Spending factors that can drain your retirement funds faster than you anticipated – Keep an eye on spending in retirement

Retirement is supposed to be a time when you can do all the things you’ve been waiting for but be aware of some factors that might drain your retirement savings faster than expected.

Despite our best efforts, there are sneaky expenses and spending habits that can eat away at your savings.

Financial pitfalls that many retirees often don’t take note of:

• Underestimating healthcare costs 

  Retirees often misjudge how much they spend on healthcare expenses. As you get older you often have more medical expenses, and one must consider future health costs that come with old age, such as possible long term frail care or assisted living, which is not covered by medical aid.

• Increasing lifestyle expenses 

  Once you find yourself with more free time, you could be tempted to indulge in activities that can turn pricey such as excessive entertaining, costly travelling or expensive hobbies. Review your expenses regularly to ensure you are not overspending on “luxuries”.

• Funding adult children’s expenses and emergencies too often

  We never stop caring about our children and sometimes they need financial assistance. But beware of continuously dipping into your retirement money to help them. Adult children learn valuable lessons and habits if they don’t have parents that keep on funding their expenses long after they start earning their own income

• Overspending on home upgrades or renovations

  Your home is a valuable asset, but in retirement you need to ensure that home improvements align with your financial position and future plans. Don’t use retirement savings on expensive renovations or unnecessary purchases.

  Your retirement money is meant to provide you with an income for many years.

• Incurring new debt 

  It is advisable to be debt free by the time you retire and avoid taking out any new loans during retirement. The repayments could put your monthly budget under unnecessary pressure – especially if you have a fixed or limited retirement income.

• Over-gifting the kids or grandkids

  This is something most grandparents love doing. But be aware and do not overspend on your children or grandchildren. Start setting boundaries and rather spend in a planned manner. The best present you can give is your time and attention, instead of expensive gifts.

• Unrealistic investment expectations

  Retirement investing often requires a more cautious approach, especially if your funds are limited. We see many retirees shift their nest egg to into high-risk products with the hope of quick gain. Retirement is the time for preserving wealth more than growing it aggressively.

•  Cancelling life/disability/severe illness policies

  Although you might think you don’t need this cover because your debts are paid off and the kids are out of the house, do consider options to reduce life cover but retain your critical illness cover. These benefits will be of great value if you are diagnosed with certain life changing illnesses.

• Ignoring inflation and rising living costs

  Perhaps most importantly, don’t underestimate the impact of inflation. Over time the prices of everyday goods and services will keep increasing. Your retirement planning should include the fact that your income should keep up with inflation.

Successful retirement is not only about money, but also about finding meaning and happiness. Do the things you enjoy, like spending time with family and/or friends, travelling, or exploring new hobbies.

You can still play a valuable role in your community like contributing your time to charities that you are passionate about.

Consult with a financial advisor should you require assistance with pre- and post-retirement planning.

* Leslie Greyling is an advisor at Brenthurst Wealth Fourways.