Ep # 87: Flipping Your Mindset From Saver To Spender

Benjamin Haas |

Change can be hard, especially when transitioning into retirement and figuring out new routines in life. You may be surprised to realize it's hard to change your pre-retirement mindset of saving to a post-retirement mindset of drawing down your investments.  Now your savings is finite. We can help you overcome the fears of: Did I save enough? How do I know when I'll run out of money? Where do I pull money from? Our goal is to help you balance that excitement of doing the things you want to do during the go-go years of your retirement by making a plan that tracks if your money and spending can last your lifetime. Check out this episode to find out how we guide people through this process.  

  • The importance of having a plan - 4:10
  • The three phases of retirement and how they differ - 11:14
  • What is the pecking order of where to access money from first? - 15:03



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Full Transcript:

Benjamin Haas  00:03 

Hi everyone and welcome to A/B Conversations where we will help you CFP your way out of it. A podcast where you get into the minds of a couple of Certified Financial Planners on how we think and feel about everyday financial planning questions and what should really matter most to you. A healthier financial life starts...now! 


Adam Werner  00:25 

Hello Ben. 


Benjamin Haas  00:27 

Hi Adam. How are you?  


Adam Werner  00:30 

Great. Podcast time once again. For me anyway, it's like the highlight of the week or every other week, whenever we end up recording these. It's always a fun time. 


Benjamin Haas  00:40 

It warms my heart to say that. We're doing our best to help people out so I think this one will resonate with a lot of people. 


Adam Werner  00:51 

Yeah, so let's just jump right into it. The topic for today is focusing in on the transition that people go through when they get to retirement, specifically through the lens of saving up to retirement and then spending once you get to retirement. Flipping that switch from saver to spender, which I've heard numerous, numerous times. It's much easier said than done.  


Benjamin Haas  01:22 

Yeah, I think it's already, you know, anytime you go through these big transitions in life, there's already kind of the anxiety around what's going to change? How do I need to change? And I think especially now, we've got people that maybe two or three years ago knew they were going to retire. But now we're in this more difficult market environment and economic environment and to your point, well, the saving part was easy. Now, fear starts to set in. What can I spend? Am I going to run out of money? Just people needing to be reassured. So I think it's a good conversation for us today to kind of talk about how do we help people flip that mindset from saver to spender and what are the things that they kind of need to look out for? 


Adam Werner  02:05 

Yeah, so right off the bat, I think this goes for many different topics but I think just letting people know that they're not on an island. They're not alone, in kind of feeling that anxiety or feeling that level of stress and just how am I now going to make that transition. Millions of people are going through the same, maybe not millions but people getting to retirement, there's a heck of a lot of people, it's that generation right now. It is the baby boomers, there's a lot of people going to be retiring in the very near future. So, number one, you're not alone. But also going through, again, we're biased since we're planners, but going through a planning process can give a little bit more context to the spending side of things. So, we'll get into some of those details but I think what kind of stuck with me in thinking of a recent client. He made it very clear to me, the saving part, while maybe not easy, right? Living within your means is not always the easy thing to do. But I know as long as I save, that is, it is a one step process, I can save. If I do investing is step two, fantastic, saving is great. There's not really a fear of over saving. That's not a bad outcome but getting to that point and now trying to flip that switch to spending, that can go awry. There are many different ways that can go sideways and have negative impact. I think it puts a lot more pressure on getting that side of it correct or at least feeling like you have a really good handle on recreating your paychecks, which we know is kind of the fear. You already said the phrase, it's the fear of running out of money, once you stop working, once you stop earning, whatever you have saved is essentially finite. That comes with a whole lot of worry and anxiety of now, how do I make this last as long as I do? 


