The Biggest Problem Retirees Have Isn’t What You’d Think
It appears that retirees aren't spending the money they've saved and instead are living below their means on fixed incomes.
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After 40 to 50 years of working, you would think retirees would relish the thought of relaxing in their golden years, taking up a hobby, or going on a cruise. But people don’t know that there is a hard adjustment from frequent earner to frequent spender.
According to CNN, most retirees have been working and saving their pension for decades, and even though your body may be ready for some downtime, your mind may take some time to adjust as there is no longer a monthly paycheck to cover basic expenses.
Shifting your mindset from working all those years to spending with no income is not for the faint of heart, as most retirees face a range of unpredictable factors. Overwhelming thoughts about life expectancy and having one set amount to help support the last years of their lives can cause anxiety about spending. Factors like market performance, health issues, and of course, life expectancy make dipping into that nest egg easier, a daunting task.
A lot of research has gone into the spending habits of retirees and one theory from this is that many try to live off of fixed sources or funds like Social Security or part-time work. Studies found that many pensioners have a high percentage of their savings, even after over twenty years since they retired.
One of the reasons why many retirees can afford to keep their savings hidden away is that their generation enjoyed one of the longest bull markets spanning over 11 years, and they also benefit from corporate pensions. Some of the newer factors causing retirees to hold back the use of their retirement savings are the economic volatility we face daily with hyperinflation, wars, and a lack of pensions.
There are many ways retirees can reduce any anxiety about spending, one way is to hire a financial planner. They can run financial forecasts to help clients see how they manage their finances.
Older clients near retirement age or actually retired need to keep in mind that the savings are there to help them live a comfortable, more relaxed retirement life. Savings should be viewed as bolstering retirees’ lives so they can live the life they want.
Once people think about the life they want in retirement, they can start to build it, and when it comes to retirement, they are satisfied with how they are set up financially. Financial planners also advise clients not to panic for the first year of retirement, as it is an adjustment when it comes to spending.
To help manage costs during retirement, before you retire, make a budget to cover all your expenses, then put it against the fixed income you will have coming in. The difference between the two is the amount of savings you need every month; from there, you can build a nest egg.
It is such a new experience for retirees to stop working and live a more slow-paced life, but once you are organized and know what you can and can’t spend, you can enjoy the better parts of retirement in peace.
