Yahoo Finance Retirement Savings: 4 Expenses Retirees Regret Keeping in Their Budgets, According to Experts
Over the years, I’ve had conversations with retirees and financial planners to learn more about how people approach retirement and what they do to prepare themselves financially and mentally for what lies ahead.
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While many people have been happy with their retirement approaches, some have also regretted decisions they’ve made along the way. Some wish they had started saving earlier so they’d have a larger nest egg, and others wish they had used a different budget once they got to retirement.
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Dining Out Too Often
When you hear budgeting advice, it almost always includes something about cooking at home instead of dining out to save money. This is no different for retirees. This is one of the easiest ways to slowly drain your budget each month.
Yes, eating out is a great way to stay active with your friends and the community, but it needs to be within reason. Limit dining out to special occasions like birthdays and anniversaries. Or, if there is room in the budget, make it a once-a-week thing. Make Saturday night the night you enjoy a meal out at a favorite restaurant and cook at home the other nights.
If you find that friends are continuously asking you to meet them out, suggest taking turns cooking at each other’s houses or even meeting at a park for a potluck-style picnic.
“Dining out frequently might be a social activity that retirees enjoy and want to maintain to preserve their lifestyle,” said Adam Paoli, lead financial planner at Coltiva Wealth. “They may also feel they’ve worked hard all their lives and deserve to indulge a bit. However, what they might not foresee is the long-term impact on their finances. As time goes on, those seemingly small expenses can add up significantly, leaving retirees with less financial flexibility than they anticipated.”
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Living in a Large, Expensive House
Some clients refuse to sell their large, expensive houses, even after their kids are grown and moved away. A large house might have served you well when you had a young family, but chances are, you don’t need all of that space anymore during retirement.
Caring for a home of that size can take more time and money than caring for a smaller home. You have more rooms to clean, more square footage to heat and cool, more items to repair or replace when they break, higher taxes and a larger mortgage if you have not already paid it off. If you sold the home and moved into something small and more affordable, you’re going to save a significant amount of money.
Plus, a large house may become too much to maintain physically as you age. It might become difficult to go up and down staircases multiple times a day. If you have a large yard, it will still need to be maintained, and hiring someone to do it will mean another expense.
Maintaining an Expensive Car
Like keeping a larger house than you need, having a larger car is a common financial mistake that some people make in retirement. At a certain point in your life, you may have needed a big SUV to haul around your kids and their friends, but that’s most likely not the case now that you’re retired. Larger cars have a much higher price tag to purchase or lease, and they require more gas to drive.
Buying expensive but impractical sports cars is another financial mistake that retirees make. Some retirees decide to “treat themselves” and buy an expensive sports car that they have always wanted. But if you can’t afford it, it can easily deplete your retirement savings. These cars are more expensive upfront and can cost more to maintain since you may need specialty parts for repairs and premium gas.
Traveling Outside Your Means
For many people, retirement means a time to travel. You’re finally not working and don’t have kids to raise. Travel can be a great way to enjoy retirement. But traveling outside of your means is a quick way to ruin your retirement budget. Staying at five-star hotels, flying first class and taking private tours may be out of your means, and that’s OK.
You can still enjoy traveling while doing so on a budget. Take advantage of credit card, hotel or airline loyalty points. Also, make sure you use your AARP or other senior discount to save money on travel.
Even during retirement, it is important to stay aware of your budget. Don’t go crazy on spending just because you’re retired. These are four of the most common expenses many retirees regret keeping in their budgets. If you are paying for one or several of these and are exceeding your retirement budget each month, it might be time to rethink your spending.
“To avoid such regrets, it’s key for retirees to approach their expenses with a clear understanding of their financial goals and budget,” Paoli said. “And while it’s OK to indulge occasionally, it’s crucial to do so within a budget that aligns with their long-term financial plans. Getting guidance from a financial advisor can help retirees have a clear picture of sustainable spending patterns and avoid potential regrets down the road.”
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