New research highlights the overlooked side of retirement planning

Most people spend decades focused on saving for retirement. But new research suggests many are far less prepared for what happens once the paycheck stops.

On this week's In Your Corner podcast from CBS News Philadelphia, Vanguard's Garrett Harbron, head of advised wealth management strategies, discusses one of the biggest retirement challenges facing Americans: turning retirement savings into sustainable income.

"It's a very difficult thing to do," Harbron said. "And it involves a complete mind shift. You have to go from this savings mindset to a spending mindset."

From saver to spender

Harbron said many retirees struggle because they have spent most of their lives being told to save money, not spend it.

"For 40 years of our lives, we're savers, and we're told save, save, save. That's the most important thing you can do, and no one really talks a whole lot about what comes next," Harbron said. "While saving feels very familiar to us, spending is really kind of unknown territory."

Vanguard's recent Principles for Retirement Income research focuses on helping investors navigate that transition.

The report argues that retirement planning should shift from focusing primarily on account balances to focusing on sustainable income and spending goals.

A framework for retirement income

The research outlines four principles for retirement income planning:

• Start with purpose
• Cover the essentials
• Make your wealth last
• Simplify

Harbron recommends retirees begin by identifying their needs, wants and wishes.

Needs include essential expenses such as housing, food and healthcare. Wants are discretionary lifestyle expenses, while wishes are aspirational goals such as leaving a legacy or helping family members financially.

The report also recommends covering essential expenses with reliable income sources, including Social Security, pensions or certain annuities.

According to Vanguard, reliable income can help retirees manage key risks such as market volatility, inflation and longevity.

The risk of underspending

While many retirees worry about running out of money, Harbron said there can also be drawbacks to being too conservative.

"A lot of people, because they don't know how to plan for their retirement spending or what a reasonable spending rate looks like, they get conservative," he said.

As a result, some retirees may cut back more than necessary and enjoy retirement less than they otherwise could.

The Vanguard report notes that retirement success is often driven less by how much someone has saved and more by how much they withdraw each year.

Start planning before retirement

Harbron recommends people begin thinking seriously about retirement income planning five to 10 years before retirement.

He also suggests reviewing financial plans at least annually and after major life events that could affect finances.

"At the end of the day, it's about making sure that people have peace of mind, knowing that they are on track to have the retirement they want to have, that they can afford to do what they're doing, and that they don't run out of money because that's retirees' greatest fear," Harbron said.

Listen to the full conversation

The full In Your Corner podcast episode explores retirement withdrawal strategies, the 4% rule, Social Security, inflation, healthcare costs and practical steps retirees can take to make their savings last.

You can find new episodes posted Wednesdays on the CBS Philadelphia YouTube channel.

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