Happy Friday Reader ☀️
You probably know what kind of investor you are.
But do you know what kind of retirement spender you are?
This week, I’ve been thinking a lot about that question.
The financial industry spends plenty of time discussing investment profiles and risk tolerance. Those matter, but they don’t fully answer two questions people have heading into retirement:
How much can I spend? And what type of income experience do I want to have?
Some people want a predictable monthly lifestyle. Others want to enjoy more while they’re young and healthy (even if that means adjusting later.) And some place a high priority on what they leave behind to loved ones.
I’ve been working on five approaches to help make those preferences and tradeoffs easier to understand. These are working names, but here’s the idea:
“I want a steady lifestyle with as little financial uncertainty as possible.”
This approach emphasizes protected income, conservative investments, and cautious spending increases. The tradeoff is giving up some growth, access to money, and potential legacy in exchange for greater predictability.
“I want to keep my money invested and accessible, with a clear plan for withdrawals.”
This approach uses a diversified stock-and-bond portfolio with spending guardrails. Spending can increase when the plan supports it and decrease when necessary. The tradeoff is greater reliance on markets to support your lifestyle.
- The Income + Growth Spender
“I want a dependable foundation, room to enjoy retirement, and money invested for growth.”
This approach combines a protected income base with investments that support additional spending and potential legacy. It can emphasize enjoying more during your active years. The key is deciding how much growth to spend and how much to retain for tomorrow.
- The Freedom-first Spender
“I want to enjoy more now, and I’m comfortable making meaningful adjustments along the way.”
This approach pairs growth-oriented investments with higher early spending. It offers substantial spending potential, but requires a willingness to reduce spending when conditions call for it. Leaving a legacy takes a back seat to enjoying retirement.
- The Legacy-Minded Spender
“I want to enjoy retirement while preserving something meaningful for my loved ones.”
This approach keeps spending conservative relative to available resources while maintaining investments for long-term growth. The tradeoff is using less of your wealth today to pursue more potential wealth for the next generation.
Which of these sounds most like you?
You don’t have to fit neatly into one category....
And what feels right today may change down the road.
A few questions worth thinking about:
- How much do you want to enjoy today?
- How much uncertainty are you comfortable with?
- And how important is what you leave behind?
Matt
PS: I'm curious... which of these feels like a best fit for you? (it can be more than one).