How do I spend down my retirement money?
Today’s question comes from Robin. She asks:
I found your website through your book list, which includes 7 titles I have added to my “Read” list (thanks!) From there, I’ve been entranced for the past hour reading articles on your website. I like your direct (open) and honest approach, which is why I’m sending you my question:
Lesson from Parents: “It’s not OK to be rich!”
My parents were Stanford grads, scientists who placed high value on education, intellect, and knowledge, and absolutely no value on wealth beyond the means to provide basic living expenses. They taught us to save our allowances toward college expenses; they paid their bills on time, living frugally, giving any excess funds to causes they believed in, and died at 87 and 94 respectively, with several thousand dollars in a bank account. Going to college in order to one day make good money was not their lesson to us. No, college was good because you could learn enough to work at something you love, something to which you make a lifetime commitment.
Now, at age 74, I still struggle with their philosophy… “It’s not OK to be rich.” I was a “saver” right from the start. By babysitting and ironing at age 14-16 for $0.25 per hour, I managed to accumulate $2,000 in a bank account toward college, which was enough at that time to cover more than two years of tuition and expenses. Even while working part-time during college, I continued to save toward graduate school. By my mid-30s with more than $100,000 in savings (1976), I always tried to hide the fact that I had any money. I was embarrassed by it. And so it continues.
My question, finally, is how can I change my attitude? Because, even at my age, I find it hard to retire, hard to live a comfortable life, hard to spend my savings, hard to be charitable. If I did, people would know I have money… and you know, “It’s not OK to be rich.”
Maybe you have younger readers who have grown up feeling ashamed about wealth who would benefit from a discussion of this topic. Although I’ve tried to rid myself what I call “money madness,” it lingers. Maybe you can help me.
I don’t think you’re afraid of people knowing you have money, because when people know you have money nothing changes.
Most people think when you’re rich that old high school friends and long-lost cousins start asking for money, but that’s simply not true.
So this story you tell yourself that it’s not okay to be rich, that it’s not okay to spend, that it’s not okay to give away your money, is just that: a story.
How do I know this? You can give money away anonymously.
I think you’re afraid to spend because it took you decades to accumulate.
This makes sense. You have Depression-era parents who taught you to be thrifty, to respect money.
You spent your lifetime being thrifty and now you have more money than you can possibly spend.
This isn’t a bad problem to have. The people who spent their life under-saving would trade places with you in a heartbeat.
So, I think you have two options.
The first is to start spending, but it’s difficult to change decade-long habits.
Plus, you hate wasting money, because only people who have no self-control do that.
The question to ask yourself is, “What makes you happy?”
If it’s travel, why not splurge on a 90-day Pacific Rim cruise.
And if that seems too indulgent, why not help someone pay their college tuition. After all, education is important to you.
What I’m trying to say is that it doesn’t matter what you spend on, what matters is that it matters to you.
This is probably going to feel overwhelming to you, so the other option is to spend in your will.
That’s what I’m doing. I think of it like this: you can give some money away now, or you can give more money away later, because of compounding.
I mean, it’s not like money won’t be needed later. Giving more later is the more logical choice.
The downside to spending in your will is that you don’t get to see your money spent. No ribbon-cutting ceremonies, no fancy plaques, nothing like that.
But this is good for you, because you don’t like being the center of attention.
Anyways, you’ve done well for yourself.
Not many people can say they paid most of their way through school and then saved $100,000 — almost half a million in today’s money — by their 30s.
But here’s a reality check: you’re 74. You have 10 to 20 years to spend what you’ve accumulated. To spread the wealth.
If you want to see it spent then you need to give yourself the permission to spend it.
If you just sit there doing nothing then someday your heirs will be buying expensive toys with your money, and I know you know that’s not okay.