I devote a Chapter to this in Nest Egg Care. But here is the overview.
1. I didn’t know, now that I’m retired, answers to two key questions, “What can we Safely Spend and Never Run Out?” “Is this connected to How Do We Invest now that I’m retired?” Those questions gnawed at me.
I found no good answers to those questions in my research. I found only general rules of thumb on spending and wildly variable suggestions as to how to invest. I was very uncomfortable going by generalities and what seemed to be just opinions. It just had to be clearer than that.
2. Understanding and trying to solve the puzzle was a challenge, and I love puzzles. I dug. I found that there are excellent tools – and free to use on the internet – that got me to the answers to those basic questions. I like that these tools are readily available, since you can recreate all the data and tables I have in Nest Egg Care. You’re not relying on someone else’s proprietary model or expert summary.
3. We’re happier, and I hope that you’ll be happier. Once I pieced the puzzle together, I was convinced of the answers of our Safe Spending Amount and How To Invest. We have NO worry about depleting our portfolio. It’s changed the way my wife and I think. I certainly don’t sweat the small stuff (some of Patti’s spending) that used to annoy me. We’re definitely focused on Enjoying More. Now. And knowing we can give more now, has added a focus and purpose that we did not have. I think you’ll get to that same point once you understand and follow the CORE principles in the book.
Clearly our Safe Spending Amount was more than I thought – more than those general rules of thumb. I think it will be more for you. How I Should Invest was clear and different from the way I had invested for years and different from the way most all retirees invest. It’s shockingly simple, and stress free for us.
It’s realistic to be optimistic about the future, not pessimistic. I found that Recalculate (one of the four CORE principles in Nest Egg Care) is a key point to understand. Nest Egg Care gets you to your Safe Spending Rate that is based on surviving the worst tracks of possible future financial returns. While we plan for the worst, it’s realistic to assume we won’t face the worst. When we aren’t on a horrible track of financial returns (and we can figure out when we aren’t) our Safe Spending Amount can increase.
One key implementation action leads us to be happier. I have total confidence in our calculation our Safe Spending Amount, and I decided to “pay ourselves” that amount monthly “paychecks.” That’s a monthly transfer from our investment account to our checking account. We know we don’t have to save one dime of the annual total; when you go through the logic, saving any of it really makes little sense. This has been a big, positive change in our thinking: at the beginning of the year our focus is, “What’s the next fun thing to do?” And later in the year, so far, the focus is on, “Who should benefit from our increased giving this year? And how much?” Added giving to our loved ones and favorite causes has given us a sense of meaning and joy that we otherwise would not have.
As time has passed, I’m more frustrated that so few retirees understand the answers to the key questions. It shouldn’t be that way. The evidence of the CORE principles is clear, yet most all retirees are victims of not knowing and therefore living a retirement plan that results in their spending, in my opinion, too little and investing in ways that mean less for them and less for their heirs and others they care about. I’ll add another post on this topic soon.