Friday, March 07, 2008

Why We Will Spend More During Retirement

Our initial retirement spending target was slightly higher than our pre-retirement spending. In a February, 2007 retirement spending analysis, we thought a slightly higher number was a good estimate since we didn't expect much change in our spending habits, except for higher health insurance premiums. After five months of retired life, I now expect that we will spend more in retirement. Here are the reasons:

  • Entertainment. Of course, there is the usual reason of more travel. However, there are also local attractions such as memberships at museums, the arts, amusement parks (for our daughter:-), and regional parks. In addition, we are taking the opportunity to eat out for entertainment more often.

  • Pay to have things done. This ranges from for household maintenance to eating out. While working, we had already begun to outsource our lawn cutting, shirt pressing and car maintenance. In retirement, we continue to hire services to cut our lawn and maintain our car. As we get older, we will initially pay to have more of the yard and exterior house work (e.g. gutter cleaning) done by others. At this point, we still do the majority of minor interior house maintenance (e.g. faucet leaks or caulking) for which I expect we will pay service companies to do in the future.

  • Personal growth and development. I expect that we will spend more on enrichment learning through courses, lessons, or experiences. Some topics may include: cooking, golf, nature, health and fitness. In addition, we will be investing in growthful experiences for our three year old daughter.

  • Currently, most of these items are discretionary, meaning that we can reduce spending if necessary. However, over the long term, I expect these areas will become regular spending items during retirement. Otherwise, retirement wouldn't be as enjoyable:-)

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    This is not financial or retirement advice. Please consult a professional advisor.

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    1 comment:

    traineeinvestor said...

    Medical expenses is the other category that we expect to increase in retirement.

    In fact it is hard to see anything other than (i) mortgage payments and (ii) (eventually) the cost of children, going down once we retire.