While seemingly small lifestyle changes, like eating out less often, can have a big financial impact, it’s often ill-advised large purchases that can do the most damage. By simply avoiding these large-scale cash outlays, you may be able to significantly reduce your risk of running out of money in retirement.
Are you one of the 64 percent of Americans concerned about not having enough money in retirement? According to Gallup’s latest annual survey on financial worries, retirement is the country’s top financial concern. In fact, retirement has topped Gallup’s list of financial concerns every year since it started the study in 2001.1
Often when people are concerned about their financial preparedness for retirement, they focus on savings. They worry that they haven’t accumulated enough assets to support their lifestyle or to live comfortably.
However, retirement planning is about much more than saving money. It’s also about controlling your spending. By using a budget and monitoring your expenses, you may be able to make your savings last longer than expected. A budget can help you scale back your spending so you can limit the amount of withdrawals you take from your savings.
Below are three such outlays to consider carefully before moving forward. These types of decisions could be large enough to substantially damage your financial stability.
Large Discretionary Items
Retirement is a time to relax and live life on your terms. Many view retirement as an opportunity to finally splurge on themselves. Additionally, when you retire, you may have more savings than you’ve ever had in your life. It’s tempting to use some of that savings to purchase items or experiences that you’ve always wanted. It’s not uncommon to see recent retirees buying vacation homes, sports cars or boats, or taking lavish vacations.
It’s important that you enjoy retirement, but it’s also critical that you do so in a financially prudent manner. Before splurging on a toy, consider whether there’s a more affordable alternative. Do you really need to buy a vacation home, or could you rent? How often will you really use that new boat? Perhaps your trip to the Mediterranean coast could be replaced by a trip to a domestic beach?
Look at the big-ticket purchase and think about how it may drain your assets. If it’s not tenable, think about alternative options.
If you’re like many retirees, your family is your entire world. You love to spoil your children and especially your grandchildren. With your substantial assets and newfound freedom, now may seem like the time to give your family the things you couldn’t afford in the past.
Or you may have children who are facing financial difficulties. Obviously, you don’t want to see them suffer, so you might opt to provide them with support.
Either of these mindsets is understandable but can also be financially damaging. There’s nothing wrong with helping or spoiling your family as long as you do it in a responsible way. Especially if you’re providing support, your loved ones may grow financially dependent on you. That kind of long-term drain on your savings may prove to be unsustainable.
Starting a Business
Maybe you’ve always had a dream to run your own business. Now that you have a clear schedule and considerable assets, the time may seem right to launch your endeavor. Unfortunately, most new businesses don’t succeed. When they fail, they often become a drain on the founder’s personal finances.
If you dream of being an entrepreneur, look for a way to do so by investing minimal personal assets or without taking on debt. Try it on a part-time basis, or perhaps work as a consultant. If the business will require a hefty personal investment, it may not be a wise idea.
Interested in making your retirement savings last? Let’s discuss it. We can help you analyze your assets and your needs. Let’s connect soon and start the conversation.
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