We are used to reporting on ways to spend less and save your money, but there are some retirees who need to know when to loosen those purse strings.
It seems counter-intuitive that after years and decades of saving for your retirement that you might have the opposite problem once you have stopped working.
However, there are some Australians who have become so good at saving for retirement that they forget about the goal they were saving for – living comfortably in their golden years.
If you have accumulated a large nest egg for your retirement, you’ll have a lot of money to manage, potentially more money than you have managed at any other stage of your life. While some people will be lured into overspending with this illusion of wealth, there are others who have been so rigid with their saving plan, they find it difficult to switch to spending mode.
While the problem is at the opposite end of the spectrum to those retirees who are spending too much, the solution can be the same – a budget.
Start by giving yourself an annual salary. You will need to estimate the length of time you will need your money to last and you are always better planning on a long time, rather than a short time. Once you have figured that out, you can allocate a yearly spending figure that will make sure your savings last comfortably and ensure you won’t run out of money.
This figure can then be broken down into a monthly allowance, which will help you think about transitioning from an accumulation strategy, used when saving for retirement, to a decumulation mindset, when spending through retirement.
Signs you are spending too little
You live like a recluse
Retirement is supposed to be fun. You should be visiting friends and grandchildren, traveling, eating out and all those activities you couldn’t do when you were working full time. If you are not doing the things you love because you are afraid of spending the money, you might be saving too much. You are also healthier and more mobile when you are early in your retirement and you want to make sure you make hay while the sun shines, because that may not always be the case.
You are suffering instead of spending
If you or your spouse have a bad back, buy a better mattress. How about seeing a personal trainer to keep you mobile and healthy longer? Or ticking some items off your bucket list? Just because an item seems expensive, it doesn’t mean it will send you straight to the poor house. If an object or experience can improve your quality of life, you should consider it an investment, even if it is not a necessity.
Do you have a budget? Are you still locked in a saving mindset?
Do you know if you qualify for an Age Pension? Find out with our RetirePlanner tool.
Join YOURLifeChoices, it’s free
- Receive our daily enewsletter
- Enter competitions
- Comment on articles