Roy Snarr


Snarr Financial & Insurance Services, Inc.

Spending Down in Retirement

Retirement marks a significant shift in how you manage your finances. Instead of building your nest egg, the focus turns to using your savings to cover your living expenses. This concept is called "spending down," and understanding it is crucial for making your retirement funds last.

What Does "Spending Down" Mean?

Spending down your retirement savings means strategically drawing from your accumulated assets to create income during your retirement. Unlike other retirement philosophies focused on preserving a significant portion of your nest egg, the core idea is utilizing your savings to meet your living expenses and lifestyle needs.

Why Choose to Spend Down?

There are several compelling reasons to consider spending down your retirement assets:

  • Enjoying Your Hard-Earned Money: You've worked diligently to build your retirement fund. Spending it within reason allows you to experience the rewards of your labor and pursue your passions.
  • Avoiding Unintentional Bequests: Leaving a large inheritance might be well-intentioned, but if it comes at the cost of sacrificing your comfort and enjoyment during retirement, it might be worth reconsidering.
  • Reducing Worries about Outliving Your Savings: Spending down strategically helps ensure your needs are met throughout your lifetime.

Strategies for Spending Down

There's no one-size-fits-all approach to spending down in retirement. Here are some common strategies:

  • The 4% Rule: This popular guideline suggests withdrawing approximately 4% of your retirement assets in your first year of retirement and adjusting that amount annually for inflation. It's a good starting point, but individual circumstances may warrant adjustments.
  • Flexible Spending: Rather than a fixed percentage, flexible spending involves evaluating your income needs year by year. This lets you adjust your withdrawals based on market performance, unexpected expenses, or changing desires.
  • Bucket Strategy: This method divides your assets into different "buckets" based on time horizons. Short-term needs are covered by cash and less volatile investments, while longer-term buckets can include stocks that offer growth potential.
  • Annuity Income: Purchasing an annuity provides a guaranteed income stream for a specified period or even for life, offering peace of mind against outliving your assets.

Factors to Consider

Before you start spending down, consider these essential factors:

  • Life Expectancy: Your projected lifespan influences how aggressively you can draw down your savings.
  • Inflation: Factoring inflation into your plan ensures your purchasing power is maintained over time.
  • Market Volatility: Market ups and downs can significantly impact your portfolio. Be sure your spending down strategy accounts for potential downturns.
  • Unexpected Expenses: Healthcare costs, long-term care, or home repairs can arise. Have some flexibility in your budget to address these potential expenses.

The Importance of Planning

Careful planning is vital for a successful spending down strategy. Consulting with a trusted financial advisor may provide tailored guidance and help you create a comprehensive plan. They can analyze your income sources, expenses, risk tolerance, and goals to help you determine the best approach for your unique situation.

Spending down your retirement savings allows you to make the most of your retirement years. By understanding the concept, employing thoughtful strategies, and seeking professional advice, you can create a fulfilling and worry-free retirement experience.

Many people have learned about the power of using the Safe Money approach to reduce volatility. Our Safe Money Guide is in its 20th edition and is available for free.  

It is an Instant Download.  Here is a link to download our guide: 

Safe Money Guide -

Roy Snarr picture

Roy Snarr

Snarr Financial & Insurance Services, Inc.

1640 Highland Falls Dr.

Suite 101

Leander, Texas 78641

(512) 591-8814

Best Annuity Rates Report Cover

Looking For Answers?

Download our Safe Money Guide and learn more about safe retirement options that can help you achieve your retirement goals safely - FREE!