You've done all the right things—financially speaking, at least—to save for retirement. You started saving early to take advantage of the power of 澳洲幸运5官方开奖结果体彩网:compounding, maxed out your 401(k) and 澳洲幸运5官方开奖结果体彩网:individuaꩵl retirement account (IRA) contributions every year, made smart investments, squirreled away money into additional savings, paid down debt, and figured out how to 澳洲幸运5ཧ官方开奖结果体彩网:maximize your Social Security benefits.

Now what? When𒁃 do you stop saving and start enjoying the fruits ofꦉ your labor?

Become a Retirement Spender

Many people who have saved consistently for retirement have trouble making the transition from saver to spender when 🦩the time comes. Careful saving—for decades, after all—can be a hard habit to break.

"Most good savers are terrible spenders," says , president of Pure Financial♌ Advisors Inc., in San Diego,👍 California.

It’s a challenge most Americans will never face. According to a 2024 AARP survey, 1 in 5 Americans age 50 and older have no retirement savings at all, and over half are concerned that they won't have enough to sustain themselves during retirement.

Fear Is an Issue

One reason people have trouble with the transition is fear: in particular, the fear that they w🐈ill outlive their savings or have medical expenses that will leave them destit🐻ute.

Spending, however, naturally declines during retirement in several ways. You won’t be paying Social Security and Medicare taxes anymore, for example꧙, or contributing to a retirement plan. Also, many of your work-related expenses—commuting, clothing, and frequent lunches out, to name three—will cost less or disappear.

"I see that many people in retirement have more anxiety about running out of money than they had when they were working very stressful jobs," says Anderson. "They begin to live that 'just in case something happens' retirement." 

Ultimately, that kind of fear can be the difference between having a dream🌄 retirement and a dreary one. For starters, penny-pinching can be hard on your 📖health, especially if it means skimping on healthy food, not staying physically and mentally active, and putting off healthcare.

澳洲幸运5官方开奖结果体彩网:Being stuck in saving mode can also caus🉐e you to miss out on valuable experiences, from visiting friends and family to learning a new skill to traveling. All these activities have been linked to healthy aging, providing physical, cognitive, and social benefits.

To calm people’s nerves, Anderson does a demo for them, "running a cash-flow projection based on a very safe withdrawal rate of 1% to 2% of their investable assets," he says. "Through the projection, they can determine how much money they will have, factoring in their spending, 澳洲幸运5官方开奖结果体彩网:inflation, taxes, 🐼etc. This will show them that it's okay to spend the mo🎀ney."

Heirs Are Another Concern

Another reason some retirees resist spending is that they have a particular dollar figure in mind that they⭕ want to leave their kids or some other be🎉neficiary. That's admirable—to a point. It doesn't make sense to live off peanut butter and jelly during retirement just to make things easier for your heirs.

"Retirees should always prioritize their needs over their children's. Although it is always the desire for parents to take care of their children, it should never come at the expense of their own needs while in retiremen𓂃t," says , founder, and president of Index Fund Advisors in Irvine, California. "Many parents don't want to become a burden on their children in reti♛rement, and ensuring their own financial success will make sure they maintain their independence."

When to Start Spending

As there’s no magic age that dictates when it's time to switch from saver to spender, you have to consider your own financial situation and lifestyle. A general rule of thumb says it’s safe to stop saving and start spending once you are debt-free, and your retirement income from 澳洲幸运5官方开奖结果体彩网:Social Security, ꩲretirement accounts, etc. can cover your expenses and inflation.

Of course, this approach only works if you don't go overboard with your spending. Creating a budget can help you stay on track.

RMDs: A Line in the Sand

Even if you find it hard to spend your nest egg, you'll have to start cashing out a portion of your retirement savings each year once you turn 73 years old. That's when the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) requires you to take required minimum distributions, or RMDs, from your individual retirement account (IRA), 澳洲幸运5官方开奖结果体彩网:SIMPLE IRA, SEP IRA, and most other retirement plan accounts (but not 澳洲幸运5官方开奖结果体彩网:Roth IRAs or 澳洲幸运5官方开奖结果体彩网:Roth 401(k)s).

The RMD age used to be 70½, but following the passage of the Setting Every Community Up For Retirement Enhancement (SECURE) Act in December 2019, it was raised to 72. Then, Congress further increased the age to 73 as part of the SECURE 2.0 Act. Required minimum distributions for traditional IRAs and 401(k)s were suspended in 2020 due to the March 2020 passage of the 澳洲幸运5官方开奖结果体彩网:CARES Act, though this suspension has run its course.

Retirees need to take the penalties seriously and start withdrawing funds. If you don't take your RMD, you will owe the IRS a penalty equal to 25% of what you should have withdrawn. So, for example, if you should have taken out $5,000 and didn't, you'll owe $1,250 in penalties. The penalty rate used to be 50% but was reduced as part of SECURE 2.0.

If you're not a big spender, RMDs are no reason to freak out.

"Although RMDs are required to be distributed, they are not required to be spent," , founder and managing partner of Dougherty & Associates in Cincinnati, Ohio, points out. "In other words, they must come out of the🎶 retirement account and go through the 'tax fence,' as we say, and then can be directed to an after-tax account, which then can be spent or invested as goals dictate."

If individuals "are fortunate enough to not need the funds, they can reinvest them using a regular brokerage account. Or they may want to start using this forced withdrawal as an opportunity to make annual gifts to grandkids, kids, or even favorite 澳洲幸运5官方开奖结果体彩网:charities (which can help reduce the taxable income)," says , of Opulen Financial Group in Arlington, Virginia. "For those who will be subject to estate taxes, these annual gifts can help to reduce their taxab🐻le estates b🐻elow the estate tax threshold."

Note that there's a helpful tax vehicle for using RMDs to give to charity: the 澳洲幸运5官方开奖结果体彩网:q🔴ualified charitable distribution (QCD). Giving your money according to this method can simultaneously take care of your RMDs and give you a tax break.

As RMD rules are complicated, especially if you have more than one account, it’s a good idea to check wi🌞th your tax professional to make sure your RMD calculations and distributions meet current requirements.

The Bottom Line

You may be perfectly happy living on less during retirement and leaving more to your kids. Still, allowing yourself to enjoy some of life's pleasures—whether it's traveling, funding a new hobby, or making a habit of dining out—can make for a more fulfilling retirement. And don't wait too long to start: Early retirement is when you're likely toಞ be the🍌 most active.