May 31, 2024
There’s a reason why the early days of retirement are called the Go-Go years. If you’re newly retired (and healthy), you suddenly have the time and freedom to tackle that bucket list. But do you have the money?
The Go-Go years are also a time when retirees might want to splurge on their newfound freedom from the 9-to-5 work world. While there’s nothing wrong with celebrating this new stage in life, you want to make sure you don’t come up short later in your retirement (in the Slow-Go years).
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If you withdraw more of your retirement savings in those early years to pay for big-ticket items, it means your nest egg will be smaller — and you’ll lose out on up to 30 years (or more) of investment returns. That’s not to say you can’t live the life you want in retirement, but you’ll need to make those decisions consciously.
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Here are five big-ticket items that many retirees regret.
A big house
For some people, retirement means buying or building their dream home. Or it might mean staying in their beloved family home, even if a sprawling three-bedroom house with a backyard and pool may not make sense for empty nesters.
If you’re buying or building a new home, you’ll have to start paying a mortgage again. If you’ve paid off your mortgage in your current home, that’s great — but consider that you still have expenses, from property taxes to maintenance. And any home improvements or renovations you do could quickly burn through your savings.
If you’re living on a fixed income, you’ll have to consider whether these expenses are worth it or if it makes sense to downsize to a smaller home.
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A luxury car
While most people know that a vehicle’s value drops the moment they drive it off the lot, they still want that Porsche or Ferrari — especially if they’ve been dreaming of it for decades. After all, the kids have flown the coop, so who needs a practical car?
But making monthly car loan payments — and hefty ones, at that — at a time when your monthly income is likely lower than during your working years could put a lot of stress on your finances. If you have enough stashed away to pay for it in cash, that could help, but you’ll still have to pay for fuel, maintenance and insurance, all of which are a lot more expensive for a luxury car.
Luxury car insurance is about 18% higher than basic car insurance, according to AutoInsurance.org. And if you get in an accident, parts and labor will cost much more than a standard vehicle, so even a small fender-bender could put a big dent in your finances.
Luxury travel
When you’re suddenly free from cubicle life, the world is your oyster. That’s why so many Americans want to travel when they retire. Indeed, 63% of Americans aged 50 and older say travel is an important retirement goal, according to a poll by RBC Wealth Management.
But it’s easy to overspend when you travel (at any age!), so you may want to create a travel budget for your golden years.
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For example, a round-the-world cruise on a luxury ship can cost upwards of $50,000 per person for a four- to six-month trip. On the other hand, you could still see the world and spend a lot less money by house-sitting or doing a home exchange in another country.
Adult kids (and their kids)
Retirees may want to help out their loved ones with university tuition, a wedding or a down payment on a new home. And there’s nothing wrong with that, provided you’re in a position to do so. In some cases, it could even be part of an estate planning strategy.
But you don’t want to give away what you might need back in your Slow-Go years, especially if you’re living on a fixed income. And, if you’re expecting repayment and don’t receive it, that could also strain relations with your kids, in addition to straining your finances.
Online shopping
No matter what our age, it’s easy to spend money on stuff we don’t need, especially since online shopping is so accessible. In retirement, the allure of online shopping can be even more tempting, especially if you’re feeling a bit lonely or restless.
Sure, you might only be spending small amounts here and there, but those small amounts can add up to a rather large credit card bill, which then accumulates interest. Consider whether these purchases are items you really want or need — or if they really make you happy — before clicking “pay now,” or you may regret it later.
If you’re retired, it’s worth celebrating — and it’s worth pursuing your dreams. But remember that you still need to budget even in retirement, so your Slow-Go years are just as comfortable as your Go-Go years.
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Vawn Himmelsbach is a veteran journalist who covers tech, business, finance and travel. Her work has been featured in publications such as The Globe and Mail, Toronto Star, National Post, CBC News, Yahoo Finance, MSN, CAA Magazine, Travelweek, Explore Magazine and Consumer Reports.
