Things that trip up retirement spending plans


Having a retirement spending plan that’s inflexible and doesn’t adjust based on market performance is one thing that trips up many retirees. Vanguard retirement expert Maria Bruno and Christine Benz of Morningstar discuss some common mistakes among retirees.

Other highlights from this webcast:

Notes:
  • All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
  • This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.

TRANSCRIPT

Amy Chain: I’m going to give you each a chance to help our viewers avoid one of the biggest retirement mistakes you see people make. So, Maria, I’m going to put you on the spot and say what is the biggest mistake you would want our viewers to make sure they take care to avoid?

Maria Bruno: I would think the rigidity of a spending pattern because I can’t underscore how often I get this question in terms of the 4% spending rule and balancing that. So this notion of being locked into this hard number really is not a reality. So to have some flexibility, make sure you’re properly balanced, and have this flexibility rather than trying to get into this methodological number. It is a balance because you are trying to balance current needs with future needs. But it is a balance and you certainly want to enjoy your retirement. So it’s finding that balance and remaining flexible. You know, longevity risk I often say it’s a two-sided coin. It’s outliving your assets, but it’s also you don’t want to pass away and leave this big bucket of money that you could have spent and enjoyed it during your lifetime. So it’s finding that balance and not necessarily being locked into this spending pattern that may or may not be right for you and your particular situation.

Christine Benz: I think the big one when we look at the numbers is taking Social Security too early. When we look at the percentage of Social Security recipients who start prior to their full retirement age, maybe even take it when they’re first eligible to take Social Security at age 62, you take a major haircut on your lifetime benefit to do so. In some cases, we talked about that may be the right answer, but in many cases delaying that receipt date can be very, very impactful. So I think that that’s one of the key pieces of advice that I would impart. If you possibly can, delay. If you think you have longevity on your side, do it because you’ll be glad about that higher lifetime payout.

Notes:
All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.