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Tim Stobbs of Regina had the financial acumen to retire before 40. After a decade of diligent saving, he’s now facing the adjustment of actually spending his money.

MARK TAYLOR/The Globe and Mail

The idea of early retirement “popped” into Tim Stobbs’s head about a decade ago, at the age of 30. Last September, the Regina-based engineer retired before his 40th birthday with no regrets and now documents his postemployment experiences in his blog, Canadian Dream: Free at 45.

“The first few weeks were great because you think, I can do whatever the heck I want today, and it feels like summer as a kid all over again or like a string of Saturdays,” recalls the father of two.

Before the big change, Mr. Stobbs and his wife discussed the option of early retirement in detail. They planned, they saved and made it a reality for him (his wife says she still wants to work for a few more years). Despite all the preparation, Mr. Stobbs is still in what financial advisors say is a “common adjustment period,” when a newly retired person goes from the act of saving money to spending it.

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“That was probably the biggest adjustment in my head was that you work so hard to build this money up, but then when you’re actually using it, it takes some time to adjust because it’s the opposite of what I just did for a decade,” explains Mr. Stobbs.

Flipping that switch from saving to spending in the retirement years takes more than pure planning. It takes confidence to ride out any unexpected market volatility, which can savage plans that take years to build up. It also requires the awareness to know when it’s time to change the plan, according to the financial experts, especially when it comes to splurging on the fun things, leaving a legacy or having the funds to support unexpected health-care costs.

Matt Wilhelm is a financial advisor with Sun Life Financial in Kitchener, Ont., with more than 1,000 clients, many of whom are nearing or in retirement, so he’s dealt with the anxieties that go along with spending.

“When people get to the first year of retirement, or even the months leading up to retirement, I do find they’re still fairly nervous because it’s an unknown,” says Mr. Wilhelm. “But having said that, there are ways that we can reduce that ... by making sure there are funds built into the plan for three different areas: fixed expenses, emergencies, and extras.”

According to 2016 report by Sun Life, retirees in Canada are living on about 62 per cent of the income they had prior to retiring from the work force. Between 84 and 88 per cent of those surveyed for the report said they were happy with their life in retirement.

Fixed expenses are perhaps the easiest to plan for, as they usually come up at regular intervals for a predetermined amount (mortgage, car payment, utilities and so on). Tracking both monthly and annual spending will often give a sense of the funds needed to cover the basics in retirement.

Emergencies require a little more forethought and can include anything from a roof repair to long-term health care.

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But it’s the extras category, which can range from world travel to covering the cost of a grandchild’s education, that can be a little tricky, says Mr. Wilhelm, noting this category tends to be more in play when a person becomes more comfortable with retirement spending.

“When people feel financially secure in their own situations, I see there is a tendency with our retiring clients that they want to help out their family members,” says Mr. Wilhelm.

It’s about finding the balance between living within one’s means, preparing for life’s last-minute spending and enjoying retirement as much as is financially possible without jeopardizing the first two areas, says Jennifer Muench, a regional vice-president and managing director at BMO Private Banking.

In her experience, spending in the initial stages after retirement spikes as retirees attempt to find that balance.

“Spending usually upticks in the time immediately after you retire and then it goes down when a person finds a more predictable routine ... which can take around three years,” says Ms. Muench. “But after a person settles into a routine, then the spending often becomes more predictable and [extras] can be added.”

The conversation surrounding spending is one that changes depending on the financial picture of the client. When it comes to leaving money behind, it can often connect to the values of the giver. For example, if home ownership is a priority, perhaps the legacy spending is paying off a loved one’s mortgage.

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“[Spending] is really fuelled by the hopes and dreams of the individuals, as well as their families,” explains Ms. Muench. “It really depends on what the client wants to spend, so if travel and entertainment and being with their families are hugely important, that all takes money and, ultimately, takes away from the legacy or philanthropic ventures.”

There is no one retirement spending plan that fits all and having a flexible plan that is updated every few years is critical, according to both Ms. Muench and Mr. Wilhelm.

While Mr. Stobbs is still in his first year of early retirement, he has a plan laid out, which includes living off the dividends of his investments and locked-in funds not available until age 50.

But a large part of his retirement plan is to make sure he alters his plan as his financial situation changes and his wife joins him as a retiree.

“You have to adjust as you go because the realities of things are not always going to turn out the way you thought,” says Mr. Stobbs. “But that’s just life and I’ve always done that.”

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