We hear so much about saving for retirement, sometimes we forget that all those dollars we’ve saved and invested have to be spent. Some people just retire and let the dollars fall where they may. The better approach is to focus on what you want, and then use your money to get it.
So take time to outline what your major goals are in retirement, and then match up your resources to finance the things that are important to you. In some cases you’ll spend more on important priorities, but you might also be able to cut expenses on things that don’t make you happy. Here are six areas where your spending could change in retirement:
1. Housing expense. Housing is one area where you might reduce spending. You probably don’t need three or four bedrooms anymore. You might not need a backyard, a two-car garage or a good but expensive school system. Some retirees relocate to less expensive regions in the sunbelt. Most people say closer to home, but choose to downsize to smaller quarters with lower real estate taxes and utility bills and fewer maintenance requirements.
2. Travel and recreation. It’s almost axiomatic that retirees take to the highways and skies to check off a bucket list full of travel destinations. Some people jet off to Europe or hit the road in their recreational vehicle on a regular basis. Others are satisfied with one big dream vacation, then are ready to settle down. My older sister and her husband made a month-long trip to Asia after they retired. Then they went home, and they haven’t stepped into an airplane since. It all depends on your interests and budget. I head south to the sunbelt every January, but after a couple of weeks I’m tired of living out of a suitcase. I’m ready to head home to spend the other 50 weeks a year sleeping in my own bed.
3. Medical costs. For most of us medical costs go up in retirement. So make sure to budget extra money for doctor visits, medical tests and perhaps some elective procedures. Don’t forget to factor in dental bills, which also go up as you get older and are less likely to be covered by insurance. Consider purchasing long-term care insurance. It’s expensive, but could save you a lot of pain and suffering when you get older, or perhaps save your loved ones the sometimes overwhelming task of taking care of you if you become infirm.
4. Helping your children. Do you pay college tuition for your children? Do you subsidize their rent or help them buy a car? These questions bring different answers to different families, and you should discuss these issues with your kids so you’re all on the same page. However, don’t be surprised if your attitude suddenly changes. My brother-in-law and his wife helped their kids with college tuition, but then they drew the line. Anything after that was up to the kids themselves. They held firm, until the first grandchild arrived. Now they’ve pulled back on their travel plans to indulge their grandchildren. They want to stay close to home to spend time with their new favorite people.
5. Investing in yourself. You’ve stopped working, but that doesn’t mean you’ve stopped growing. Maybe you want to take a history course or a writing class. Maybe you have a passion for art, music, a sport or hobby. Retirement is the time to invest in new equipment, build your basement woodworking shop or outfit a music studio or pottery shed. You could start your own business or train to learn a new skill by taking classes at a cooking school or learning a new language. Most people retire with 20 or so good years ahead of them. There’s no reason to let them go to waste, so budget in some start-up money for yourself.
6. Donating to charity. If you’re committed to a church, feel close ties to your alma mater or have a favorite cause, you may want to set aside some of your retirement funds to support your favorite charitable activity or leave a bequest in your will. If you’re committed to this laudable goal, make an effort to consciously set aside the appropriate funds. The same goes for an inheritance to your children or other relatives. If you plan to leave an estate for any reason, you should talk with a professional to decide how to do it and how much you can safely leave without sacrificing your own retirement dreams.
Tom Sightings is the author of “You Only Retire Once” and blogs at Sightings at 60.
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How to Prioritize Spending in Retirement originally appeared on usnews.com
