Why Savvy Savers Should Spend More in Retirement

You’ve saved well enough to secure and enjoy your retirement. Today, you’re going to hear two financial advisors (us) say something that you never thought you would hear: spend more in retirement.

We see it all the time – people are so used to saving that spending money is difficult.

People have developed a mindset where spending money in retirement becomes a moment of anxiety. Many of our clients leave behind significant inheritances. We encourage them, with good and thoughtful planning, to spend some of that money to:

  • Make memories
  • Experience new things

You can spend a little more and still leave money behind for the next generation.

Why Savvy Savers Should Spend More in Retirement

A long time ago, we had a client call us. She had about $2.5 million in retirement and at the time, she had some water damage in the kitchen. She was living on only her Social Security amount and was in her 70s.

She said that insurance would cover the replacement of her linoleum floors, and she asked if she had enough money to upgrade to hardwood floors for about $15,000. We knew that with 100% certainty that she could upgrade, but she was so scared and reluctant to use any of her $2.5 million, she never did.

She left behind a few million dollars to her children and grandchildren, but she never spent her money on herself. Perhaps she would have enjoyed life a little more while she was here by doing something like buying those hardwood floors for $15,000.

The Psychology of Savings

You want to save for retirement and get to a place where you don’t need to worry about having enough money. From a young age, you decide to save for the future, and you put away as much money as you can to enjoy it later.

Everything you do in life is for your family and future, whether it’s saving for a house, putting food on the table, or putting money away for retirement.

You build a habit of saving over the course of decades, and then what happens? It becomes an ingrained habit that can be hard to break. People become extremely frugal, and it’s difficult to spend your money when you reach retirement age.

There’s also a factor of going from accumulation mode to retirement, so you’re taking money out of your retirement and no longer earning a paycheck, which is scary change for a lot of people.

Shaping Your Mind for Retirement

Five or ten years from retirement, when you know you’re on the right track to secure your retirement, it’s time to start switching your mindset. You want to think about:

  • What you’ll do in retirement
  • What big travel or experience goals you have
  • How you’ll spend time with family
  • Whether you want to own a second home

When we’re working, we tend to neglect some things in life, but when you finally hit the retirement milestone, you deserve to make the most out of your time.

We always ask our clients what they’re going to do when they’re on pace to reach their goal, and they’ll often say:

  • We’re too busy to think about that
  • We’ll figure it out when we get there

If you start making goals for what you’ll do in retirement, you can start allotting money to it. Good saving habits help to reach big goals in retirement, but you need to break that “saving only” habit to some extent.

Things to Think About When You Hit Retirement

What are the things you would like to do in retirement? A few questions we like to ask are:

  • Where would you like to travel to in retirement? How would you like to travel?
  • Do you want to do any major house renovations?
  • Do you want to focus on your health and wellness? Ex: hire a personal trainer?

Paying for health and mobility improvements are always going to be worthwhile.

You can also create experiences with your family. For example, we have one client who took their entire family on a cruise for a week. While the person spent a little money on the experience, they created a memory that will last a lifetime.

We’re not saying go out and spend 75% of your retirement, but you can enjoy the money you worked to save and still be confident that you have planned well to secure your retirement.

What You Need to Think About to Spend Your Money Smartly

We don’t want you to go out and spend all your money. What we would like to do is have our clients get these goals in place so that we can use financial planning to help them reach their goals.

If you think about your goals ahead of time, we can:

  • Plan for these costs
  • Allot enough money for these expenses

Imagine a $35,000 trip that you want to go on. We can add the expense to your retirement plan and see its true impact.

When we understand the numbers, it makes it much more comfortable for clients to spend some money in retirement because they see the true impact of their spending.

One story that we love to share is of a client who wanted to sell their house, buy an RV, and travel the US for 10 years.

We told them to provide the details and let us run the numbers. The clients came back with data on the cost of the RV, the sale price of the house, expenses, and everything else you could imagine.

They have been happily traveling in their RV for over 10 years now.

We sat down with them last week, and they plan to keep traveling for the next 5 or so years. Next week, we’ll run through case studies to show you the numbers, examples, and “what-ifs” for this type of retirement goal.

A financial plan is like a GPS to help you reach your retirement destination. If your destination changes, the GPS can reroute you to get you where you want to be. Proper financial planning can help you safely reach your retirement destination while still making pit stops along the way.

If you want to learn more about planning for retirement and spending more money, please feel free to reach out to us.

Schedule a call with us to talk more about spending money in retirement.