Even the most optimistic person can develop a limiting mindset upon entering retirement, regardless of how much money they have accumulated. What is a limiting mindset? It basically means that you see resources and opportunities as scarce in nature. "I only have so many pennies to spend, so I can't part with any of them."

When scarcity-minded people get their last paycheck, it's cue the worry syndrome. They think, “That’s all I have! I’ve got to hold on to it.” They see their income and savings abruptly stop and realize that whatever is in their accounts has to last....Forever! Worst case scenario, they enter a never-ending spiral of fear. Fear can seep into every decision they make. They rethink vacations. They rethink eating out. They rethink hobbies and personal enjoyment activities. A limiting mindset can zap away every single amazing plan you had for your retirement.

It’s not that frugality is a bad thing (far from it!), but you’ve got a life to live my friend, especially if you have been putting off living that life saving for your retirement. And I bet that you want that living to happen while you’re still healthy enough to enjoy it. Right?

Typically when this happens, people have already wasted their early retirement years—what we call the "Go-Go" years —and what happens is we find ourselves in the "Slow-Go" or "No-Go" phase when we are are now too old or frail to really enjoy their money. They have less energy, cannot do as much, and their health might not be so good.

Unfortunately, It’s not that uncommon for these people to pass away with more money left over than they ever expected. Their irrational frugality turned them into hermits and kept them from the life they worked so hard, for so long, to reach.

It doesn’t have to be this way. All you need to do is put a plan in place to create clarity ahead of time.

The first step in recreating a retirement paycheck is to plan how you will pay for your lifestyle. In the past, calculating your annual retirement withdrawals was a simple math equation. First, you figured out how much money you had saved. Then, you divided that amount equally based on how long you believed you would live. Voila! That’s your yearly withdrawal amount. Then came the 4% Rule, which said you can withdraw 4% of your assets for income to last your lifetime. Alas, it is not that simple. Bot of these equations become more one-dimensional and have proven to be antiquated in their thinking. Life is just not linear like that. So why do so many financial advisors and planning software tools rely on linear equation when it comes to retirement analysis.

A better way is to plan a systematic withdrawal strategy that accounts for the way we actually spend money in our actual lives during retirement. Maybe you take a huge, expensive family vacation every three years. Maybe you have to buy a new car two years from now. Or maybe you have to pay for a wedding next year or anticipate having some large medical expenses. No matter the specifics, it is just not practical to expect that you will spend the same amount every year. Let’s account for that when determining your annual withdrawal amounts.

With a flexible retirement plan, you don’t have a set withdrawal ratio each year. You withdraw a paycheck based on what you expect to spend each year. Some years you may have a 10% withdrawal rate. Others, you will only withdraw 2%. Forget about simply selling stocks when you need money—a dangerous plan with the level of uncertainty in the market these days anyhow. And having different buckets to withdraw that income to offset any such declines in any single portfolio or holdings value. If you’re financially ready for retirement, implementing a system to recreate your paycheck can give you the confidence to make the most of your most active years.

The ARIES Foundation for Financial Education, Inc is a nonprofit dedicated to the mission of trying to help everyone have a better realtionship with their money. Follow us on social media or catch any of our updates on our Youtube Channel.