life, and you don’t want to be constrained by that old frugalistic mentality. So, it’s a big transition. I would say it probably took me about five years.

And the hack that I use—kind of like we were talking about with Dana where she’d mail a check to the clients—I set up automatic paychecks basically, it comes out of a money market fund that I set it up every year-end, and I go through the numbers again, I restock this cash bucket, and I just set up a paycheck based on my safe withdrawal rate. I know I’m good to spend it. Look at my year-end portfolio. So, I adjust it every year based on what the market is doing. The market has been very good since we’ve retired, fortunately. So, our ability to spend has gone up, but we haven’t really had the need to spend that additional money. We’re very happy with our lifestyle. But what we’re doing is we’re forcing that safe withdrawal rate into our checking account. And at the end of the year, if there’s $10,000 in there that we haven’t spent, OK, let’s give it to charity. We’re forcing ourselves to spend what’s coming in. And that has seemed to work for us.

My first real struggle was this mountain bike. I wrote a story about it. I live in the mountains. I love to ride mountain bikes. And there was a nice e-bike, and I was like, oh man, it’s like $5,000. I’ll just buy the old traditional bike for $1,500. I don’t need it. And I’m like, what are you doing? It’s $3,500. Well within our safe withdrawal rate. And I bought the e-bike and I’ve never been happier. I love this thing. I’m getting older. It’s harder to get up the hills. And this thing has brought me true joy. So that was kind of my first, like, it worked. And we’ve, we’ve continued to grow on that. We just got back from a trip. We went up to the Arctic Circle, up the coast of Greenland. It was Viking cruise. It was expensive. But my wife and I talked about it. We said, you know, we’re 62, we’re healthy. There are some places we really want to go that when we get older—die with zero mentality—we’re not going to be able to do. We’ve got the money. Let’s do it. So, we took this trip. It was one of the best trips in our life. We saw polar bears. It’s one of those things for the rest of our lives. I’ll always remember seeing those polar bears out on the sea ice. It was magical. And it was just a special time for my wife and me. So, spending money, like Dana says, on things that matter.

The other example I use, right now, we’re doing an expansion on our cabin. And our thought process there is we love where we live. If it’s within our control, we plan to live here the rest of our lives. But there’s some things about the cabin that kind of irritate us. The laundry is in the hallway. There is not a good place to put it. It’s a three-story, 2,200-square-foot cabin. So, we’re always going up and down stairs. And we say, man, when we get older, we’re not going to be able to do this. So, we are extending the main level and we’re putting in a master bedroom on the main. We’re putting in a laundry room on the main. Everything is going to be right there on one level. Why? Because right now we can afford it. And then we can enjoy it for the next 20 years rather than wait 20 years and then do it. And it’s going to cost roughly the same adjusted for inflation. Let’s do it now and enjoy it for 20 years and really love where we’re living.

So, we are getting better at it. But I think the trick is you really need to look at your safe withdrawal rate, determine how much you can safely spend and force yourself to spend it. Because everybody worries, what if I need a nursing home? What if I need this? What if I need that? Valid concerns. But once you’ve built safety stocks into your numbers—an example, let’s say you’re going to be in a nursing home for, maybe two years, let’s say $200,000, well, fine. Take $200,000 out of your net-worth calculation at the end of the year and say, I’m going to reserve that for a nursing home and then calculate your number. There are ways to get around these fears of late-in-life financial needs. And the thing you don’t want to do is have safety over safety over safety over safety and not live this life that you can enjoy now in your go-go years. And then you get to your 80s and you can’t do anything anymore, and you’ve got more money than you can spend and you’re going to have regrets. That’s a pretty common path.

I’d love to hear Dana talk about how many of her clients that are 80-plus have more money than they know what to do with? I bet it’s the majority. So that’s kind of the choice. Do you want to be that person? Or do you want to find a way to give yourself freedom to spend, within reasonable limits, and then be very conscious on how you spend that money to bring the greatest value and joy to your life? That’s the approach we’ve taken.