In our last post, we tried to encourage retirees afraid of (or behaviorally resistant to) spending their wealth to consider increasing their spending whenever their Funded Status exceeded a specific threshold percentage. In this post, we will take another shot at increasing your spending comfort level assuming safely increasing spending during retirement is consistent with your spending goals.
The “spend-less” Funding Status guardrail we recommend is 95%, and the “spend-more” guardrail we previously recommended in our post of January 7, 2023 for considering increased spending was 120%. The 150% (or 140%) Funded Status spend-more threshold used in the example in our previous post was considerably higher than our recommended 120% “spend-more” guardrail. We did this primarily to illustrate the process that could be used to transfer assets from one’s “upside portfolio” bucket to a “surplus bucket” whenever the Funded Status exceeded the specified threshold. We have absolutely no problem if you want to use a higher threshold than 120% as your spend-more guardrail, especially if you may be afraid of having to decrease your spending in the future.
However, in this post, we are going to look at just how conservative the 120% Funded Status spend-more guardrail is by stress-testing it for a hypothetical couple.