I recently come across a couple of strange cases where people initiate high and unaffordable levels of spending in retirement because they feel they deserve it.
One of them is destitute because they spent all of their cash on cruises and leisure boating.
Please don’t get me wrong, I'm all for living it up in retirement and constantly tell my clients to enjoy it while they can.
We all go to too many funerals and see too many people stricken with cancer, heart disease, and other ailments. It is tragic when you see somebody that was too frugal with regrets on things that they could have done or should have done with their families or travel, etc.
I can't remember ever talking with somebody in the final stages of their life where they wished they bought more stuff.
But in some of these cases, we're seeing people work hard and feel that they deserve what they've dreamed about no matter what and spend accordingly. Unfortunately, the math catches up with you at the end and like I've said for years, in retirement, there is no do-over and nobody's going to lend you any money because you're just going to die on them.
You really need to try to make sure that you're spending is in line with your resources.
I have a wonderful person that I've been helping for years that is still convinced that they don't have enough money to retire. The 4% rule is an imperfect rule of thumb but it means that you can usually spend around 3 or 4% of what you start with in your investment accounts for about 30 years, give or take. It’s not a guarantee but that's a rule of thumb.
Some of these problem spenders are spending 3, 4, 5 times that amount and the investment return simply cannot keep up with that kind of spending and it leads to the inevitable crash!
Try to run it down the middle.
Don't live so frugally that you have regrets later in life the things you missed out on, but if you don't have the resources to meet every possible dream that you've had or feel entitled to, don't write that check because it can end up very badly in the end.
Do the math of life.
Thanks for taking a look!