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.
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.
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.
