Happy Friday Reader ☀️
This week, I put together a case study about a 62-year-old couple with competing priorities: spending more AND leaving more money to loved ones.
Brenda wanted to spend an extra $2,000/month for traveling and vacationing, especially in the early part of retirement.
Her husband, Brandon, was more concerned with leaving a larger legacy to their children.
Both are perfectly reasonable goals. But spending more today generally means having less to leave behind later.
So can they actually do both?
This is where retirement income planning gets interesting.
We start by figuring out what matters most to you. Then we explore which tradeoffs you’re willing to accept to make those goals possible.
For Brandon and Brenda, the question was:
Can we enjoy more of our money while we’re healthy enough to travel AND improve the likelihood of leaving a meaningful legacy?
Their initial plan supported about $14,000/month in after-tax spending, with roughly $500,000 left to their children in the lowest legacy outcome modeled.
Brenda wanted $16,000/month. Brandon wanted more left behind.
Getting there required a few adjustments.
First, they accepted more flexibility in their future spending.
They could spend more today if they were willing to make adjustments later, should the markets disappoint.
That doesn’t mean they were planning to run out of money. It means the higher spending came with a greater likelihood of needing to pull back.
And that’s a real tradeoff.
An extra $2,000/month for travel sounds great. But would you still be comfortable with that decision if it meant reducing your travel budget after a prolonged market downturn?
For some people, absolutely. For others, that uncertainty would take away from the enjoyment.
Second, they accepted more short-term investment uncertainty.
A more growth-oriented portfolio gave them greater long-term growth potential, which helped support Brandon’s legacy goal.
Of course, that also means accepting larger swings along the way.
More growth potential doesn’t come with a promise of better results.
Third, they changed how they would manage spending over time.
They would be quicker to reduce spending when the plan called for it, and more restrained about increasing spending when markets performed well.
That last piece matters. If leaving money to your children is a priority, you probably don’t want every good market year to become a permanent increase in your lifestyle.
With those changes, the revised projections supported $16,000/month in after-tax spending and increased the lowest legacy outcome modeled to approximately $1 million.
Those are projections, of course. Neither the spending nor the inheritance is guaranteed.
But the comparison showed something useful: their initial plan wasn’t the only way to approach retirement.
They could pursue both goals by accepting more investment volatility and more flexibility in their spending.
Sounds like a win-win, right?
But if you’ve followed me for a while, you know I talk about safety-first retirement planning.
How does a more aggressive investment strategy fit into that?
Safety-first doesn’t always mean conservative investments.
Bonds, CDs, annuities, and conservative portfolios can all play a role.
But safety can also come from how you MANAGE your income throughout retirement.
For Brandon and Brenda, a key safety mechanism was the ongoing spending process.
We will monitor their plan, watch how their investments are performing, and adjust spending when necessary.
I refer to these as income guardrails.
Instead of deciding on an income at retirement and increasing it every year regardless of what happens, guardrails give us a framework for responding to what actually happens.
When can you comfortably spend more?
When should you hold steady?
And when is it time to pull back?
The guardrails only help if you’re willing and able to follow them. They don’t eliminate investment risk or make every spending level sustainable.
But they can give you a way to enjoy more today while keeping future decisions grounded in how your plan is actually doing.
For some people, safety means knowing a dependable income check will arrive every month.
For others, it means keeping more money invested for growth, with clear rules for adjusting their spending.
And for many, it’s a combination of the 2.
Matt
PS: here's a link to that case study if you'd like to watch