Saving for retirement can be a long-fought journey, but once you reach that milestone, a new challenge arises: how to plan your spending. Retirement Daily Editor and Publisher Robert Powell joins Yahoo Finance’s Wealth! to discuss spending strategies for when one finally retires.
Powell notes that an individual’s retirement spending should be based on "how well-funded you are when you enter retirement." However, he points out that regardless of whether an individual is underfunded or overfunded upon entering retirement, retirees often tend to be more conservative with their spending in the initial few years due to uncertainty about their longevity, referring to this period as "the go-go years."
Powell recommends two spending approaches to alleviate retirement uncertainty: "the bucket approach," which involves allocating one to five years’ worth of expenses into "safe accounts," with the second bucket invested in more volatile assets, and the third bucket allocated to stocks; and the second strategy entails matching "guaranteed sources of income against essential expenses" and utilizing your 401(k) for discretionary expenses.
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