{"id":598,"date":"2018-03-16T05:48:13","date_gmt":"2018-03-16T05:48:13","guid":{"rendered":"https:\/\/evolvemyretirement.com\/blog\/?p=598"},"modified":"2026-06-12T12:06:22","modified_gmt":"2026-06-12T11:06:22","slug":"spending-fear-spoils-retirement","status":"publish","type":"post","link":"https:\/\/evolvemyretirement.com\/blog\/spending-fear-spoils-retirement\/","title":{"rendered":"Don\u2019t Let The Fear Of Spending Spoil Your Retirement"},"content":{"rendered":"\n
If you\u2019re a natural saver, you may easily stash away a nice pension pot during your working years. Once those pay cheques stop coming in though, your instincts may tempt you to cut right down on your spending. Maybe it goes against your frugal nature to draw down your savings. Maybe you\u2019re a spendophobic!<\/p>\n\n\n\n
If you have a defined benefit pension, then it may not feel so bad to spend it, since you have guaranteed income. But if not, then the thought of dipping into your pension pot or other savings each month may stress you out.<\/p>\n\n\n\n
Know Your Budget<\/h2>\n\n\n\n<\/figure>\n\n\n\n
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A clear budget can help make retirement spending feel more manageable. Many people find it helpful to think about their budget several years before retirement. You then have the chance to get used to living within that budget before you retire. Sudden changes in spending patterns can feel disruptive once retired.<\/p>\n\n\n\n
Your budget is not just about hard cash though; it\u2019s about lifestyle. Budgets typically cover essential expenses, but also allow for spending that supports wellbeing. Once you\u2019ve retired, you\u2019ll no longer have the same social contacts that work gave you. For many people, spending that supports social connection plays a meaningful role.<\/p>\n\n\n\n
Understand Risk<\/h2>\n\n\n\n<\/figure>\n\n\n\n
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If you\u2019re risk-averse, nothing can spoil your retirement more than the fear that you might lose everything in a market crash. Life always entails risk, but understanding how different levels of investment risk affect long\u2011term outcomes can be helpful. The level of risk you’re comfortable with depends not only on your personal appetite for risk, but also on your individual circumstances. Taking too little or too much investment risk might endanger your long-term finances. Getting the balance right is hard; but doing so can boost your confidence in retirement enormously.<\/p>\n\n\n\n
Balancing risk often involves considering different types of investment. It also involves knowing whether and when to generate some or all of your income from an annuity. Doing so may drastically reduce risk. However the money you spend on an annuity will no longer be available to pass on to your heirs.<\/p>\n\n\n\n
Remember Your Uncertain Life Expectancy<\/h2>\n\n\n\n<\/figure>\n\n\n\n
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Okay, let\u2019s assume you\u2019ve now got budgeting and risk management under control. But if you make the wrong assumptions about your life expectancy, you risk running out of money if you live for a long time. Many people budget for a fixed lifespan; this is arbitrary. Factoring uncertain life expectancy into planning can provide a more realistic picture. If you buy an annuity, your longevity risk is removed. But relying wholly on an annuity does not suit all circumstances.<\/p>\n\n\n\n
Even for a single person, uncertain life expectancy is a major complication in retirement planning. For a couple, life expectancy is even more complex; the chances are increased that at least one member of a couple will live well beyond their life expectancy.<\/p>\n\n\n\n
Have A Contingency Budget<\/h2>\n\n\n\n<\/figure>\n\n\n\n
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There are some things that you simply can\u2019t plan for in detail, but if they happen they\u2019d make a nasty dent in your finances. These might include things like long-term care, or unforeseen spending to help out a child, just as examples. For such possibilities, some people set aside a separate budget from your day-to-day spending budget. Some people might feel more comfortable creating a separate ring-fenced contingency fund, invested separately from everything else.<\/p>\n\n\n\n
Be Flexible<\/h2>\n\n\n\n<\/figure>\n\n\n\n
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The assumptions you made at the start of your planning may no longer hold later on. If you stick rigidly to your initial plan, you may run the risk of running out of money. Or maybe you won\u2019t take advantage of good fortune by spending a bit more.<\/p>\n\n\n\n
Periodically reviewing your plan can help keep it aligned with changing circumstances. You may find that adjusting spending slightly helps keep things on track. This might be if the market takes a dip. It could also be if you ran up unexpected spending, which depleted your contingency fund. Or if you\u2019re lucky, you may find that circumstances allow for additional discretionary spending.<\/p>\n\n\n\n
A well\u2011structured plan often means later adjustments feel less drastic.<\/p>\n\n\n\n
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