You’ve spent your entire working life saving for retirement, and if you have done it well, you have accumulated a sizeable nest egg. Because your thrifty habits have served you so well, though, you might have difficulty opening your pocketbook as widely as you could afford to once you’re actually retired.
Retirees can be too conservative, holding back on spending in the early retirement years when they are most likely have good health and high energy. In fact, most retirees still have 80% of their pre-retirement savings after 17 or 18 years of retirement.
Here are some ways to get over any psychological hurdles you may have to spending more of what you have:
Tip 1: Make Your Favorite Activities Part of the Budget
Once you have budgeted for your living expenses from your regular retirement income, designate a specific amount for fun, whether it’s dinner at a nice restaurant, a weekend getaway, a day out with the grandchildren, or a spontaneous splurge. Because you’re accustomed to saving this way from your pre-retirement paychecks, this might be an easy way to transition to treating yourself. Your financial planner can also help you turn your retirement investments into additional income.
Tip 2: ‘It is better to give with a warm hand than with a cold one.’
Some retirees hold back on spending on themselves because they don’t want to exhaust their children’s inheritance. Maybe there’s another way to look at it. If you’ve done estate planning, you have an idea of how much your estate will eventually be worth. If your children are struggling with house payments or college debt today and you can afford to help them out, tell them it’s an advance on their inheritance. While you’re still around, you will have the experience of easing your loved ones’ financial burdens at a time they need it the most. On the positive side, you could use that money to create experiences your loved ones will never forget, like a safari in Africa for the whole family.
Tip 3: Make the Most of Every Dollar
Even if you’ve decided to increase your non-essential spending, you can still be frugal about it. Take advantage of the discounts and special savings that are available to seniors at many fast-food restaurants, movie theaters, museums, and transportation systems, among others.
Tip 4: Cut Back on Expenses to Fund More Fun
You can also choose to trim some expenses to free up funds for more of the activities you enjoy. Some of the ways you do that include sharing living expenses with a roommate, trading a high-maintenance house for a less costly condo or RV, and using a social platform like Airbnb or VRBO (Vacation Rentals by Owner) to save on vacations.
Tip 5: Reevaluate your Spending Plans Regularly
While you don’t want to cheat yourself out of the benefits of retirement you deserve, make sure you don’t take your spending too far. Your retirement funds are subject to changes in the economy and other sources, so it’s critical to periodically assess your financial situation with your accountant or financial planner and adjust your budget as needed.
Tools to help:
- AARP Budgeting Worksheet
- 10 Best Ways Retirees Could Live Well on Less
- The Complete Guide to Senior Discounts
For more information:
In the End, It’s All about You
Most financial planning advice for retirement focuses on savings, but if you have saved well, you deserve to enjoy the benefits of your good planning. Each person defines enjoyment differently, so list the things that mean the most to you — family togetherness, charitable giving, leaving a legacy, travel, and so forth. Prioritize your spending around those things and bring more meaning into your life.
Did we spark any new ideas for you? Do you have tips to share? Did we miss anything? Let us know in the comments.
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