Retirement is a time for you to kick back and enjoy life. There are many things people consider doing in their post-work years. With newfound free time, it’s easy to start spending money on costly things you would never have considered before.
For many retirees, it’s difficult to balance the desire to enjoy their newfound freedom with the need to stay within budget. Most retirees live on a semi-fixed income, so large cash outlays can have a substantial impact on their finances. Before making a big purchase, consider how it may affect your ability to live comfortably in later years.
Below are three common ways that retirees spend through their savings. Think carefully before going through with any of these transactions.
A major “fun” purchase.
It can be tempting to splurge and make a large purchase in retirement. Spending money on an RV, a vacation home or luxurious travel may seem like a great idea, but you may want to consider the impact it has on your savings.
For instance, how will you fund your purchase? With debt or with cash? If debt, are you certain you’ll be able to make the payments? And if you decide to fund the asset with cash, will you have enough left to cover things like long-term care or emergency expenses?
You may also want to think about how much you’ll actually use the asset. If you think you might not get much use from it, perhaps there are other ways to get the same level of enjoyment without buying. For instance, instead of purchasing a time-share, you could simply rent. Instead of taking an international cruise for two weeks, consider a one-week option closer to home.
Giving money to kids and grandkids.
Family is important, and most people feel a desire to help out their closest relatives. However, your assistance can turn into long-term dependence if you’re not careful. No one likes to see their children or grandchildren struggle, but there may be other ways to help them in lieu of giving them money.
One way would be to give them a loan, but if you do that, be sure you put the terms in writing. Another way to help could be to use your network and previous business contacts to help them find employment. Or you could let them live with you for minimal rent. Limited, one-time gifts and loans may be harmless. If they turn into ongoing support, though, the assistance could become a drain on your assets.
Starting a business.
After a lifetime of employment, you may feel the need to be productive and keep working. Starting a business might be a good way to do that. The reality is, however, many small businesses don’t succeed. With that being the case, you wouldn’t want your business venture to deplete a large portion of your savings.
If you get the entrepreneurial itch in retirement, you may want to ensure you don’t invest more than you can afford to lose. You could also consider alternatives like a freelance job or part-time work for a company in your previous profession.
Need help developing a budget and retirement spending plan? Let’s talk about it. Contact us at Gallagher Financial Group. We can help you evaluate your objectives and needs, and then develop a strategy. Let’s connect soon and start the conversation.
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