I am retired and I’m younger than the US Social Security early retirement benefit age. After many years of saving for retirement, I need now to learn to live from my savings. While there are many articles and blogs that discuss saving for retirement, I’ve found little to help me understand how best to spend down my savings.
I am not a financial advisor and none of what follows on this blog represents financial advice. Instead, I’ll describe my journey. The approach I take including the successes and – hopefully fewer – mistakes. I will review my financial plans with a a fiduciary financial adviser but, I like to take responsibility for my finances and so will listen to their advice but decide for myself how to proceed.
In these blog posts, I will use a notional amount of $1,000 savings. This figure will appear in spreadsheets that will accompany posts to show how I’m approaching decisions. Here’s the first spreadsheet. It is a template for those that will follow and shows the proportions of my assets by asset class (stocks, bonds etc.):
In my next post, I will discuss my first problem. This is to ensure that I sufficient cash available to tide me through the next couple of years.
I’m making multiple assumptions about the world and my finances and will try to itemize these as I make them and as I uncover them:
- my retirement starts before the US Social Security early retirement age
- Initially, I plan to “deflate” my retirement pot by keeping the proportion in each asset class, constant (more on that in the next post)
- I have a budget and have confidence in knowing how much I will need to cover my monthly (and yearly) expenses
- I have no direct dependents and am not prioritizing leaving money to heirs
Before I move into this new phase, here’s a brief summary of my approach to saving. Although I’m now retired and expect to earn less, I will continue to add to my savings whenever possible and, through the magic of compounding, my savings should continue to grow too.
My strategy has been simple and I’ve automated it as much as possible:
- I’ve always maintained a budget and aimed to have income exceed expenses
- I invest the majority of my money in the world’s stock markets through low-cost index funds
- Because the stock markets are volatile, I keep money in less exciting bond (index) funds and cash
- I invest whenever I have a budget surplus and used to invest bonuses and stock awards