Broker Check

Avoid New Retirement Overspending

| July 22, 2019

You’ve put your time in and the day you’ve been waiting for has finally come. It’s time to retire!
You’re done working 40+ hours a week and ready to enjoy the money you’ve been saving for years.
Slow down for a minute, though. It can be tempting after working for so many years to start checking
off all the items you’ve been adding to your bucket list throughout the years, but this can lead to
some severe overspending. It’s a nice gesture to invite your entire extended family on vacation or
help your children pay off some of their debt, but you need to focus on the future.

When you work, you have a steady stream of income along with a healthy savings account to fall
back on when unexpected expenses pop up. When you retire, it’s like someone just threw a few
hundred thousand or million dollars at your feet and said “have fun!

You can avoid overspending by cutting back on certain luxuries you’re used to having. The balance
comes with developing a smart financial plan to ensure you live within your means while still
enjoying the quality of life you’re used to. Here are some essential tips to get you started on the right

Create a Budget
You should be no stranger to a budget by the time you retire, but you’ll need to start tweaking it to
adjust to your new financial circumstances. Know how much money you’ll have coming in between
social security, pensions, and your retirement plans such as a 401k. Split your expenses into those
that are required, such as housing, food, and vehicle maintenance, and another category for
discretionary purchases like vacations.

Develop a Withdrawal Strategy
Once you know how much you need to live comfortably every month, you can determine how much
you need to take from your retirement every month. A standard 4% withdrawal rate should
tentatively last 30 years, but this can vary based on your savings, the financial market, interest, and
hefty expenses such as healthcare.

Cut Back on Expenses
Cutting back on spending is painful if you’re used to getting what you want when you want it, but
it’s a necessary part of smart financial planning. Evaluate whether you can make changes to the two
highest expenses: housing and health care costs.

Healthcare: Retirees spend roughly 11.4% of all income on medical care because Medicare only
covers 80% of costs. That 20% responsibility can swallow up your income. It also fails to include eye
exams, orthotics, and dental care. Find a supplement plan to help ease your financial burden.

Housing: The average retiree 75 or older spends 43% of income on housing and related expenses.
It’s beneficial for many to downsize to a smaller home or move to an area which a lower cost of
living than where you currently are. The adjustment can free up income for discretionary purposes.
Other basic actions such as not eating out as often or capitalizing on discounts and specials for
seniors can also keep your wallet a bit thicker.

Hire a Financial Advisor
Seeing a financial advisor can put financial responsibility in someone else’s hands. They can look at
your investments, determine an acceptable withdrawal schedule, and examine your current and past
spending to give you helpful tips and advice. It’s smart to fix an overspending problem sooner rather
than later, which financial advisors recognize and work quickly to remedy. Their goal should be to
help you have the most money to enjoy the golden years that you’ve worked so long for.

We are here to help, contact us, today!

This material was created for educational and informational purposes only and is not intended
as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to
you needs, such advice services must be obtained on your own separate from this educational