What to Do When the Fear of Spending in Retirement Becomes a Prison

What do you do when you've worked your entire adult life with the goal of one day enjoying retirement, only to find that once you are retired, you're too anxious to spend the money you worked so hard for? It's not an uncommon issue. In fact, there's a name for the issue -- the "retirement consumption gap."

After decades of prioritizing saving over spending, it can be tough to retrain yourself to find a happy balance between financial security and enjoying your life. If you find yourself imprisoned by a fear of spending, the following tips may help.

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Create a "spending permission" plan

Planning for retirement is great, but it may not be enough to help you find balance. Instead, consider creating a spending permission plan. Simply put, this plan divides your assets into "buckets." You can label your buckets any way you'd like, but here's an example:

• Bucket 1: Essential expenses -- covers basic needs through guaranteed income, such as Social Security benefits, pensions, and annuities.
• Bucket 2: Discretionary spending -- earmarked for travel, hobbies, and general enjoyment.
• Bucket 3: Legacy -- reserved for heirs or charitable giving.
• Bucket 4: Emergency reserve -- for unexpected expenses.

The beauty of buckets is that they give you permission to spend from designated accounts without guilt. For example, if you dip into your emergency reserve, you know you're not taking the money from the essential expenses bucket.

Use the "paycheck" method

This retirement withdrawal strategy involves setting up automatic monthly transfers from your investment accounts to your checking account. The goal is to mimic receiving a monthly paycheck, just as you did when you were working. You may find that spending feels more like business as usual than depleting assets.

Reframe your perspective

Consider whether you're truly "living," doing the things that can make life so rich. While spending may feel uncomfortable for a while, excessive frugality in retirement may lead to:

• Missed experiences and memories
• Regret over postponed dreams that may one day become physically impossible
• Sacrificing present joy for a future that may never arrive

You've already spent decades saving, which is a good thing. However, dying with unused assets means you may have under-lived. Refusing to spend your money means you're serving it; it's not serving you (or anyone else).

Practice spending

Sure, spending assets can be scary, but you must decide whether you'd rather be surrounded by untouched assets or collecting new, rich experiences. And if you've been hoarding your funds for a while, it can be a hard habit to break. As with any habit, it pays to start small. For example:

• Hire help for jobs around the house that you have trouble doing or simply don't enjoy.
• Rather than looking solely for the lowest price, treat yourself to a high-quality purchase.
• Treat yourself (and your family or friends) to a dinner out.
• Upgrade to business class when taking a short flight.

Finally, calculate your "enough" number. You do this by using conservative assumptions to determine a realistic worst-case scenario. Would you have enough money to carry you through if that thing happened? This is a good point to consider working with an experienced financial or retirement advisor who can use software to model potential scenarios.

Like many retirees, you may find that you can spend significantly more than you do each month without risking your future.

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