Here’s a threat to a fulfilling retirement that seems to hurt as many people as almost anything else I see: Overspending risk. When you transition into retirement and receive a lump-sum pension payout from your employer, or cash out your 401(k), you may suddenly be in possession of hundreds of thousands, if not millions of dollars, which is likely more money than you’ve ever had in your life.
It seems like that kind of money will last forever (and it can). But all too often, it doesn’t. Think of all the horror stories about lottery winners and professional athletes. In spite of millions of dollars handed to them over night, a large majority end up flat broke. These are not bad or weak people. They’ve simply never had any financial training or advice.
Comparatively, over-spending risk is precisely what it seems: spending too much too early in retirement. It’s particularly damaging because you’re spending down the savings that, not only do you need to live on for the rest of your life, but it’s money that you should be using to grow and enlarge your nest egg.
Budgets, qualified, professional investment advice and guidance, and proper asset allocation, along with an honest evaluation of your long-term goals and needs goes a long way toward remedying the threat of over-spending.
There are no guarantees in life, but a multi-pronged approach to retirement, including a fluid and proactive approach to the philosophy of spending and saving, this can go a long way toward helping make sure that you don’t run out of money once you retire.