Wednesday, August 14, 2013

Creating a New Retirement Spending Plan

Since the 08/09 stock market decline, we had implemented our own austerity spending plan. We cut back on living expenses, paid off our mortgage and worked part time to reduce our withdrawal rate from retirement savings.  We reduced our expenses by 30-40% and covered 20-100% of expenses with my part time jobs.

Due to the recent recovery of my company stock and an inheritance from my parents, our retirement savings now above the 2007 highs.   This is encouraging since we have used 6 years of living expenses and paid off a mortgage since 2007.  In addition, I've identified a few sources of retirement income streams that will become available over the next few years.

Although there is still a chance of a significant stock market decline, I think we are better protected now than we were in 2008 due to a higher proportion of assets in cash and an income stream  from a partnership interest.   So I'm planning to give a raise of 20% to our monthly spending account.   This will be in addition to a 5% raise earlier this year.   For reference, the allocated amount is still less than our spending in 2008 when we had a mortgage.

I will review this thinking with our financial advisor over the next couple weeks. I expect our advisor will validate the increase.  

For more on The Practice of Personal Finance, check back every Wednesday  for a new segment.

This is not financial or retirement advice. Please consult a professional advisor.

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