How to Spend Money Wisely in Retirement: From RMDs to Rewarding Yourself
We often hear advice and read articles about how to NOT spend money, with the focus always being on budgeting, working hard and saving for the future. But once you’ve reached retirement, have you thought about how to spend wisely? For many people, saving comes naturally after decades of discipline, while spending, especially on themselves, can feel unfamiliar. Retirement marks a shift from the wealth accumulation phase to the wealth distribution phase.
You might assume that your financial advisor’s role is only to encourage you to keep saving. In reality, the focus is on aligning your financial decisions with your goals. In recent conversations with clients, I’ve noticed a recurring theme: hesitation to spend money, even when their financial plan supports it. Add in the fact that Required Minimum Distributions (RMDs) eventually require retirees or beneficiaries to withdraw from their retirement accounts whether they need the funds or not, the question often shifts from “How do I save more?” to “How do I spend well?”
Spending with Intention
Many retirees find that their lifelong habit of saving is difficult to break. It is common to feel guilty about splurging, even when it is within their means. RMDs often highlight this tension because the money must be withdrawn, even if there is no immediate need. Instead of viewing withdrawals as a burden, they can be seen as an opportunity to use resources with purpose.
Once everyday expenses are met, RMDs or other discretionary funds can be directed in meaningful ways. This might include supporting charities, reinvesting in a taxable account, or pursuing strategies such as Roth conversions when appropriate. Just as you plan carefully for essential expenses, it is worthwhile to plan for enjoyment as well. Setting aside resources for travel, hobbies, and experiences helps ensure they become intentional parts of retirement rather than afterthoughts.
Spending with intention also means thinking about the kind of legacy you want to create. Legacy is not only what you leave at the end of life but also how you use resources now to create experiences, strengthen connections, and pursue goals that matter most. Defining this vision helps ensure that your wealth supports both your needs today and the future you want, and it gives your advisor the ability to build a plan around those priorities.
What Is Luxury to You?
Luxury is personal. It is not about appearances but about what brings joy, comfort, and freedom. For some, it may be long-planned home improvements, a new car, or upgrading to first class on a long flight. For others, it might mean helping a child with a down payment, contributing to a grandchild’s education, or treating the family to a trip where lasting memories are created.
Luxury is less about the purchase itself and more about having the confidence to say yes to experiences and comforts that make life richer and more meaningful. Asking “What does luxury mean to me?” allows you to align spending with values. It may mean convenience, reclaiming time, enjoying experiences rather than things, or simply having peace of mind. Whatever it looks like, the key is to embrace it with intention, recognizing that money is not only for protection but also for improving the way you live.
Balancing Joy and Longevity
A financial advisor’s role is to provide clarity and perspective, helping you have confidence in your financial plan. When your plan shows flexibility, it is a reminder that you can enjoy the present while still being mindful of the future. Balance is the key. Thoughtful spending is not about choosing between enjoyment and security but about finding a healthy middle ground where both can exist together.
A critical part of that balance comes from looking ahead. We use advanced financial planning software and analysis to help organize data, test different scenarios, and project how your plan may perform under changing conditions. This allows us to model economic events that are outside of your control, such as market fluctuations, inflation, tax law changes, and other shifts in the economy. We consider personal factors such as longevity, family structure, health, and career transitions. We also plan around the most common concerns cited by retirees, including:
- Healthcare and long-term care expenses
- Market volatility and uncertainty
- Taxes in retirement and the future of Social Security
This process is not about predicting the future. It is about preparing for the unexpected and acknowledging that challenges will arise. It is not a matter of if, but when.
We also apply the same approach to larger goals such as purchasing a second home, funding education for grandchildren, or relocating in retirement. Careful planning of cost, timing, and long-term impact provides clarity on how these choices fit into the bigger picture. Timing can be especially important, since health and energy often make the early years of retirement the best opportunity to pursue meaningful experiences.
The Takeaway
Retirement is not just about drawing income. It is about drawing fulfillment from the years you have worked so hard to reach. Spending thoughtfully means finding the balance between enjoying today and preparing for tomorrow. Advanced planning, scenario testing, and regular reviews with your advisor provide the framework to help you pursue your goals and legacy.
Luxury does not have to be extravagant; it just has to be yours. Whether it is experiences, convenience, or peace of mind, aligning your spending with your values can transform retirement into a season of freedom and enjoyment. The real reward of financial planning is not only financial security but the confidence that comes from knowing you are prepared for the unexpected while living well today.
~ Claire Olmstead
This blog is for informational purposes only and is not personalized tax, legal, or investment advice. Please consult your advisor regarding your specific circumstances.