In this episode of Fireside Financial, Joe and Regan delve into the fascinating topic of retirement spending. They explore two sides of the same coin: the challenges faced by individuals who feel unprepared for unexpected expenses during retirement, and those who are reluctant to spend their hard-earned savings due to fear of running out of money. Joseph and Regan share valuable insights and real-life examples to help listeners navigate these financial dilemmas.

They discuss the importance of accurately estimating retirement expenses, including factors like travel, home renovations, and unexpected costs. They also emphasize the significance of aligning spending with personal values and offer practical tips for identifying and prioritizing what truly adds value to one's retirement lifestyle. Additionally, they address the paradigm shift that occurs when transitioning from saving to withdrawing funds, providing strategies to overcome the fear of spending and make informed decisions that balance growth and longevity. Tune in to this episode for expert advice on retirement spending and maximizing your financial well-being during your golden years.

What You’ll Learn in Today’s Episode:

1.     People who feel well prepared for retirement can still fall into spending traps they didn't plan for, underestimating expenses like vacations, vehicle purchases, or renovations.

2.    It is essential to identify and align spending habits with personal values to make informed financial decisions in retirement.

3.    Retirement planning should consider unexpected expenses like home repairs or unforeseen financial challenges, especially for those without defined benefit pensions.

4.   The transition from saving to withdrawing money in retirement can be a challenging paradigm shift that requires a shift in mindset.

5.    Some retirees may hesitate to spend their money out of fear of running out, while others may need encouragement to spend more and make optimal investment decisions.

 Ideas Worth Sharing:

"One of the things I would look for is a big shift between the income someone has been living with while they're working and what they're showing their expenses are going to be when they get to retirement."

"If you can identify what are those core values that you have, and then you kind of go back through your spending, you can see if there's a disconnect there."

"Most people can have what they want, they just can't have everything." 

"I think one of the things that can help some people with that is to have a bit of a fallback... at least they know that if I do spend through my portfolio, I have a backup that's going to at least be able to pay my bills and kind of maintain that basic lifestyle."

 “There are always unexpected expenses. If you don't have that, it could create more stresses, I guess, if you will, or force you to go back to work is another, I guess, downfall to that."

 “The transition from saving to withdrawing money in retirement can be a challenging paradigm shift that requires a shift in mindset."

Resources in Today’s Episode:

Joseph Curry

Regan Schiller

The Latte Factor by David Bach - This book is recommended for understanding the importance of aligning spending with personal values and making mindful financial decisions.

 How to Overcome the Fear of Spending in Retirement: A Comprehensive Guide

Are you among those who are hesitant about spending money during your golden years? Joe Curry and Regan Schiller are here to ease your worries. Having worked with numerous individuals who have crossed the bridge into retirement, they understand the mindset, challenges, and solutions to this common concern.

A common dilemma for many retirees is the transition from saving to spending. It can feel unnatural and even risky to start using the money you've worked so hard to accumulate. This is why we must address the important issue of retirement spending challenges and traps. By understanding these, you can steer clear of common financial pitfalls and embrace the joy of spending during your golden years without unnecessary stress or regret.

1. What are some common spending traps that retirees often encounter?
Spending money effectively during retirement requires careful planning and understanding personal needs and values. Some retirees encounter what we may call spending traps due to imprecise estimates of their anticipated retirement expenses. An overly optimistic transition into the retirement phase of life can push individuals towards these traps, especially when they underestimate their current spending or fail to include unexpected future expenditures. For instance, one may forget to factor in expenses like vacations or home renovations which, upon hitting unexpectedly, can lead to financial instability. Hence, one best practice put forth by many financial advisers is to aim for settling down major expenses, such as home renovations, prior to retiring. This can help avoid the shock of unplanned expenses during retirement and help ensure a smoother, more predictable transition.

Knowing where to cut corners and where not to, can significantly impact an individual's retirement experience in terms of being fulfilling and ensuring financial security. In essence, understanding the nuances of retirement spending is critical for retirees, and it isn't just about having enough money saved up. It's about avoiding potential spending traps, recognizing core values, and strategically aligning spending habits to those. It's about maintaining a delicate balance between overspending and unnecessary frugality during retirement. Adopting sound financial practices prior to retirement, ongoing communication with advisors, and periodical financial check-ins can help retirees prepare better for the golden years of their life. This approach is integral to shaping a retirement lifestyle that meets personal needs while simultaneously ensuring financial stability.

2. How can a pre-retirement income and planned retirement expenses comparison help prepare for a financially stable retirement?
When preparing for retirement, it's vital to have a thorough understanding of both your current income and anticipated retirement expenses. This comparison allows you to assess if your planned retirement income will suffice to cover your likely expenses throughout retirement. Additionally, it provides a valuable opportunity to preemptively acknowledge and address potential spending traps that could jeopardize your financial stability during this phase of life. Regular income ceases for most people during retirement, so the significance of accurately determining what your expenditures will look like becomes all the more paramount.

