{"id":22998,"date":"2023-09-28T19:01:55","date_gmt":"2023-09-28T19:01:55","guid":{"rendered":"https:\/\/isafespend.com\/personal-finance\/retirement\/the-goldilocks-strategy-to-safely-spend-your-retirement-savings\/"},"modified":"2023-09-28T19:01:56","modified_gmt":"2023-09-28T19:01:56","slug":"the-goldilocks-strategy-to-safely-spend-your-retirement-savings","status":"publish","type":"post","link":"https:\/\/isafespend.com\/?p=22998","title":{"rendered":"The Goldilocks Strategy To Safely Spend Your Retirement Savings"},"content":{"rendered":"
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Retirees who rely significantly on their IRAs and 401k accounts to pay for their living expenses face a serious challenge: How do they carefully invest and draw down their retirement savings to spend on living expenses, with the goal that they don\u2019t outlive their money and recognizing that they might live a long time?<\/p>\n

Here\u2019s the dilemma: Spend too much, and you might run out of money in your 80s or 90s. But if you\u2019re overly cautious with your spending, then you might not spend as much as you could have. Of course, you won\u2019t know if you\u2019ve successfully addressed this dilemma until you \u201cfinish your retirement\u201d (i.e., \u201cpass away\u201d).<\/p>\n

There\u2019s been evidence recently that many retirees fall into the \u201cspend too little\u201d group for a variety of reasons. The top reason on the list is that they want to prevent being broke in their later years. While that might be financially prudent, it\u2019s unfortunate that they aren\u2019t enjoying retirement as much as they could.<\/p>\n

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The Goldilocks strategy<\/strong><\/h2>\n

To address this dilemma, you\u2019ll want to build a portfolio of monthly retirement paychecks that are designed to last the rest of your life, no matter how long you live. Then, if you spend no more than your monthly paychecks, you can feel confident that you won\u2019t outlive your money.<\/p>\n

Your portfolio of retirement paychecks will consist of guaranteed lifetime paychecks\u2014Social Security, pensions, income annuities, and tenure payments from reverse mortgages\u2014and variable paychecks from investing your savings with a careful withdrawal plan.<\/p>\n

As you transition into retirement, you\u2019ll want to estimate your total retirement income from all your retirement paychecks. Then you\u2019ll have a target for managing your regular living expenses. It\u2019s a good idea to build a healthy margin between the total amount of your retirement paychecks and your regular living expenses to prepare for the surprises that are inevitable over the course of a long retirement.<\/p>\n

Most retirees need to reduce their living expenses<\/strong><\/h2>\n

If you\u2019re like most retirees, you\u2019ll have much less regular income in retirement compared to your working years. As a result, you\u2019ll need to look for ways to reduce your living expenses. The sooner you face this reality, the better your long-term financial security will be. Too often retirees put off making tough decisions about cutting back until they reach a financial crisis in their later years, when their options might be more limited.<\/p>\n

Here are a handful of time-tested ways to help manage and balance your retirement spending:<\/p>\n