The Richest Person in the Graveyard

October 4, 2017 | Paul R. Ruedi CFP®
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There are many ways a person can go wrong managing their own retirement.  The one that is most often overlooked is not spending enough throughout retirement and ending up “the richest person in the graveyard.” 

That is probably because the cost of underspending is not as readily visible or emotionally stirring as the cost of overspending.  It is unseen: the lifestyle that you could have had but did not. 

I don’t think advisors get enough credit for being the “life optimizers” that they are.  By helping you develop a reasonable spending plan and giving you permission (or sometimes even a little push) to spend money in a way that makes you happy, advisors can make sure you get the most out of life! Here’s how:


They develop a reasonable spending plan

The most common retirement spending rule is the 4% rule.  That is, you can safely withdraw 4% from your portfolio every year, make yearly adjustments for inflation, and even if you get bad returns you won’t run out of money over a 30 year retirement.  It sounds good, and works well as a starting point, but what if I told you that spending according to this portfolio will likely result in your leaving an estate twice the size of your original portfolio balance?  Perhaps you would want to spend a little more?

An advisor can help you develop a spending plan that balances the risk of running out of money with the equally important risk of not spending enough.  Then, they can periodically update the plan as you go through life and your portfolio balance changes.


They give you the “go-ahead” on one-off items

Retirement is rarely a completely consistent stream of spending – often “wants” and “needs” come up in chunks.

Suppose you always wanted to fix your kitchen, buy a new sports car, or take your entire family on a vacation but never knew whether or not you could afford to.  An advisor can take everything about your financial plan into consideration and give you the “go-ahead” on big ticket items like this that you may have assumed you couldn’t afford.


And sometimes a little push

People often end up wealthy because they are naturally frugal.  Believe it or not, it can actually be difficult to get people to spend money they can easily afford to spend.

A good advisor will recognize your personality and make suggestions to ensure you actually live the lifestyle you can afford.   A good advisor can subtly suggest you treat yourself to that first class ticket or extra nice hotel room by reminding you that you can easily afford it. 

If that doesn’t work, they can be blunt like Paul Sr. is: “If you don’t fly first class, your kids will.”


Final Thoughts:  The Value of an Advisor is Bigger than Finances

A lot of people like to try to quantify the value of advice in dollars and cents.  But a good financial advisor has an impact beyond just the investment portfolio and financial plan; they help you get the most out of life.  The vacations that otherwise wouldn’t have been taken, the gifts to children and family members during your lifetime that would not have been given… that is the value of an advisor.