Spending more now: Living fully while you can
For many retirees, the allure of spending in their later years is undeniable. The trips you never took, the hobbies you put off and the experiences you’ve dreamed of are now within reach. And let’s face it, at 79, timelines are tightening, as mobility and overall health issues add urgency to seizing the day. Data backs up the notion of spending at least some of your hard-earned wealth.
A study by T. Rowe Price found increased discretionary spending was associated with higher financial satisfaction among retirees. Those who reported being "much more satisfied" with their financial situation had a 7.4% increase in discretionary spending, while those who were "much less satisfied" experienced a 32% drop in discretionary spending.
Living more freely with your money could transform your golden years into something extraordinary. Imagine traveling to places you’ve always wanted to see, or even using your resources to strengthen family bonds by helping a grandchild pay for college or contributing to your children’s home purchases. But there’s risk in letting go of too much, too soon.
Medical expenses can skyrocket, particularly with long-term care. Healthcare costs rise substantially as Americans age, with those aged 65 to 84 experiencing faster healthcare spending growth than younger individuals in recent years, according to Centers for Medicare & Medicaid Services.
While your $920,000 nest egg seems like a lot, medical costs tied to chronic or serious illness can drain your savings faster than you think.
With some planning and safeguards, spending some money now doesn’t have to be irresponsible.
Discover how a simple decision today could lead to an extra $1.3 million in retirement
Learn how you can set yourself up for a more prosperous future by exploring why so many people who work with financial advisors retire with more wealth.
Discover the full story and see how you could be on the path to an extra $1.3 million in retirement.
Read MoreLegacy over lifestyle?
On the other hand, many retirees feel a responsibility to pass on as much as possible to their children. After all, your savings and investments represent decades of hard work and sacrifice. For some, the thought of depleting those resources on fleeting pleasures feels wasteful.
Leaving a substantial inheritance could profoundly impact your children’s lives. It might allow them to pay off student loans, purchase homes or invest in their own futures. You’ve already provided them with stability by owning your home outright — imagine what a financial windfall could do to further their security.
But prioritizing your legacy often comes at a personal cost. Tightening the purse strings means forgoing the adventures and comforts that could make your remaining years more enjoyable. It could also create regrets down the road. What if you pass up the chance to visit a dream destination or fail to make your final years as comfortable as they could have been, all in the name of preserving your kids' inheritance?
And there’s another question to consider: Do your kids even expect a large inheritance? If they’re financially stable, they may prefer you focus on your own happiness and well-being rather than sacrificing for them. But let’s be real. A recent Northwestern Mutual study found that 38% of Generation Z respondents and nearly a third of millennials expect an inheritance, even though only 22% of Generation X and baby boomers plan on leaving one.
Choosing this path also assumes your health expenses won’t consume a significant portion of your savings. However, the unpredictable nature of medical and long-term care costs can make saving for the sake of an inheritance a tricky gamble. Estate planning strategies, such as trusts, can help protect your assets while ensuring you don’t deprive yourself unnecessarily.
It’s not all or nothing
The bottom line: You can spend wisely to enjoy your remaining years while still leaving a meaningful legacy for your children. Start by evaluating your health care needs and estimating the potential costs of long-term care, then determine how much is safe to allocate toward discretionary spending.
It’s also worth having an open conversation with your kids. They may encourage you to spend more freely, knowing you’ve earned the right to enjoy the wealth you built. Or they might express gratitude for your intention to leave a legacy, helping you feel more confident in saving for them.
This 2 minute move could knock $500/year off your car insurance in 2024
OfficialCarInsurance.com lets you compare quotes from trusted brands, such as Progressive, Allstate and GEICO to make sure you're getting the best deal.
You can switch to a more affordable auto insurance option in 2 minutes by providing some information about yourself and your vehicle and choosing from their tailor-made results. Find offers as low as $29 a month.
