Nearing Retirement: Signs You Might Be Spending Too Much


As you near retirement, here are some key signs you may be playing fast and loose with an aspect of your finances that should be kept slow and tight.

Getting close to retirement certainly brings its share of anxiety. Chief among the concerns is typically the question of whether you’ll blow through your retirement savings long before you’re finished being retired. (Isn’t that a nice little euphemism? “Finished being retired!”)

As you near the big day, you can put your mind at ease by taking a look at your spending habits. Here are some key signs you may be playing fast and loose with an aspect of your finances that should be kept slow and tight.

1. Your budget is missing an important column. It’s called the “actual” column, and its role in the budget is helping you determine what you actually spent on something, as opposed to what you budgeted for it. The actual lack of an “actual” column is actually what breaks more budgets than anything else.

Take action: Setting a budget is great, but it’s meaningless if you don’t measure how you’re doing against budget and make needed adjustments. Take the important step of keeping track where your money is going.

2. You’re spending in big (and plentiful) chunks. Most experts recommend that retirees should spend about 4%, and certainly no more than 6%, of their savings annually. Let’s say you have a nest egg of $1 million. A 5% rate would mean you would spend $50,000 per year. Sounds like a lot, right? But consider that as a retired dentist, you’ll have a lot more free time. And as a newly retired dentist, you may have a travel or hobby itch to scratch.

Take action: Pay really close attention to the first few years of retirement spending, as these are the years most likely to produce inflated spending or impulse spending. Why? After working so long and finally reaching your goal of retirement, you may go a little overboard on the travel or the hobby pursuits. But even if those are within reason, consider that picking up golf or fishing or any number of other hobbies will mean an initial investment larger than an ongoing one—unless you lose golf balls at the same rate I do!

3. You’re spending an outsize amount on mortgage, car, or credit card debt. Many retirees ditch credit cards altogether, and for good reason. After your peak earning years as a dentist, you don’t want to be accumulating bad debt. And no matter how many times you hear Samuel L. Jackson or Jennifer Garner tout the benefits of having plastic in your wallet, the simple truth is that credit card debt is bad debt. Mortgage debt is different, of course, and most car loans are relatively reasonable. But paying a large percentage of your savings for debts incurred earlier in your life is a sign you may want to cut back on some of the things you don’t own outright.

Take action: If you find yourself still battling debt as you near retirement, look into debt consolidation. You may also want to consider downsizing your home, or using your home for income.

A final word

I spend a lot of time on community message boards related to retirement, because I like to hear strategies directly from the recently retired. One thing I find striking his how many experienced retirees give the advice to take the first few years of retirement slowly. Retirement isn’t a race; for the newly retired, it’s the reality that will define the rest of your life. It can all come at you a little fast in the first few years.

Ease into it. Monitor your spending. Make good choices. If all goes well, you’ll have many years beyond the first few to pursue whatever kind of life you want most.

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