How to Start Spending Once You Retire

Thriftiness is a vital part of protecting your future, and saving for retirement. But once you step into those golden years, what are the right spending habits to form?

Although many of us worry that we won’t have enough to live out our older years in comfort, we forget that certain expenses will naturally lower after we step out of the working world. Although for most, that doesn’t mean booking monthly cruises to exotic locations – it does mean that some of the things you once daydreamed about are now within reach. Here are a few tips on how to start spending once you retire, without going overboard — or missing out.

Many Things Are Cheaper in Retirement

Did you ever feel a little jealous of that senior discount when you were in your twenties? Well, now is the time to get the most out of your golden years. Aside from discounts on restaurants, travel, and entry fees, you may also find yourself saving money on everyday living. Expenses incurred by commuting, business attire, and eating out will suddenly dwindle – and that Starbucks coffee at the start of your daily commute becomes a simple cup at home, for a fraction of the price. This trade-off often offsets the cost of inflation, and evens out the score for many retirees. Instead of spending money on new slacks, now is the perfect time to look at that wish list you’ve been saving – and start purchasing those “nice-to-haves,” now that the “must-haves” have been shelved.

Don’t Be Afraid to Live a Little

In the past, you may have skipped that Broadway musical, pushed off your dream cruise, or passed up that new pair of shoes. Now that you can clearly see the road ahead – and you’ve ample security beneath your feet – it’s time to treat yourself to a moderate boost in spending.

This can be a difficult mindset adjustment, especially for those who have saved particularly well, and metered their spending habits down to the dime. Once retirement hits – all of those dimes have added up over the years, debts have been paid off, and savings are fruitful – a mental shift is in order, and retirees can begin to loosen the grip on those purse strings a little. Dote on your grandchildren, buy that vintage car, or purchase a new grill for those summer barbecues.

Spend Your Monthly Allotment

Most of us are used to spending some of our monthly allotment, and then sequestering the rest into paying down our debt and saving for retirement. But once retirement hits and those debts are gone, you can more freely spend your monthly salary. After all, without a second retirement on the horizon, this is exactly what you’ve been saving for.

Simply make sure that you’re not stealing from your future years. It’s still very important to anticipate future needs, health expenses, and understand your finances fully; know exactly how much that monthly allotment should be, to keep you in good shape throughout your retirement.

The Reality of Inflation, Medical Expenses, and Savings

End-of-life medical expenses can be daunting, and savings can often be a buffer between enjoying life now, and facing that reality later. Just don’t let your fears about future affordability take over. On average, retirees tend to actually spend less as they travel through their retirement years. Additionally, a lot of the money that has been squirreled away becomes available, including the savings sitting in your IRA and 401k accounts. At 70 ½, withdrawals on IRAs become mandatory – this means that as medical costs begin to build, so does the capital available to deal with them.

Take a look at your monthly income and expenses before you retired, and compare them to your expenses in retirement. This can help you understand how your income is meeting your expenses, and allow you to spend accordingly. Oftentimes you’ll find that you can spend a little more, without sacrificing the savings you’ve built to protect yourself in times of future need.

Spend According to Your Savings

Loosening your grip on your frugality is generally advisable once retirement comes knocking. But every person has prepared for their future in their own way, as we don’t all retire with the same nest egg in tow. It’s important to note that, you and your neighbors may have a different affordability index in your retirement. If your finances can’t support taking a little more liberty with your expenses, then it’s vitally important that you adhere to your means — as no one wants to have to re-enter the job market after a few years of living the good life.

If your nest egg is looking a little worse for wear, yet you have equity built up in your home, keep in mind that you may be sitting on a way to bolster your quality of life in retirement. A reverse mortgage can help you convert part of your home’s equity into cash, which can be used for healthcare and basic living expenses.

Consider Family

Your family configuration may make a big difference in how you spend your money after retirement. If you are a bachelor or bachelorette with no children, then those fancy gadgets, new technology, and travel plans are all yours for the taking. If you have children and grandchildren that you are proudly watching grow into wonderful adults, you may opt to live on less, in order to help them secure their futures instead.

It’s important to have a healthy respect for the possibility of future medical issues, and end-of-life monetary necessities, but not at the expense of missing out on some of the best years of your life. If you’re feeling shaky about your spending habits once you leave the office for the last time, it might be helpful to sit down with a financial advisor, and take a close look at your finances –l so you can spend wisely, and get the most out of your golden years.