You’ve saved loads of money for your retirement. But do you know how to spend it?
You may think that sounds like the easy part — who doesn’t love to spend money? Yet determining how much or how little to spend can be confusing. You don’t want to overspend early in your retirement. You also don’t want to skimp on affordable things that could make this time more enjoyable.
Follow these suggestions to find the right balance to help you spend wisely but not irresponsibly.
Stages of Retirement
First, you should understand the three stages of retirement:
Phase one: Right after retirement, you are more likely to spend heavily, taking trips and tackling items on your bucket list.
Phase two: Your spending stabilizes for a prolonged period, when you may travel occasionally and remain in good health.
Phase three: Outlays on everything but healthcare-related expenses decline as you reach your final years and stay close to home.
Where you are in your retirement will dictate how much you want to spend. Keep these tips in mind.
Find a Way to Track Your Spending
You can download a plethora of apps, probably including one from your bank, that will follow your daily spending habits. This allows you to see areas where you may want to cut back in phase one.
Prioritize Your Spending on Things That Will Benefit You
Retirement isn’t just sitting on your porch. You finally have an opportunity to concentrate on bettering yourself and enriching your worldview without worrying about your job or caretaking.
Deciding what you will spend on depends a lot on your personal priorities. They will differ between people. Some ideas include:
Continuing education: Learn to speak a new language or pursue a new hobby like photography, which will fill your days with exciting new pursuits. Taking classes on new technology can also help so you don’t have to wait till your grandchild visits to figure out how to use your new laptop.
Health: The healthier you are, the better you feel and the longer you live. Consider investing in gym memberships or home workout equipment. This will pay off down the line, as healthy people incur fewer healthcare costs.
Relationships and travel: Going to see your kids, grandkids and friends gives you social as well as mental benefits — those with strong personal connections have better cognitive health as they age.
Avoid Buying Shiny New Things You Don’t Need
Investing in a pricey car, for instance, may feel good in the moment, but the car will depreciate quickly, and you can find better things to spend on.
Start Putting Cash Into One Account to Live on for the Year
When you know you have a finite amount of money to live on during a calendar year, versus the much higher amount you may have in your savings account, you will be more careful with your spending. See it as a self-imposed budget — and don’t break it just because you can. Approach this as an exercise in discipline.
Have more questions about spending what you’ve saved for retirement? Reach out to Jay to learn more.