For decades of your career, the financial goal has been clear: save consistently, invest wisely, and build a nest egg large enough to support your retirement dreams. But when that retirement date finally arrives, many people are surprised to discover that the shift from accumulating wealth to spending it is far more complex—both emotionally and technically—than they expected.
We see this transition all the time. It’s one of the most profound financial turning points in a person’s life, and understanding it can make the difference between feeling uncertain and enjoying the retirement you’ve worked so hard to create. At this point, having a smart withdrawal strategy matters. After all, the average American can expect to live 20–22 years beyond their 65th birthday, according to Social Security Administration estimates. That means that, while making sure you’ve saved enough is important, it can be equally important to make sure you’re spending it the smartest way possible. A solid withdrawal strategy considers the character of the various income streams that may be available, whether taxable or tax-free, as well as potential for growth (yes, growth of assets is important even in retirement) and the effects of market volatility.
The Emotional Shift: Letting Yourself Spend What You’ve Earned
1. Losing the Comfort of a Paycheck
For 30 or 40 years, your financial life has been anchored around earning. Every month, money came in. Suddenly, that flow changes direction—from incoming to outgoing—which can feel like stepping off solid ground.
Even retirees with more than enough savings often worry:
- “What if I run out?”
- “What if the market turns?”
- “What if big expenses come up later in life?”
These fears are normal.
What’s important is creating a plan that gives you permission to spend within boundaries you understand and trust.
2. Identity and Purpose
Saving is an act of discipline and control. Spending—especially on yourself—can feel indulgent or even irresponsible after decades of frugality.
A structured spending plan helps reframe this:
You’re not “splurging.” You’re using your money exactly as intended—to support a fulfilling life.
3. Replacing Structure With Strategy
Work provided natural structure: schedules, goals, routines. Retirement requires new ones.
Similarly, your financial strategy must evolve. The mindset shifts from:
- maximizing growth → maximizing sustainability
- saving more → spending wisely
- seeking high returns → managing risk and longevity
Recognizing this change helps you stay confident when emotions run high.
The Technical Side: Withdrawal Strategies That Support a Sustainable Retirement
Once the emotional groundwork is laid, retirees need a technical plan that turns savings into predictable, lifelong income.
The traditional advice is to spend down taxable accounts first and then begin tapping tax-deferred sources like annuities and traditional IRAs, 401(k)s, and 403(b)s. Then, when those accounts are depleted, the advice is to begin drawing from tax-free sources such as Roth retirement accounts. The advantage of this approach is that it allows tax-favored accounts to continue growing and compounding without taxation for as long as possible.
But the conventional wisdom sometimes overlooks factors that affect tax-deferred accounts, such as the effect of required minimum distributions (RMDs), which begin for most retirees at age 73. RMDs are fully taxable, since the traditional accounts were funded with pre-tax dollars. Adding RMDs to taxable retirement income from other sources can subject a retiree to an increase in their tax bracket. And that conventional wisdom also may not take fully into account the taxation of Social Security benefits.
For some retirees, it may be beneficial to begin drawing down tax-deferred balances such as traditional retirement accounts earlier in retirement (before the age when RMDs and Social Security begin) and paying the tax due on these withdrawals. This can have the effect of spreading the tax burden on the income over a longer period. Also, drawing down the accounts earlier may reduce the balances and, thus, decrease the size of RMDs when they begin, resulting in less taxable income later in retirement.
This also allows balances in Roth accounts to continue accumulating without the burden of taxation.
Bringing Emotion and Strategy Together
The best retirement plan isn’t purely analytical or purely emotional—it’s a balance of both.
A strong plan should provide:
- Confidence: knowing your money will last
- Flexibility: adapting to market changes and life events
- Purpose: aligning spending with your personal vision for retirement
Of course, any retirement withdrawal strategy should be carefully discussed with your financial advisor and tax expert. Every situation is unique, and you deserve guidance that is tailored to your specific needs. At JFS Wealth Advisors, we work with clients to maximize not only their accumulation strategies, but also help them make the most of the money they’ve worked so hard to save.
