Shifting gears is never easy. Habits made are hard to break.

I have been writing a bit about life transitions of late. (See here and here.) One of the biggest transitions we can go through in life is retirement. This comes without a lot of changes. The biggest change maybe going from a saving mindset to a spending mindset.

Money isn’t a number on an account statement. It represents opportunity. Opportunity created by hard work. Many retirees are not taking advantage of that opportunity. Tammy La Gorce in the New York Times:

But while retirees who live extra cautiously may be securing the sense of contentment that comes with having the resources to deal with sudden expenses like long-term care, they may also be sacrificing quality of life to do it.

The financial services industry is built around the idea of asset accumulation. Retirement is about shifting gears. Going from accumulation to decumulation. This is scary. As my colleague Kris Venne wrote:

As financial advisors we spend a ton of time collecting client’s goals for “the future”. I am certain that most financial planning software is literally overflowing with goals that clients will never bother to act on. Not because they can’t afford to, but because nobody is pushing them to pull the trigger.

Can you imagine spending 30 years doing something regularly, having it work out really well, then one day be expected to start doing the exact opposite?

Or said another way, from the paper Spending in Retirement: Determining the Consumption Gap:

Retirement income conversations may need to move away from sustainable withdrawal rates toward strategies that maximize spending for a given level of financial assets, while addressing client concerns about uncertainties. A shift of this nature would require less focus on asset management and more attention on income management to ensure that clients receive the highest possible satisfaction from their accumulated retirement wealth.

The fact is that many retirees, upwards of half, are afraid to dip into their savings. They rely on current income to fund consumption. Their fear that they may need these funds at some point in the future is palpable. Nobody wants to be a burden on someone else in the future.

As retirees age their capacity for spending changes. An elaborate overseas trip at age 65 may not be physically possible for someone at age 85. In a conversation with Chrisine Benz, Joel Dickson of Vanguard stated:

One question is whether that spending can be shifted a little bit early. So maybe you spend a little bit more in early retirement years when you may be more able to do that, recognizing that your spending will probably adjust automatically or you may adjust it based on resources as well later in retirement.

Retirement is a dynamic time in your life. Spending choices and market moves can have a big impact on your financial situation. Financial advisors provide many services, but this may be the most important. Giving clients the confidence to spend their hard-earned money in retirement. Isn’t that what we are all working towards?