7 Signs You Could Be Spending More of Your Retirement Money

Are you nearing or in retirement and feeling like you could be spending your money a bit more freely? You’re not alone. Many people think they can spend freely in their golden years, especially when they see the size of their nest egg growing more and more every day.

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But can you really spend more without outliving your savings? This is something that worries many retirees, and it’s also why many hesitate to take that dream vacation or make a large purchase.

Can you afford to be spending more retirement money?

But how do you know if you can afford to splurge a bit now and then or if you should reconsider your monthly budget to make room for more entertainment or fancier food? Unfortunately, this is by no means an easy question since budgeting for retirement isn’t an exact science.

Many unforeseeable events could force you to tap into your savings earlier than expected and leave you in a tough spot financially. However, there are clear signs that you may be able to pull it off safely and spend more of your retirement money without compromising your financial future. Keep reading to learn more about what those good signs are.

Sign #1. Your investments performed better than you originally anticipated.

If you did your homework throughout your working years and planned for retirement correctly, you estimated how much income you would need for a comfortable retirement. An essential part of that plan probably involved estimating the average rate at which your savings would grow every year. That way, you could calculate how much money you needed to save every month for your desired income level during retirement.

Look at your estimated returns on your investments

However, when we estimate returns on investment, we purposely underestimate those returns (or are conservative when estimating them) to give ourselves more wiggle room while remaining on budget. Therefore, unless you invested in an annuity with a fixed rate or something similar, your investments’ actual performance would likely be quite different from what you estimated.

For example, stocks have an average annual growth rate of around 10%, but that performance tends to vary yearly, which is why most investors prefer to set their expected return at 7% or 8%. On the other hand, if you decide to diversify and invest a portion of your portfolio in crypto through any of the many available crypto exchanges, you’ll have a much higher potential return, but things can vary wildly.

Look what happened to Bitcoin if you have some

The average return on Bitcoin is a whopping 18%, which sounds great on paper, but that’s just an average. Year to year returns goes from -40% (a heavy loss, to say the least) to almost 500%.

Either way, suppose that you set your expected return on all of your investments (stocks, crypto, gold, real estate, etc.) at the same level as your expected return on stocks, say 8%. Then, if by the time you retire, the stock market only shows an average performance (i.e., a 10% return), that extra 2% may add tens of thousands of dollars to your nest egg. And the difference will be even higher if the crypto market does averagely.

Since you set your budget based on the first estimate, you’ll have a lot more money at your disposal than you anticipated by the time you retire, allowing you to spend much more than your original budget allows.

Sign #2. You and your spouse are healthier than expected for your age.

This one is a bit more personal, depending on your unique situation. For example, if you or your spouse suffer from chronic health conditions, you may have saved more for medical expenses than the average retiree. However, if your condition improves or science finds a definitive cure or cheaper treatment, you’ll likely have money left over every month.

How is your health, now, in retirement?

Additionally, even if you don’t have any chronic conditions, any well-planned retirement budget will still need to account for the regular check-ups and treatments that come with aging. On the other hand, if you stay healthier throughout your golden years than the average Joe, you may not need specific medical exams or treatments, freeing more money for travel and other fun activities.

Sign #3. You waited longer than initially planned to tap into your retirement fund.

This one goes hand in hand with the first sign. If you retire later than expected, you’ll have more time for your money to grow and compound, resulting in a larger retirement fund. This two-fold effect will allow you to spend much more than you originally anticipated.

How did you calculate your original nest egg? It matters.

On the one hand, all else equal, the larger retirement fund means more available money every month to spend and enjoy the good things in life. But, on the other hand, you probably calculated your original nest egg to last a set number of years, say 30 years.

Did you retire later than you planned?

If you retire 5 or 10 years later than initially intended, not only will you have more money to spread out over your retirement, but you’ll also be able to spread it out over a shorter number of years (25 or 20 years, respectively, in our example). This means you can afford to spend a lot more per year.

Of course, you can also opt for spreading out the more considerable sum over the same original period (30 years in our example), dramatically reducing your chances of outliving your retirement fund while still being able to spend more than you are now.

Sign #4. Inflation was lower than expected when you budgeted for retirement.

This one is a bit out of your control, but it can profoundly affect how much you’ll be able to spend in retirement. It has an equivalent effect as your investments perform better than expected.

Are you estimating prices now?

When most people budget for retirement, they use current prices as a baseline to calculate their current cost of living. Then, they account for inflation by estimating how much prices will rise in the future to estimate how much it will cost to maintain the same lifestyle in retirement.

But if inflation isn’t as rampant as predicted, your purchasing power will be higher than anticipated, allowing you to afford a more luxurious lifestyle in retirement on the same budget.

Sign #5. Your “rainy-day fund” is already big enough.

It takes discipline and self-control to build a sizeable emergency fund, but it’s something that any personal finance expert will always recommend. But these funds don’t have to keep growing forever.

Is your emergency fund in place?

There will always come the point when you can say, “I don’t need to save anymore for my emergency fund.” For example, if you have an emergency fund that can cover five years of your current living expenses, it’s safe to say you don’t need to put any more money aside for that fund.

That means you’re free to spend that extra amount on anything else since it’s already accounted for in your retirement budget.

Sign #6: You’re still living in a big, expensive home.

One of the most common pieces of advice for retirees is to “downsize” and sell their large family home for a smaller, more manageable condo or apartment. The main reason is to free up some extra cash that can be spent in retirement, whether it’s on travel, hobbies, or anything else.

The smaller home

But another often overlooked reason is that a smaller home is cheaper to maintain in terms of property taxes and utility bills. So even if you don’t sell your house and downsize, you’ll have a lot more monthly money to spend on the things you love if you can manage to pay off your mortgage.

Sign #7: You just finished paying off all your debts.

Debt is a burden that can weigh you down, both emotionally and financially. So it’s no surprise that another standard piece of advice for retirees is to make sure they’re debt-free before they leave the workforce. But unfortunately, almost half of the retirees aged 65 to 79 are still paying their mortgages.

What does debt-free mean?

But debt-free doesn’t just mean having a zero balance on your mortgage. It also includes things like credit cards, car loans, student debt, personal loans to pay for a daughter’s wedding, etc. If you’re retiring with any of these debts still outstanding, they can eat up a significant part of your available income during retirement.

However, once you finish paying off that debt, you’ll have all that income available for you to spend on anything you want.

The bottom line

Budgeting during retirement doesn’t necessarily mean living a frugal and monotonous lifestyle. However, while most financial advisors will focus on helping you save more and getting you in tip-top financial shape to afford an enjoyable retirement without outliving your savings, there is much to be said about being too cheap once you reach retirement age.

What items do you want and deserve?

After so many years of worrying that you won’t have enough to go around in retirement, it’s easy to hold back on paying for the things you want and deserve once retirement arrives. That’s why it’s so important to be aware of the signs that you could be spending more money in retirement.

Whether it’s due to better-than-expected investments, lower inflation, or because you’re no longer burdened by debt, having more money available to spend without compromising your budget can make a big difference in your quality of life during those golden years.

If any of these signs resonate with you, it might be time to start planning that dream retirement trip.

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