What 'One More Year' Is Actually Costing You in Retirement

追加: 2026-05-23

[00:00:00]I'd rather work one extra year than run out of money. That's what someone told me on a call recently. And I get it. I really do. But there is a cost to one more year that many of us miss and that's what I want to talk about today.

[00:00:12]But first, my name is Kevin Lum. I'm a certified financial planning professional and this channel is dedicated to helping a million people retire without worry. So, in today's video, I want to talk about what one more year is really costing you, and more importantly, how you can know when enough is enough. If you're one of the people telling yourselves, "I'm just going to work one more year or two more years," I want to ask you something. Do you know what retirement is actually going to cost? Because almost everyone I talk to who's stuck in this loop has the same problem. They have a vague, anxious sense that retirement is going to be too expensive or that they're going to run out of money, but they've never actually run their numbers in the absence of real data. Fear fills in the blank every single time. So, let's deal with the question underneath all of this. What does spending actually look like in retirement? And there are a couple of camps. The first is people who genuinely spend more when they retire, at least early on. You've worked hard for decades and suddenly you have all this time back. You have an immense amount of time and you have a long bucket list. So you travel more, you eat out more, you pick up additional hobbies, right? You're golfing more, you're fixing up the house, you're spending more time with the grandkids, you're traveling to go see the grandkids. And for people in this category or this camp, work was actually a cap on their spending, on their lifestyle, right? They thought they were frugal, but they were just frugal because they were too busy to spend their money. But once they retire, that cap on their spending comes off.

[00:01:43]And for a few years, they live it up.

[00:01:44]And then there are the second group of retirees. These are the retirees whose spending actually goes down. And I probably see this more often than the people who kind of blow the top off their spending. When you stop earning a paycheck, you also stop contributing to a 401k. You stop paying Social Security and Medicare taxes. You stop commuting.

[00:02:05]You stop buying new work clothes. And at some point around this retirement window, many retirees pay off their mortgage. And so you get a substantial drop in your fixed cost because you're not commuting any longer because you're not buying clothes for work because you don't have a mortgage anymore. You're not putting money into your 401k. And so you see a significant drop in your spending. And here's something that surprised me. The Employee Benefit Research Institute surveyed more than 3,000 retirees between the ages of 62 and 75. And they asked retirees to rate their consumption philosophy on a scale of 1 to 10. One was a pure savings mindset and 10 was a pure spending mindset. Only 11%, this is really surprising, only 11% rated themselves on the spending side. So almost 90% of retirees would not consider themselves spenders. Most retirees, even the ones with money to spend, are still operating like they're accumulators, like they're in the savings portions of life. But there is a mindset shift that you have to make in order to give yourself permission to retire. You have to move from seeing yourself as an accumulator, from someone who wants to see that number on your Fidelity account pick up to someone who gives themsel permission to begin to spend the money they've saved. But some of you are saying, "If I have another two years of savings, isn't that better?" Right? Shouldn't I have more money in retirement than less? I mean, that seems to make sense. And I'm not going to tell you that more money is a bad thing. More money can always be helpful for something, but you need to understand what you're trading it for.

[00:03:50]We think about lifespan, right? How long we have to live, but we don't think enough about health span. The headline number is, and a lot of you see this when you read in articles, that the average American lives to about 77 years of age with healthy years ending around 66. And some research studies show that there typically is about an 11 to 12 year gap between when you pass and when your health begins to decline. But your health on average is going to begin declining about a decade before the end of your retirement. But, and I need to spend some time here because for this audience, the average is hiding something important. If you're watching this, at least based on the data that YouTube has given us, you are probably above average. You are more financially secure and more college educated than the general population. And based upon research, your life expectancy will be longer than the general population.

[00:04:45]Meaning, if you were 60 today and you were in good health and you are financially secure, you're realistically looking at living into your late 80s, maybe even your early 90s. And your healthy years likely are going to stretch into your 70s or early 80s, right? The years you can actually enjoy your retirement. Meaning, if you retire at age 65, you probably have 15 good years, maybe 20 if you're lucky, and you've really taken care of yourself.

[00:05:13]Those are the years that you can still really hike a trail, not just kind of walk around the loop. Those are the years you can fly to Europe without your back giving out on your second day, at least hopefully. Those are the years you can still chase the grandkids if you have grandkids around the house. And then it narrows and often it begins narrowing fast. You've probably seen this with friends and family, right? The decline is often much faster than we expect. And when you push retirement out one more year, you are not pulling that year from the end of your life. You are pulling it from the front, from the healthiest years you have left. And here's the kicker. Most people working that extra year aren't doing it because they love the work. Some people are doing it because the economic realities require it, right? They just they can't make the numbers work. A 2026 study from the Economist Enterprise found that nearly half of workers delaying retirement say they're doing it because of the cost of living. So some people it is just an economic reality. But many people that I talk with actually can afford to retire, but they haven't run their numbers. And if they have run their numbers, they haven't yet given themselves permission because they say, "Well, more money is better." And of those people who continue working, only one in five said they wanted to keep working because they actually enjoy it.

[00:06:34]So the majority of people who say, "I'm going to retire next year or in two years or whatever it might be," are not doing it because it brings them joy.

[00:06:42]Now, there are some people who just love their work and it gives them life and it gives them energy and it brings them joy. For example, if I could do this for another 40 years, I would be delighted.

