Working Wealthy – Accumulation to Consumption

September 24, 2019

We get the opportunity to work with BDF clients in all stages of their personal financial planning. Those stages include building wealth, accumulating wealth and eventually consuming that wealth.

That last stage is probably the most interesting as it appears to be the most difficult from a behavioral level.

That’s right—spending one’s retirement savings is harder than it looks. Consuming the savings you have spent a lifetime accumulating is a sometimes daunting, challenging and even paralyzing experience.

Retirement Strategies

Consider the following analogy when it comes to your retirement strategy.

Let’s say I have heart disease in my family health history so through diet, exercise and discipline, I create a lifestyle that includes different controls in my life. I avoid red meat, cheese and sodium. I work-out 4-5 times per week to maintain proper cardio health, and I try to moderate things like stress and get enough rest each night. And let’s say I maintain this lifestyle for twenty to thirty years.

In that thirty-first year, imagine my doctor comes to me and says, “you know that lifestyle you have lived the past three decades, you shouldn’t live like that anymore. Have a steak and put some bleu cheese on it”. Wait, what?

The same could be said for someone who has saved their entire life and one day, all of a sudden, they no longer need to save anymore. And what’s more challenging, to live their lives, they now can do the opposite of what they’ve done the past several decades—spend the money they’ve saved.

This is the exact experience we work through with our clients when helping them transition from gathering to spending. It’s an enormous behavioral shift that should be approached thoughtfully.

Planning for Retirement

A few ideas to keep in mind during this transition:

1. Stick to your plan – as a BDF client, you already have your plan in place with your wealth manager. Constant updates and adjustments to your plan will allow you a real-time view of how your plan looks. Focus on this plan, not the market or short-term results, and use it as a guide.

At BDF, our client financial plans always concentrate on a spending goal. Use that as your guide into your spending future.

2. Don’t criticize – we often hear from clients that say, I’m spending too much. When we ask more about that statement and learn where it’s coming from, we usually learn that someone has spent more on a one-time expense or a special trip they’d planned for years. Although we planned for these expenses, it feels out of character to spend in this manner.

Don’t beat yourself up and overanalyze the situation. Spending in retirement tends to be higher in the beginning for nearly everyone, and then it becomes a bit more stable. Give yourself some time to adjust.

3. Ask for help – I find the older I get, the harder it is to ask for help. In my mind, I’m an adult, a parent, a spouse, I should know what I’m doing. When in fact, this is when I should be asking for help all the time. I don’t know it all.

Just as I should be asking more experienced parents for advice about a fussy 3-year old or the best ways to help with homework, those that are beginning to spend in retirement should rely on their wealth manager and their more experienced peers.

I’ve often found that our clients take great solace in speaking with their colleagues and friends that are already in retirement about how the transition has gone. Learn from others’ experiences and it’ll help provide an additional framework to your personal situation.

Plus, your BDF wealth manager should also be a great person to lean on for support, guidance or just to be a sounding board. We want to help.

Nick Cosky, CFP® is a Wealth Manager and Owner at BDF and is responsible for educating and introducing prospective clients that are considering hiring BDF for their wealth management needs. In previous roles, Nick has served as the head of BDF’s Financial Planning Committee and has participated on the Business Owner Team and Women’s Service Team. Nick is passionate about the planning that BDF does for its clients and enjoys every aspect of the client-advisor relationship. Nick graduated from Lawrence University in Appleton, Wisconsin, with a Bachelor of Arts degree in History and English. He is a CFP® professional and is a member of the Auxiliary Board at the Art Institute of Chicago.