If you’ve socked away plenty of money in your 401(k) plan and invested it carefully, congratulations. Now comes the real challenge. For retirees, choices about how to spend a lifetime’s savings are fraught with tricky calculations about market risk, taxes, and death.
Jim and Sue Cleary, both 69, have two homes, one in Florida and a second in western Michigan that keeps them close to five of their nine grandchildren. And yet, as they attend the kids’ football, basketball, and soccer games, Jim says he knows they won’t be able to maintain this lifestyle indefinitely. To reduce expenses, the Clearys have already stopped going on cruises to Alaska and Australia, and they know they may eventually have to sell one of their homes. Even though they’re careful planners, they’re struggling with a basic question: spend now to enjoy their healthy years and risk running out of money, or scrimp today for a tomorrow that may never come or come only when they’re too infirm to savor it? “That’s kind of the main concern I have—are you going to outlive what you have?” Jim says.
