This document outlines ideas for a new book about helping people transition successfully from saving money to spending it in retirement. It discusses 12 major "switches" or transitions that occur in later life, from full-time work to no work, saving to spending, receiving paychecks to creating income streams from savings, and more. Each transition requires adjustments in thinking and behavior. The document seeks feedback on other important later-life transitions and changes in perspective that the book could address.

1. Flipping a Switch for
Happiness and
Financial Security in
Later Life
Barbara O’Neill, Ph.D., CFP®
Rutgers Cooperative Extension
boneill@njaes.rutgers.edu

2. Possible New Book Idea
Tentative Title:
Flipping a Switch: Your Guide to Happiness
and Financial Security in Later Life
My previously authored or co-authored personal finance books

3. Inspiration #1 to Delve
Into This Topic
Personal experience: Rutgers Cooperative
Extension and New Jersey will soon be in my
“rear view mirror” after 40+ years

4. Inspiration #2 to Delve
Into This Topic
• Research presentation at the 7/18 ASEC
meeting about Spending in Retirement (Lucas)
• Described a subset of retirees with a unique
“problem”: they saved their whole life, are not
comfortable spending, and assets keep growing
• Speaker quote: “We need financial education to
teach people how to ‘flip a switch’ from saving
to spending”

5. Inspiration #3 to Delve
Into This Topic
• Grasshoppers and Ants in Retirement article
(Finke, Guo, & Johnson, AAII Journal, 6/18):
https://www.aaii.com/journal/article/grasshoppers-and-ants-in-retirement
• Describes thrifty “ants” who spend less in
retirement than they are financially able to
– Excessive thrift puzzle: why did they save all
their money if they’re not going to spend more?
• “Habit formation hypothesis”: people get
accustomed to a certain lifestyle and spending
habits are hard to break

6. I Then Realized… There are
Multiple “Switches” That
Need to Be Flipped in Later
Life (Not Just For Spending)

7. Some Flipped Switches are
Voluntary (e.g., Spending)
and Some are Mandatory
(RMD Withdrawals)

8. 1. Full-Time Work to…
• Continued full-time work
• Part-time work
• Freelancing/starting a business
• Volunteering
• No work
• Could be on/off or like a “dimmer switch”
(gradual adjustments)

9. 2. Saving Money (Deposits)
to Spending Money
(Withdrawals)
• Need to reverse everything you’ve been doing
for 30-50 years
• Psychologically, savings withdrawals may feel
like a “loss” (as you see balances decline)
• Automated withdrawals can help reduce the
“sting” (“set it and forget it,” in reverse)
• Change of mindset (e.g., flying first class)

10. A “Permission to Spend”
Mindset May Require Some
“Practice”
Personal Experience:

11. 3. Receiving a Paycheck
to Creating a “Paycheck”
• Try to simulate a regular income stream
– Annual cash withdrawals (1/12 per month)
– Automated mutual fund withdrawals
– “Laddered” bonds or CDs
• Withdrawal rate consensus: 4% to 4.5% of
asset balance with annual inflation adjustment,
if 50%+ of portfolio in stock (to last 30 years)
• Set aside ample cash to avoid having to sell
stock/stock fund shares in down markets

12. 4. Funding Tax-Deferred
Plans to Taking Required
Minimum Distributions
• Applies to distributions from Traditional IRAs,
401(k)s, 403(b)s, SEPs
• Must begin RMDs by April 1 of the year
following the year that you turn 70 ½
• Employer plans: can delay to April 1 of year
after one leaves employer
• Failure to take RMD: penalty of 50% of
amount that should have been withdrawn

13. 5. Shift to More
Conservative Investing
• Desire for income vs. growth
• “Do it yourself” asset
transfers (buy/sell
securities)
• “Do it yourself” changes in
asset allocation weights
• Target date mutual funds

14. 6. Accumulating
“Stuff” to Downsizing
• Often precipitated by life events:
– A local move to a smaller dwelling
– A long-distance move
– A health crisis, disability, or death
• A sudden or gradual feeling of “having enough”
• Can exacerbate a saver’s reluctance to spend
(i.e., a downsizing “ant”)

15. Plan Ahead: Downsizing
Takes Some Time!
Personal Experience: • 15 days of garage sales
• 4 days of home file
organization and
document shredding
• Multiple thrift shop
donations
• 2 full trash cans per
week for 8 months

16. 7. Change in Household
Income
• Most common: Higher income to lower income
– Living on less
• Smaller group: Lower income to higher income
– Living on more (pension, SS, asset withdrawals)
• Requires a revised spending plan
• Adjustments may be needed for housing,
spending, use of public benefits, etc.

17. 8. Tax Withholding to
Estimated Tax Payments
• May have to calculate and remit quarterly
income tax payments for the first time in life
• Need to be extra careful to avoid IRS under-
withholding penalty
• Quarterly payments are due April, June,
September, and January of the following year
• Download IRS form 1040-ES

18. 9. Employer/Private/
Marketplace Health
Insurance to Medicare
• Learning Medicare rules
• Signing up on time to avoid penalties
• Purchasing insurance to cover gaps
• Coordinating policies

19. 10. Job Title to a New
Personal Introduction
• An answer to the “What do you do?” question
• No “right” answer
– Define yourself by current job or volunteer role
– Define yourself by a profession if still involved
– Define yourself by family roles
– Define yourself by your hobbies

20. 11. New Financial Goals
Shift from “Getting to Retirement” to “Getting
Through Retirement”
– Making accumulated savings last
– Travel and entertainment
– Long-term care
– Increased interest in philanthropy (e.g.,
Qualified Charitable Distributions from IRAs)

21. 12. “Do It Yourself” to
Hiring or Asking for Help
• Complex financial decisions (financial planner)
• Asset management services (e.g., trustee)
• House cleaning and maintenance
• Yard work
• Bill-paying
• Other

22. Frequent “Dimmer
Switch” Transitions
Gradually Over Time
• Working
• Spending
• Investment asset allocation
• Downsizing

23. Other “Switches”
• Disengagement and engagement
• New relationships with children
and spouse
• Simplification/consolidation
• A different definition of ”busy”
• Becoming “the family storyteller”
• Changes in health habits
• Increased interest in philanthropy
• Increased interest in accessibility
and safety features

24. What Have I Missed?
• Other common later life transitions?
• Changes that require big (sudden or gradual)
changes in thinking and/or behavior?
• Please share your thoughts

25. Questions and Comments?
Barbara O'Neill, Ph.D., CFP®, CRPC, AFC, CHC
Extension Specialist in Financial Resource Management
and Distinguished Professor, Rutgers University
Phone: 848-932-9126
E-mail: boneill@njaes.rutgers.edu
Internet: http://njaes.rutgers.edu/money/
Twitter: http://twitter.com/moneytalk1