Benjamin Haas  04:10 

Yeah. I think that probably hits the nail on the head and the first thing that I would have wanted to talk about, it's creating some sort of balance for people. If you have a plan, the whole purpose of the plan is to kind of understand parameters a little bit, but I think it's okay and what we want to do is get people okay with the thought that you don't have to think too far out. I think those first couple of years of retirement, those go-go years. It is a little bit of trial and error to go okay, what am I going to be spending money on? What does this look like for me? We've got all the technical things and maybe we'll talk about some of them to try to be efficient about this. But I think right off the bat, we want them to be able to balance that excitement of doing the things that they were so excited to retire to, while not being too fearful on the front end of well what's going to happen 25-30 years from now, am I going to run out of money. It's really about that trial and error and creating a system, I'm going to say not just for the spending, but for review. So, flipping this switch, you say it a lot of times, it's going to be moving a dimmer. It's not off and on and it's okay give yourself permission to be okay with, here's going to be the plan but I know it's not going to be perfect. We're going to adjust it. I'm going to see how spending is going. I'm going to break it into these different camps of now I understand what I need versus what I want or what I wish for, and be able to work through that over time.  


Adam Werner  05:37 

Yeah, and I think, part of that conversation, it's not always the fun side and maybe sometimes there are difficult decisions that need to be made based on what you have saved. But as you said, it is a little bit of trial and error or for some people, it is just test driving what that may look like and feel like early on in retirement with some guard rails. We wouldn't want somebody to overspend early in retirement and then feel like that's going to be a detriment later in life. But it is, there is some of that where it is somewhat uncharted territory.  


Benjamin Haas  06:15 

For sure, yeah.   


Adam Werner  06:18 

But hopefully for people getting to retirement, it is just an abundance of time and now how are you going to fill that time? Oftentimes there are hobbies or volunteer work or whatever, spending time with grandkids, whatever that may look like, oftentimes, travel, comes with expenses. I'm thinking back to a recent podcast that we did, where we were encouraging people to not hold back on projects or spends that they had planned to do. They were very fearful of doing those things and actually following through because of the market volatility because of the downturn in the market. So, I think through that lens, this should be no different. But yeah, I'm not sure if I made a point there. But I guess the point is, it is early on in retirement, give yourself permission to kind of feel it out without huge major, irrevocable decisions with your life and your finances. But be able to kind of plug and play a little bit and see what actually feels good and what actually works for your situation. 


Benjamin Haas  07:23 

Yeah, and that process of review with us really is going to start with let's just come up with a baseline plan. I don't want to equate somebody's retirement to like parenting our children, but like, sometimes you just need to create the parameters, right, and we try to do that in planning. We know we're not going to hit the nail on the head with your expenses, you can't know, and oftentimes people come in and once you start to open up that conversation, they don't know if they'll sell the house later in life and downsize. They don't know if their kids move away if they'll do that, too. They don't know what trips and what big expenses are going to pop up. Yeah, the point is to have the process for review, but to have the parameters and we will share that. Here's what we think you can spend, by the way here are the buffers that we built in. So, all those things that might make you anxious about spending, let's talk about them, and let's keep them in a camp that's supported by maybe the next step on what are the logistics that we're going to do with you behind the scenes to recreate those paychecks. Where are those efficiencies with places that you have money saved? What's accessible? What's invested, where and why? 


Adam Werner  08:26 

Yeah, so I mean, that leads me right into our three-bucket theory, which I know we've done a separate podcast on but that essentially speaks to exactly what you're just talking about. If you have things structured in a way that gives you flexibility and have cash accessible, that if the market is down, you're not forced to sell investments at a loss to generate the cash that you need to meet your needs. That should come with a whole lot of confidence that we know rocky times are going to come our way at some point, whether that is just pure market volatility or if it's a phone call this morning from a client. One of the spouses was in a car accident. Now we need to replace this car, we're going to get some proceeds from the car insurance, we know that but this was not an expense that they had planned for. By the way, this exact same couple had to completely redo their HVAC system less than a year ago, again another expense that wasn't planned for. But as long as you have kind of the plan, you have those, use your words like those parachute cords to kind of pull, when it's necessary. Again, we hope that transition from I know I have to do all this saving to I still want to be mindful of my spending. Those things are going to pop up, they are unavoidable. So at least going through that planning process, have a path that when life throws us a curveball, we at least have something to go back to and be able to adapt and access money in an efficient manner to your point.  


