Breaking the Saving Habit in Retirement
We’ve been taught to save, not spend, all our working lives. The goal is to prepare for retirement. However, when we retire, it’s hard to reverse that approach and spend some of our money on things that make us happy.
Statistics show that seniors actually spend less the longer they’re in retirement. I’ve been retired for nine years and haven’t spent much money on anything (except Apple gear!). Aside from a few trips to Disneyland and one to Disney World, the only travel we’ve done for fun has been local.
My wife and I have enough savings and discretionary income to travel more if we want to. However, spending significant amounts of money makes us uncomfortable. We live with the fear that we’ll run out of money before we die.
What Happens to Leftover Wealth?
Most retirees die while still holding significant assets like homes, IRAs, etc. These are often left to beneficiaries who don’t fully appreciate the sacrifice that went into those savings.
As an estate planning attorney, I told my clients that beneficiaries often viewed inheritances as ‘Monopoly money’ because they hadn’t worked for it and didn’t value it. No matter how large the inheritance is, in most cases, it will all be depleted within eighteen months.
Shifting Priorities: Time, Not Money, is the Most Precious Resource
While life spans and years in retirement are increasing, our ‘good health spans’ have not increased much. Medicine helps us to live longer, but often not with a good quality of life.
After we retire, we likely have limited time when we have the mobility and good health to do many things. The adage that ‘the 60s are the go-go years, the 70s are the go-slow years, and the 80s and 90s are the no-go years’ reflects the reality of declining health.
Time, not money, is the most valuable resource in retirement. Assuming you have the means to meet basic needs and some discretionary money, It’s crucial in retirement to shift from valuing money to valuing time, especially as health declines with age. Spending on travel and other activities should ideally be done in the early retirement years when health is still good.
The Emotional Block to Spending Money
Many retirees could safely spend more than they do but are hesitant due to their saving habits and fear of the future.
Some retirees have deep psychological barriers to spending their savings, including guilt, fear, or a sense of identity tied to frugality. To have a happy retirement, it’s essential to identify and deal with those blocks. Therapy might be helpful.
Retirees should consider what spending would bring them joy, whether it’s traveling, philanthropy, or gifting to children. It’s not about unreasonable or reckless spending but about enjoying the fruits of one’s labor.
Find a financial advisor who could help you develop a spending plan that balances predictable needs with spending earlier in retirement. Come up with an early retirement budget that controls how much you spend on discretionary activities.
Retirees can enjoy their money while still leaving a legacy, such as funding education for grandchildren, contributing to charities, or creating memorable experiences with loved ones. Spending can enrich relationships (e.g., taking trips with family, hosting events) and improve emotional well-being.
Our Plans: Spending on Activities While We Can
My wife and I are in our early 70s. We are discussing this topic and starting to plan to travel in the next few years while we still have good health. We’re considering destinations like Germany, Ireland, and London.
We’re also thinking about other activities we might want to spend on. Attending conferences? Going to workshops on topics we’re interested in? Visiting friends and family who live far away?
While we won’t deplete our savings entirely, we intend to enjoy our money responsibly while we still can.
Spending for Joy: What Brings You Happiness?
Are you retired and still in saving mode? Do you have money to spend? What spending would bring you and your spouse joy?
Make plans and do it while you still can.
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