Many people who manage to save enough for retirement find it agonizing to start spending that money when the day finally comes. As a result, they needlessly deny themselves the simple pleasures and occasional splurges that can make the difference between a dream retirement and a dreary one.
More Americans face the opposite dilemma, of course. According to the 2013 Retirement Confidence Survey from the Employee Benefit Research Institute, nearly 3 out of 10 people have virtually nothing saved for retirement, and 57% have less than $25,000 in total savings and investments.
But at the other end of the savings spectrum are those frugal retirees who have been prudent or lucky enough to set aside a serious pile of cash. For them, the challenge is shifting from saving mode to spending mode once they retire. And, perhaps not surprisingly, it’s often the very best savers who have the greatest trouble doing that.
If this sounds at all like you, here are some ideas that might help you spend your money.
Ask yourself what you’re afraid of. There are probably both rational and irrational reasons to be reluctant to spend. A rational reason might be to have enough money to cover a lengthy nursing home stay. Another one might be to send a grandchild to an expensive college someday. Less rational is hoarding assets simply because you can’t bear to see your net worth decline.
Consider your cash flow. Many of us grew up believing we should never touch our principal. And while that philosophy can serve us well during our working and saving-for-retirement years, it can also become so ingrained that it’s hard to change. If your goal is not to leave a large estate, inevitably, you will have to spend principal.
Evaluate your estate goals. Some of those desirous of leaving inheritances tend to hesitate to spend anything because they have a dollar figure in mind that they want to leave as an inheritance. That’s all well and good unless it reaches the point where you’re living on cold cereal so your heirs can someday gorge themselves on Chateaubriand. If your heirs really care about you, chances are they’d rather see you living comfortably now than get a few more bucks from your estate when you’re no longer around. And if they don’t really care about you, you might as well start ordering Chateaubriand for yourself.
Don’t equate spending with squandering. Sometimes it’s more prudent to spend your money than to save it. If your car is running up big repair bills, laying out the cash for a new one might be cheaper in the long run. If your house is ready for a new roof, it’s likely to be more cost-effective to replace it now than wait until you start seeing water damage on your ceilings. If you want to go back to school in retirement to prepare yourself for a new career, think of it as an investment in your future rather than an extravagance.
Other big expenditures, such as new furniture or a dream vacation, can be a harder sell to the super-savers. But consider whether you’d get more happiness from a slightly bigger bottom line on your mutual fund statement or, let’s say, a once-in-a-lifetime cruise around the Mediterranean. Some hesitant retirees find that consulting a financial planner and running detailed simulations showing what can comfortably be spent delivers that last bit of verification by way of professional advice from an unrelated party.