Benjamin Haas  10:04 

Yeah, so in addition to kind of setting the parameters on spending that second step, what I heard you say, we follow that three-bucket theory where it's really our job to manage liquidity needs and structure things in a way where the time horizon is what we're paying attention to. If this is money that you don't need to spend or we don't anticipate spending in the next four to seven years, then it's okay that stocks are down right now. Because we have cash on the front end or we have some investments that are creating income to replenish the money you're taking out to replace that car. If you set these parameters, you set these structures in play, we want it to be as simple as, hey, you have this auto deduction, saving going on for 30 years of your career. Now you've got this auto flow of money, right? You got this direct deposit. And by the way, your investments just like when you were working kind of act like your savings account did when, you know, had you needed to replace this car 10 years ago, when you're still working. Safe money that we can have accessible. We don't want these ebbs and flows of the market to create that type of anxiety in retirement. We want the hands-off approach that maybe you had when you were working to be the same way. 


Adam Werner  11:15 

Yeah, that's fair. So I guess another thought that I just had in general and maybe it doesn't necessarily flow, but we'll see how it goes. We know that retirement is not necessarily or at least spending in retirement is not linear. Usually the term go-go, right, and we kind of have like three phases of retirement. It's early on, maybe it's the honeymoon phase, where it is those go-go years. You're still young enough and active enough to travel, do the things that you want to do, when you want to do them, like that is a window of time. Then when you get beyond that, there's the slow-go years, where you're still doing things. Maybe you're not traveling as much, maybe you're not spending as much on whatever, but it tends to slow down. And then at the towards the end of life, we call it the no-go years where you're probably not traveling the world in your 90s. Maybe some people will be, but odds are that the lifestyle spending probably decreases over time. But that may be somewhat offset by who knows what. Medical care, health care costs later in life. So where the spending may not be completely just linear day one of retirement to day, what is it 8,000? What's the 30 days or 30 years in retirement?  


Benjamin Haas  12:42 

Yeah, 8,000 days. 


Adam Werner  12:42 

I think just kind of thinking through it in that lens. There are different periods of retirement and those can have different spending levels. I guess that doesn't necessarily impact the three-bucket side of things for us. But it is just another thing to be mindful of that what you're spending on day one in retirement could very well be different than what you're spending on when you're 80 in retirement. 


Benjamin Haas  13:08 

Yeah, and I think specific to spending, that's a really good point because everything is a balancing act. It needs to be that way. So, when there are those bigger spends, we do need to balance the fact that compounding returns is still important. When we say managing time horizon, we understand that with the closer people get to retirement, they need greater certainty that the savings is going to be there and doing what they want. But we can't just take everything and this is a temptation right now for people, we can't just take it all and move it to cash or move it to bonds because let's be real, your pensions not going to keep up over time. Some people have those annuity payments that aren't increasing at all. Social security, we've gotten some increases here these last couple of years but historically doesn't keep up with expenses. You need to be able to have that money growing and killing the geese on the front end that are supposed to be laying your golden eggs later in life. You just you need to balance the spending in the go-go years. It's just another way of saying, look, it's important to have a partner in the process. I understand that the do-it-yourself model can work for a lot of people. Please if you're retiring, seek somebody that's gone through this. Come up with that baseline plan and understand those parameters because spending is a big one. 


