The Humans vs Retirement Podcast Dispelling the myths around spending your money in retirement with Abraham Okusanya
May 8, 2023
Abraham Okusanya, founder and CEO of Timeline, shares insights on how retirees can spend confidently. He tackles the myth of overly cautious spending and encourages enjoying the 'go-go years' of retirement. Abraham also challenges the U-shaped spending pattern, advocating for a dynamic approach to withdrawals rather than sticking rigidly to the 4% rule. He emphasizes aligning financial goals with personal values and the importance of open discussions between couples about their retirement plans.
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Retirement Changes The Nature Of Your Portfolio
- Retirement portfolios become the asset you must spend, not just a producer of income, which changes the decision dynamics.
- Unknown lifespan, investment returns, and inflation make people overly cautious and leave money unspent.
U-Shaped Spending Is A Myth
- The commonly cited U-shaped spending pattern in retirement is largely a mirage according to research in several countries.
- Spending instead tends to decline gradually in real terms as people age, roughly ~1% per year on average.
Unmanageable Care Costs Are Often Overstated
- Fear of catastrophic care costs tends to be overstated when viewed probabilistically and by duration of care used.
- Most people who enter residential care spend relatively short periods, so planning should be data-driven rather than fear-driven.
