8 Things Retirees Spend Too Much Money On
If you've set yourself up financially well for retirement, congratulations! You can now reap the fruits of your career and be rewarded for your diligent efforts to save and invest. And while you should enjoy your retirement to the fullest extent possible, it's not the time to simply toss prudent financial planning out the window.
Retirement at Any Age: Get Retirement Tips That Fit Every Stage of Life
More: 7 Surprisingly Easy Ways To Reach Your Retirement Goals
Although it's understandable that you may want to splurge once you finally hang up your work boots, without maintaining some financial discipline, that nest egg you've worked so hard to accumulate could run out long before you expect. If you desire something strongly in retirement, it can make you prone to overspending, something that should be avoided when you're living off a limited income.
Vacations
One of the first things many retirees want to do after they've finished working is to go on a vacation. While this is part of the joy of being retired, it's also an area which is ripe for overspending.
For example, you may have worked so hard and for so long that you feel you "deserve" that 105-day round-the-world cruise. While that may be fine for wealthy retirees, if you're more like the average American senior, a seven-day cruise to Alaska may be more in line with your budget.
It can be easy to spend too much money on a vacation for a number of reasons, from the feeling that you "deserve it" to travel agents and advertisements suggesting that this is the "best and only" way to retire. While you should feel free to vacation to your heart's content, be sure that your travel expenses remain within your budget, just as if you were planning them when you were still working.
Live Richer Podcast: Unexpected Ways Losing a Spouse Can Affect Your Finances and Retirement
Big Houses
It can be tempting once you retire to splurge on a luxury home in a destination you've always dreamed of, but more often than not, this results in overspending. In reality, most retirees are in the position where they should be downsizing rather than expanding into a giant luxury home.
If you find yourself in a simple one- or two-person household after you retire, for example, you likely don't need a large five-bedroom house. While you certainly shouldn't avoid living on the beach, in the mountains or in a foreign country if that is your dream, be sure to match the size of your home with the reality of your retirement lifestyle if you want to avoid spending too much money on it.
Gifts to Friends and Relatives
Some retirees like to share the wealth they've accumulated during their lives with their friends and loved ones. Gifting is certainly a nice gesture, and you should feel the freedom to enjoy the good feelings that come with being generous. But if you're draining your retirement funds to support the lifestyles of your adult children, for example, or treating your friends to lavish vacations, you may end up in a position where your own lifestyle suffers.
Full-Price Consumer Goods and Services
One of the financial benefits of being a senior is you have much greater access to discounts. For example, some movie theaters, drug stores and even restaurants may offer you a senior discount, as will many hotel chains. This is particularly true if you are a member of an organization like AARP.
Just because you're a senior doesn't mean you should overlook additional discounts that others are also privy to, such as AAA discounts. But as a senior, it can pay off handsomely to always ask for a discount. If you can keep the money you save rather than spending it, you'll end up with extra money for your other retirement needs, which is shrewd financial management.
Groceries
Groceries are an area where it's easy to both save money and to overspend. Although there are exceptions to the rule, in many cases, groceries are essentially a commodity.
While you may prefer to shop in one store over another, it's entirely likely that the same broccoli you're paying $3 per pound for at one store is only $2 per pound down the street. The same could be said for many grocery products, from eggs and milk to ground beef and produce. Different stores also run promotional sales or offer coupons that can bring the price of your groceries down even further. Rather than simply buying all of your groceries at the first store you see, you can save a lot of money with just a little bit of planning instead.
Luxury Automobiles
When it comes to retirement spending, cars are somewhat like houses. Retirees are often tempted to buy luxury vehicles -- just as they might eye premiere homes -- out of a feeling of having "earned it." Just as with buying a big home, however, spending too much on a luxury vehicle is all too common.
You should certainly enjoy the car you drive after working a lifetime to earn and save, but make sure it fits within your budget. Some retirees have saved up more than enough to buy the latest BMW or Mercedes, but if you're going to be living on just the average Social Security retirement benefit -- which was just $1,657 as of January 2022 -- those types of cars will put a gaping hole in your budget. Many financial experts recommend you spend only 10% to 15% of your take-home pay on a car payment, so budget accordingly.
Charities
Just as many retirees offer too much of their income to friends and relatives, others donate excessive sums to charities. Again, like many of the things on this list, there is nothing inherently "wrong" with giving to charity -- in fact, it's quite beneficial to society as a whole. But as much as you might believe in a charity, giving to the point that your own lifestyle suffers qualifies as excessive spending.
If you really want to give more to charity, trim down other portions of your budget, such as entertainment or eating out, and divert that money to your favorite cause. Although you may feel that charitable giving is a worthy endeavor, from a financial standpoint, you have to treat it like any other line item in your budget. If you increase your charitable giving, you'll have to reduce spending in one of your other budget categories.
Medications
Healthcare expenses are one of the top costs that most retirees face. In addition to ensuring you have the best available insurance, the best way to save money on medications is to insist on using generic versions of drugs rather than name brand. The savings could literally be thousands of dollars per year for you, depending on the type and amount of medication you need.
In this day and age, you can even save money on medication by shopping around at your local pharmacies, comparing costs online or even ordering in bulk by mail. The long and short of it is that you have lots of options for saving money on medications, and you shouldn't fall into the trap of overspending.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: 8 Things Retirees Spend Too Much Money On
