Retirees Are Not Spending Enough

Would you rather spend money on that vacation now or have your children spend that money when you’re gone? This is a question I might ask a client who is living well below their means. I am coming across more individuals who are not spending nearly as much as they could. And now the data seems to support it. A recent study by the Employee Benefit Research Institute has found that the majority of affluent retirees actually have more – in some cases significantly more – than when they started retirement nearly a decade prior.

There are some good reasons for underspending -

“What if I have extensive medical bills later in life.”

“What if we go into a recession and I have a lot less.” (this is timely)

“I’m just not a spender, it’s not who I am.”

I can understand these points of view. After all, the data can speak to probability but we only all get one chance at this retirement, and what if it doesn’t work out for you? These concerns can be addressed with a good financial plan that adjusts with you over time. A document that tells you when to spend more and when to cut back.

And for the person who is just not a spender, I encourage you to do two things -

First, try spending money on something that you haven’t before. A first-class ticket, center field at a ball game, a larger Christmas gift to your children. You might find that there are ways to spend money that bring you more joy than others. It’s worth “wasting” a few to find out what that is for you.

Second, consider accelerating your estate plan. If you are going to give a bunch to your kids or charities, begin now. Not only can the gift come at the perfect time for the recipient, but it can also give them the opportunity to practice spending or saving wisely on their own before they inherit more.

Happy Planning,

Alex

This blog post is not advice. Please read disclaimers.