Larry Frank Sr.: Manage spending at any age

McClatchy-Tribune Information Services

November 9, 2015

You save and save and save for retirement, trying to tune out those escalating estimates of what you need to never run out of money. Conventional wisdom blathers that in retirement you spend only 75 percent of your current expenses, anyway. Think again. Here’s why.

Retirees often spend too much early in retirement and — the retiree’s nightmare — outlive their cash.

Aside from having more time to pursue increasingly expensive recreation from golf to cruises, other factors pinch retires like no post-work generation before. These include, as Jill Krasney notes in her Business Insider article "The Notion That You’ll Spend Less in Retirement Is Totally Misguided," skyrocketing health care costs and bankrolling equally skyrocketing costs of housing, education and other life expenses for both kids and grandkids.

Why retire then? Why not keep working? As the Employee Benefit Research Institute notes in its "2013 Retirement Confidence Survey," almost half (47 percent) of respondents retired earlier than planned because of illness; a third of those respondents also retired early simply "because they can afford to do so." Maybe a big financial mistake.

Among other findings:

More than 1 in 5 workers and retirees say they expect to retire later due to the poor economy, lack of faith in Social Security or the government and inability to afford retirement.

More than a third (36 percent) report they expect to wait until after age 65 to retire and 7 percent don’t plan to retire at all.

Almost seven of 10 workers plan to work for pay after they retire. Only a quarter of retirees report working for pay since they retired.

Nearly half of retirees are "not at all confident" about finding paid employment in retirement.

Misguided notions and pessimistic outlooks lead to faulty retirement planning at any age, working or retired.

First, you save too little when working because you expect to spend less once you retire — justifying in your mind why you can spend more and not save more now. Once retired, you again expect to spend less when older and once again continue to spend more. Expect to cut spending later to justify spending more now?

Eventually you run out of money, period.

Maybe illness or the economy ended the job and with it your income. Maybe you spent what little you saved. In any case, yes: Your expectation about future spending came true.

Do an annual checkup on your portfolio during retirement and try these spending-control steps:

Admit that you spend too much and think about why you spend so much. Does it make you feel good? Is it the pleasure of having money to spend on what you like?

Make a goal of how much you want to save. Whenever you get your money, put it all — or at least a portion of it — away.

Spend stuff on what you actually need. Keep a record of what you buy.

Think about all the money you spent instead of saved. If you hit a milestone in your saving goal, don’t celebrate by blowing all of it at once.

Try to spend with cash as much as possible. Parting with actual cash makes spending feel more real.

And remember: You can manage spending at any age.