[00:06:51]I don't know if you're going to keep watching me for another 40 years, but if you're willing, I'll keep making videos.

[00:06:55]I love getting to do this. But what I see all too often is that people keep working out of fear, out of anxiety. And I cannot stress this point enough. Money is not the purpose of life. Money is not the purpose. Money is what enables the purpose. It's a tool. If you have enough to do the things that matter to you to live the retirement that you want to live, the question simply becomes this.

[00:07:20]What are you waiting for? Now, some of you are watching this and saying, Kevin, you have sold me. I am on board. But how do I know when enough is enough? So how do you know? For many people with a solid strategy and many of you watching this channel, not all of you, but many of you, spending too much and crashing the entire plan is not your biggest risk. In fact, research from Michael Kites, uh, who's kind of the guru for financial advisors, he found that over twothirds of retirees using a 4% withdrawal rate end a 30-year retirement with more than double their starting balance. The median ending balance is almost 2.8 times what they started with.

[00:08:00]That is a lot of people who end up decades into retirement who significantly underspent during the years they had energy and health to enjoy it. So here is what I believe is a better solution. Your number is much more dependent on what you actually spend each month than some article. So first of all, know your number. What do you spend each month? And I'd split this into two different numbers. What are your fixed costs? Right? The cost you cannot really do without. And then what's the discretionary number? You know, give yourself some flexibility in your spending. So what's that number?

[00:08:31]What's the fixed number? And then what's the discretionary number? And go ahead and add those two numbers together. So let's say it's 6,000. That's fixed.

[00:08:38]2,000. That's discretionary. Then next, calculate your guaranteed income. How much money can you kind of count on from a pension or social security or an annuity or some guaranteed income source? Like, what's your guaranteed income? And then step three, what's the gap? So, you need $8,000 a month. You have $4,000 a month of guaranteed income. So, you have a $4,000 gap. And then step four is look at your portfolio value. How much money do you have in your portfolio? So, you have a $4,000 gap and you have a million-doll portfolio. That million-doll portfolio is going to have to help you cover that gap. And then step five, know your withdrawal rate. And this is the part that trips a lot of people up. So, you could use a 4% withdrawal rate on this plan. You've read all the articles, 4% withdrawal is a fairly safe rate of return. So, you could then say, I have a million dollar. I'm going to pull out $40,000 a year on an inflationadjusted basis. So, you're going to pull out $40,000 a year this year and then next year $40,000 a year inflation adjusted and so forth. But you need your gap in this particular plan is about $48,000 a year. That's where we find that a dynamic income strategy or a guardrail strategy can be particularly helpful because it often helps you increase that withdrawal rate significantly which allows you to retire earlier because you've done the math. You figured it out. You ran some cheap online calculator and you found out, oh, I still can't afford to retire. When in reality, the challenge may be is that you're using the wrong withdrawal rate.

[00:10:10]And remember that a guardrail strategy or a dynamic income strategy expects some variability in spending assumes that if we have a big market crash, you can maybe cut your spending. And if you remember when we talked about expenses at the beginning, you have 6,000 in fixed expenses and then 2,000 in variable spending. So you have some room to move your budget around. But that also means that assuming everything is going well in the economy, you can accelerate your spending, which allows you to spend more of your money upfront rather than finding out you have a giant sum of money late in retirement. If you've watched this channel, you know I'm passionate about this topic, right?

[00:10:48]I talk about this a lot. You're probably tired of hearing me talk about it. But the reason I talk about it so much is twofold. First of all, I have multiple people in my, you know, immediate family lineage, including my dad, who passed in their 50s. They were not able to fully enjoy their retirement. And the second reason is because I've seen so many people later in their retirement who have this large chunk of money, but they did not spend it earlier in retirement when they had much better health. Right?

[00:11:14]It's not just about your lifespan. It's also about your health span and being able to use your resources earlier in your retirement when you're healthy and active and you still have energy, not later. Some of you have the money to spend today, but you are obsessed with over optimizing your plan and you were causing yourself to spend less than you could and put off the things you want to do in your retirement because you're so obsessed with optimizing everything. I see this particularly around ACA subsidies, right? You retired early. You went and checked the price on health care on the exchange. You're like, "Wow, that's expensive." And so now you are living like you have no money even though you have more money than you'll ever need to spend because you're trying to get this subsidy, right? You are overoptimizing your plan. And that's just one example. There's lots of different ways that we do this, but in reality, our health span is much shorter than our lifespan. And we have this window when we first retire, when we're the most healthy and most active to actually enjoy our retirement and enjoy the money that we spent a lifetime saving. Okay, I am going to end it there. Uh you can get access to the same planning software we use with our clients. It does not do the dynamic income strategy or the guardrail strategy as well as I would like. We use a separate piece of software internally called income lab, but I can't make that available to all of you. But I can give you access to write capital for 30 days so you can play with your numbers. Uh you can find the link in the description or you can use this QR code. It'll let you start walking through your numbers, running scenarios, and kind of show you where you are on your retirement journey. At least gives you something to begin. And if you're like, "That sounds great, Kevin, but I would like to talk to a professional." I would love it if you'd reach out to our team. You can click the link in the description to book a free retirement strategy session with us. or you can um use this QR code here. And finally, if you were listening, you're like, "What was that study about Michael Kitses and how people spending 4% can spend way more and all that?" Well, you're in luck.

[00:13:18]I've got a whole video where I go deep into that and you can watch that