Sunday, October 17, 2021

Don’t Bury Your Head in the Sand, Have a Spending Plan




“Seek the truth or bury your head in the sand. Both require digging.”

~ Andrew Nolan

Question: We may have put our financial security in jeopardy by helping a family member. I’m concerned that my wife and I may not have enough set aside for the future and we’re not sure what to do. Can you provide any suggestions?

Answer: It’s very common for preretirees and retirees to use retirement savings to support the needs of children and other adult relatives. Whether you’ve helped parents or children, you may have felt an obligation to assist and saw no other solution. Whatever the reasons, now is the time to focus on you and your future.



Taking a realistic approach and evaluating your current situation is much more productive than putting your head in the sand. Congratulations for having the willingness to conduct a thoughtful and measured analysis of existing assets and income needs. A good starting place is to begin by estimating expected costs for housing, food, healthcare, transportation and a few extras. The tricky part is knowing how long you’ll need your funds to last. Life expectancies have risen, just look around, there are more of us living longer than ever before. If health issues are not yet a concern, it’s suggested to plan on living into your early nineties. For many people this requires that their retirement nest egg last up to thirty years.

During the accumulation phase of one’s financial life we often formulate an Investment Policy Statement (IPS). An IPS helps define individual risk tolerance and return objectives. A written plan is a tangible reminder that may help you stay on track to reach your goals. We suggest the same discipline for the retirement phase and develop a Spending Policy Statement (SPS). In contrast to your IPS, a SPS documents spending needs and goals. Your SPS is a gentle yet powerful reminder intended to keep you accountable and on target with a retirement withdrawal strategy to manage and evaluate spending expectations.

An SPS provides focus and framework for long-term goals with the intention of increasing confidence. An SPS may also help you to avoid emotional decision making behavior. I use a “24 Hour Rule” that you’re welcome to borrow. It recommends waiting 24 hours before making expenditures over a certain dollar amount. For me, this applies to everything including household purchases to online shopping for the grandchildren. At a time when you’re restructuring your financial future, the 24-Hour Rule could help you avoid financial remorse and curtail impulse buying. If after a good night’s sleep, an idea is still reasonable, and rational, proceed only if it doesn’t threaten your SPS.

Overspending, especially on discretionary items can slowly, almost unnoticeably, erode savings and disrupt long-term projections. The willingness to be accountable is a big advantage. Think of your CERTIFIED FINANCIAL PLANNER® professional as a personal trainer or coach.

One popular SPS approach is to set a fixed withdrawal percentage based on the year-end value of your portfolio. This causes some years to be flush while others are lean, but you’ll have the confidence of knowing you’re not disrupting the future with today’s spending. Another approach is to establish a “floor” to cover basic needs that can be withdrawn in any market environment. Discretionary spending or “wants” are the variable to be adjusted based on your portfolio’s performance.

Withdrawing larger amounts in the early years of retirement can place stress on a portfolio. Anticipating and planning for larger expenditures like a new car, special getaways, gifts, paying down debt, or relocating is suggested. If possible, it helps to address these extraordinary items before saying good-bye to the regular paycheck.

Uncertainty can upset an otherwise sound financial plan. Increased longevity brings additional and often overlooked concerns. Retirement has a lot of moving parts. As you’ve recognized, plans will change along the way. Written goals to categorize and clarify objectives while increasing discipline and accountability are helpful. You may be pleasantly surprised at the positive influence of a SPS. The willingness and ability to make adjustments to your SPS is essential. A solid financial foundation depends on realistic spending goals and a well-crafted spending plan statement. These are the instruments that can provide a blueprint for a new beginning and financial freedom. Stay focused and plan accordingly.

There is no assurance that any investment strategy will be successful. Asset allocation does not guarantee a profit nor protect against loss. The process of rebalancing may result in tax consequences. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. All investments are subject to risk. The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and subject to change at any time.

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”

This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC, 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email darcie. Website:

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