But you also have to remember that retirement means you’re on a fixed income now, and big purchases can hurt your long-term investment strategy.
So before you start spending your retirement funds, see if any of your potential purchases are things you might regret or force you to earn extra money to cover the expense.
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A second home
You may think buying a second home when you retire can be a great investment as well as a place to spend the summer or winter.
But a second home can cut a big hole in your retirement savings and cost you additional money for utilities, taxes, and maintenance.
And unless you buy a home in a major tourist area, for example, you likely won’t be able to rely on additional income by renting it when you’re not there.
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There is a saying that the two happiest days of a boat owner’s life are the day they buy a boat and the day they sell it.
Boating can be a great hobby, but a boat is an expensive purchase and costs additional money to maintain. You’ll have to constantly spend money on things like fuel, maintenance, dry docking, or for a slip, among other expenses.
An expensive car
Is there a dream car that you’ve always wanted to own? You may regret waiting until you’re retired to make an expensive purchase like that.
In addition to the cost of the car itself, an expensive vehicle may have a higher price tag to maintain than a typical car.
You’ll want to factor in routine maintenance when budgeting how much you need for the car. Luxury cars may also have higher insurance premiums and other related costs that could set you back.
You may be excited to have more free time for traveling around the country or even around the world. But your luxury accommodations are going to cost extra cash that will come out of your retirement savings.
Instead, consider downgrading the extra luxury and staying in more affordable hotels or taking less expensive trips. You also may want to look into the best travel credit cards that can earn you extra points or perks for your trips.
Your ideal retirement might be living in a retirement community in a warm climate by the beach with all the amenities you could ever want.
The novelty of resort living with other people your age may wear off after you’ve been there for a few years. A clubhouse, gym, golf course, pickleball courts, and swimming pools are wonderful facilities for an active lifestyle.
But someone has to pay for them. That’s why you need to consider homeowners association fees when you tally up the cost of living in a retirement community.
Upsizing to a new home
Instead of moving to another city or state with resort living, you may decide to stay in your current area and buy your dream home with plenty of features and extra space.
But a home with more space and fancy features than your current home may cost more, which will have to come out of your retirement savings.
You’ll also have to factor in higher monthly expenses for heat and air-conditioning and landscape maintenance.
Upgrading your current home
Now that you’re retired and spending more time at home, you may think it’s time to gut your kitchen, put that addition on the back of your home, and redo your bathrooms.
But before you do a home makeover, remember that you’re living on a fixed income now. Perhaps you should focus on one project at a time and see how much you actually have to spend on it before you move on to the next one.
Giving money to your kids
You may have adult kids who moved out of the house ages ago, but who may need a little cash to make ends meet or help them with a big purchase.
But don’t let your love for your kids cloud your financial judgment when it comes to your retirement cash. Make sure you pay yourself before you start to pay others, especially if your kids are adults who can make their own money.
Leisure time at home may mean you have more time to shop online for any number of items. You also can tune in to shopping channels on your television to see the latest and greatest things that you need to buy.
But you probably don’t need those purchases, and buying too many little things at once can add up. Instead, set a spending limit for yourself each month as part of your budget and make sure you stick.
Shopping, because you’re retired and bored, may lead to financial trouble. Better to volunteer with one of the many organizations that could use your help.
Life insurance is necessary when your family is young, and they would need money to cover expenses if something happened to you.
However, now may be the time to reevaluate that life insurance policy when you no longer have a mortgage to pay or dependents who rely on your income anymore.
If you’re still concerned about expenses when you’re gone, you can downsize to a smaller policy that can help your spouse out if something happened to you.
You may decide that if you’re spending time at home, you’re going to need a bigger television, a new surround-sound system, a faster computer, or a better smartphone.
Before you spend all your cash on electronics, consider if you really need that item or if it may be outdated quickly. When you do decide it’s time to upgrade your TV or electronics, be sure to research the product and find the best deal.
You may have met your goal to retire, or even retire early, but remember that the chunk of cash for retirement needs to last you for decades.
Be prudent with your spending and think hard about whether you want to spend your cash on certain purchases before you take out the money for them.
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