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Retirement Spending 101: The Do's and Don'ts

Financial advisers say some costs are worth it, but others aren't

By Bruce Horovitz

Knowing how to spend your retirement money is often harder and more confusing than knowing how to save it.

a grandfather helps his grandson bait a hook while they are fishing together
Credit: @5byseven via Twenty20

The basics for saving for retirement are pretty simple. For four, five or even six decades, you painfully learn how to spend less and save more. But once you reach retirement, there are few really good guidelines about how to wisely spend the money you’ve saved.

“Most financial plans are fundamentally incorrect about the real way that money is spent. Retirement spending is not linear,” said Ted Jenkin, CEO of oXYGen Financial in Atlanta and author of The 21-Day Budget Cleanse.

The 3 Periods of Retirement Spending

There is typically an initial three-to-five-year period of retirement “jubilation,” where many retirees overspend, often with more frequent travel as they start checking off their “bucket list” goals, Jenkin said. That’s usually followed by a longer period of “stabilization” — when spending normalizes for the next decade or so. Jenkin calls the last spending period the “five-mile radius,” when older retirees mostly stay closer to home and their spending (except for health care) typically decreases.

The typical retired person who exercises regularly can save $2,500 in annual health care costs.

For guidance on how to spend money in retirement wisely, Next Avenue asked Jenkin and two other investment advisers who specialize in retirement. Here are their Do’s and Don’ts:

DO put cash into one account to pay for your first year of retirement. Use money from that account to pay your credit card bills and other expenses so you can track exactly where the money is going, said Jenkin. This technique also helps ensure that you only spend what  you can afford to in Year One of Retirement.

DO track your spending daily — using your bank’s app, said JB Bryan, owner of JB Bryan Financial Group of Richmond, Va. Alternatively, you can call the bank’s computer system daily — without ever talking to a real person — to check on your transactions and your account balance.

DO spend on learning. Continued education of any kind — from developing new professional skills to enhancing old ones — is almost always a positive way to spend retirement money, said Bryan. “If you’re expanding your knowledge, you’re going to have a more comfortable eighties,” she said.

DO spend on relationship-building. Paying for travel to visit children, grandchildren, or old friends from high school or college — even out of the country — is often money well spent, said Mark Woodward, founder and CEO of KANA Private Wealth Group of McLean, Va.


DO spend money on activities that can improve your health. This includes health club memberships, exercise equipment, pool memberships and personal training, said Woodward. You’ll feel better, of course. But research shows that the typical retired person who exercises regularly can save $2,500 in annual health care costs, Woodward noted.

DO activities that bring you pleasure. Great experiences tend to bring far more happiness to retirees than accumulating lots of expensive stuff, said Jenkin. “If it’s between a Coach handbag and a great trip, go with the trip,” said Jenkin.

DO spend money on technology training. The cost will likely pay itself back many times over, said Jenkin. Keeping up with new technologies can ultimately save retirees money, time and frustration, he added.

DON’T buy pricey, new cars. Buying assets which quickly depreciate is one of the dumbest things a retiree can do, said Jenkin.

DON’T over-support adult children.  If you indulge your grown son or daughter, your child will be less inclined to save and invest for retirement, said Bryan. “You hurt your children by not showing them how to be financially independent,” said Bryan.

DON’T purchase lottery tickets. Bryan has several clients who spend hundreds of dollars weekly on them.  “It’s a terrible habit, and lately I’ve seen it more with women than with men,” he said.

DON’T neglect to put money aside for one-time expenses, like a child’s wedding. “Too many retirees think about this only when it’s too late,” Jenkin said.

Bruce Horovitz, a national freelance writer and media training consultant, is a former USA Today marketing reporter and Los Angeles Times marketing columnist.  He can be reached at [email protected] Read More
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