It's interesting to note that what may seem like an everyday expense now may not hold the same value post-retirement. Understanding your pre-retirement income in juxtaposition against anticipated retirement expenses isn't merely a basis for comparison. On a deeper level, it's a tool of introspection that can help you reassess your values, spending habits, and expectations from retired life. It instigates a shift in one's perspective from simply accumulating wealth to strategically spending it in a way that it lasts through retirement while allowing one to live comfortably and pursue passions and interests.

Consequently, a clear outlook on future expenses can pave the way for a more content, fulfilled, and financially secure retirement. The key is continuous financial education, open communication with your financial advisor, and willingness to tweak your financial strategies as per changing circumstances and needs.

3. How does understanding personal values contribute to effective retirement spending?
Understanding personal values is a cornerstone in effective retirement spending. Personal values act as a compass that aids in directing retirees when making financial decisions. They provide a clear picture of what money means to them and where they derive satisfaction in their expenses. It's essential to comprehend these values because they determine financial habits, for instance, the differentiation between necessary and unnecessary expenditures. By identifying what truly matters, retirees can prioritize their spending on fulfilling activities or experiences.

The discussion on understanding personal values and retirement spending is crucial for retirees. This strategy offers clarity toward expenses that align with a retiree's long-term goals and aspirations. As retirement introduces changes to one's financial structure, it's vital to maintain control in the allocation of resources. Aligning spending habits with personal values, alongside effective communication with financial advisors, empowers retirees to make informed, purposeful decisions. Recognizing personal values is more than a spending strategy; it's a tool for enriching one's life during retirement by focusing spending on areas that truly matter to the individual.

4. Why is communication with financial advisors crucial in making informed decisions about retirement spending?
Communication with financial advisors plays a pivotal role in making informed decisions about retirement spending. Throughout our working years, we're conditioned to save and invest to accumulate wealth for retirement. This mindset can shift dramatically in retirement, where the objective is to spend and enjoy the fruits of our labor. This shift can be daunting. Many retirees grapple with the fear of outliving their savings, leading to under-spending. Others may lack clarity on how much they should spend, leading to over-spending and potential financial distress. These contrasting scenarios underscore the need for open, honest, and regular communication with a financial advisor who can provide crucial insights, guidance, and reassurance.

Retirement is a significant life change, requiring a considerable mental shift from saving and accumulating to spending. A well-articulated financial plan can provide a roadmap for spending in retirement, striking a balance between enjoying retirement and ensuring the sustainability of retirement funds. However, without regular interaction with a financial adviser, this plan remains just a document. Open, regular feedback, guided by a financial advisor, will keep financial aspirations aligned with evolving life circumstances, market conditions, and legislative changes. This ongoing interaction equips retirees with the confidence to adapt their financial plans, ensuring their spending decisions align with their desired retirement lifestyle. Having a deeper understanding of personal values and financial principles can embolden retirees to spend wisely and joyfully, reaping the benefits of their lifelong labor.

5. How can retirees find fulfillment and joy in spending their hard-earned money during retirement?
Retirement is a period characterized by a significant lifestyle shift, particularly concerning financial habits and viewpoints. Once we've transitioned from our full working years into retirement, a new dynamic must be established - one where we no longer earn a regular paycheck. The question is, how can retirees find fulfillment and joy in spending their hard-earned money during retirement? The crux of the matter truly lies in a change of perspective. It's about recognizing that the purpose of our financial diligence throughout our working years is to provide comfort, security, and enjoyment in retirement. This means aligning spending with values, creating meaningful experiences, contributing to causes we care about, or even passing on a legacy to loved ones. Yes, it's crucial to have a sensible, sustainable financial plan in place. But, just as important is the art of indulging in the fruits of our labor and actually enjoying our accumulated wealth.

Many retirees come to recognize that it is fine to spend their earnings, they consented to the idea they could relish in the rewards of their labor; it's a switch from the notion of constant conserving to cautious spending. They discovered that aligning their spending with their values and desires led to a sense of satisfaction. Moreover, entrusting loved ones with financial gifts and granting them the liberty to use it for pleasure and experiential spending, offers retirees a sense of gratification. The money shared acts as a 'living legacy', securing contentment for retirees it doesn't jeopardize their financial security. Understanding the importance of finding joy in spending during retirement can lead to a healthier, satisfying post-working life. A critical aspect of this journey is realizing that retirement isn't about putting one's interests aside for the fear of potential financial instability; it's equally about enjoying and utilizing that diligently saved wealth. Holistically, it's about maintaining a balance between preserving and indulging that can lead to a gratifying retirement life. Retirement, after all, is the time to reap the benefits of years of hard labor. It's a stage that should be characterized by joy, contentment, and fulfillment - made possible not only by thoughtful saving but also by responsible, gratifying spending. Living a life of scarcity may lead to comfort, but embracing a life of balanced abundance can lead to joy.

Understanding your financial freedom in retirement is an essential part of making the most of your golden years. Spending in retirement should bring joy and fulfillment, fully aligning with your values. By proactively planning your spending, you'll be better positioned to take full advantage of your retirement without compromising on your long-term financial security. So, go ahead, give yourself permission to enjoy your hard-earned money. After years of diligence and saving, it's time to embrace the rewards of your efforts with confidence.