The Richest Person in the Graveyard

Paul R. Ruedi, CFP® 

One of the most overlooked ways people can go wrong during retirement is by being overly conservative in their spending. Though it does make sense to be somewhat conservative, especially in the beginning of retirement, many people live unnecessarily frugal lives just to end up “the richest person in the graveyard.” Helping people avoid this situation is one of the unique ways advisors can create value for their clients. 

The most common retirement spending rule is the 4% rule. This rule works as a starting point, but is so conservative that spending according to this rule can result in leaving behind an estate twice the size of your original portfolio. Such a high account balance at the end of life would leave most retirees wishing they had spent more. 

An advisor can help you avoid that regret by developing a spending plan that balances the risk of running out of money, with the equally important risk of not spending enough. They can periodically update the plan as you go through life and your portfolio balance changes to make sure you are heading in the right direction. 

Retirement is rarely a completely consistent stream of spending. “Wants” and “needs” come up in chunks. Suppose you want to update your kitchen, buy a new car, or take your entire family on a vacation but never knew if you could afford to. An advisor can take everything about your financial plan into consideration and give you the green light to spend on big ticket items that you may have assumed you couldn’t afford. 

People often end up wealthy because they are naturally frugal, and it can be difficult to get frugal people to spend money they can 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 an extra vacation by reminding you that you can easily afford it. They can even be blunt like Paul Sr. when he says things like, “if you don’t fly first class, your kids will.” 

Some advisors 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 family members during your lifetime that would not have been given – that is the value of a competent and caring advisor. 

Paul R. Ruedi is a CERTIFIED FINANCIAL PLANNER™ professional with Ruedi Wealth Management in Champaign, Illinois.