Adam Werner  14:21 

Yeah, and on that note, we certainly have I won't say that it's a lot but we certainly work with people that are Do It Yourself investors but just want to have that sounding board getting to retirement. That is a big, big kind of inflection point in somebody's life. So, if it is just creating that pathway to make sure they're not missing something or they are being mindful of where money is saved. Where to access money first. For accumulating clients, the pre-retirees that are just doing the hard work of putting their head down and saving. We often come up with we call it the pecking order of savings, like the hierarchy, where should you save first? Where should you save second, where to save third and that's different for everybody based on their individual situation and what they're hoping to accomplish. But when you get to retirement, we kind of flip that around to now it's not the pecking order of where to save, it's the pecking order of where do I access money first. I guess, that's kind of the three-bucket theory side of things but it ultimately comes down to taxes, accessibility, and that long term investment growth that we're hoping to achieve, and having things structured in that way, again, that you can ride out the market volatility in years like we are in right now. 


Benjamin Haas  15:52 

Yeah, and it's that education that not every dollar is created equal. I think you don't want to learn that the hard way in retirement because that act of saving and the automation of that while you're working traditionally, is into that company retirement plan, that 401k, that 403b, that's going to be 100%, taxable when you take money out, more often than not. So, there is a degree of preparation to where we start to look at those things when we have the opportunity to work with somebody closer to retirement. Where's this money going to come from? And can you build different buckets of money that gives you some flexibility? Because ultimately when that retirement happens and that finite amount of savings is there, what's the job? Be as efficient as possible as we can with recreating those paychecks and those little changes over time, whether it's saving a tax dollar there or saving an investment dollar over here by tax loss harvesting or rebalancing, whatever it is, they may not feel like big moves, but that's another one of those checkpoints of things that we need to do for our clients that hopefully give them greater clarity on how to move forward with their spending and what's possible and what's not.  


Adam Werner  17:05 

Yeah, and sometimes it is that simple. The little tweaks and little moves can add up over time to more meaningful impacts and in this situation in particular, we're just thinking longevity. Making sure that the pool of resources that you have, let's be efficient, like you said. If small tweaks or adaptations need to happen over time to make sure that that is still there for you later in life if and when you need it. That is the key. It's being able to adapt and make those small tweaks, which I think for most people that's way more palatable. I'll make a small adjustment at this point in time, rather than feeling like I have to make a huge shift in my lifestyle when I'm 85.  I often hear clients joke, you know, just as long as you don't think I'm going to be eating cat food when I'm 90, then I'm okay. 


Benjamin Haas  18:03 

Yeah. How about that? I, to your point, I think that is palatable. It's all the reason I think, to have planners and clearly, we're biased. That's why we're talking about this, I just think when you have that plan on the front end and you have somebody to help coach you through flipping that mindset, you almost have to look at it, everybody knows when they turn 65 and they get on Medicare, they're now in retirement that those annual doctor visits are really important thing because things that you can get ahead of, you want to know that so that you can course correct your own health if you need to. Like retirement planning is no different. Yeah, make the small tweaks, find the efficiencies, manage the time horizon so that we can find efficiencies with recreating those paychecks and let us be that guide. 


Adam Werner  18:52 

If there's anything else that you want to share, go for it. All right, then I'll try to put a nice little bow on it. I think this is the perfect scenario where the phrase, what got you here isn't necessarily going to get you there. It is the encapsulation of you've done the saving that's gotten you here. But it is now a very different ballgame once you get to retirement and spending down those assets, if you need to, in an efficient way is a whole different ballgame. 


Benjamin Haas  19:23 

Yeah. I just want to end it by kind of maybe saying where we started. You're not going to be able to figure it all out. Planning is not a point in time. It's supposed to be for a rolling period of time, so give yourself permission to not have to have all the answers. But if you have a process, if you have partners, that's the key. That's the key that way you can adapt over time.  We're here. Reach out. All right, thank you, sir. Enjoy the rest of your day. 


Adam Werner  19:48 

Yep. Agreed. Bye. 


Benjamin Haas  20:08 

Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in this show are for general information only, and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant and financial advisor or tax advisor prior to making any decisions or investing. Thanks for listening!

Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice. 

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