Spending some retirement funds now can lead to years of happiness.
By Rachel Hartman, Contributor March 7, 2018, at 12:05 p.m.
You may have diligently set money aside for decades, growing a nest egg to live on during your golden years. But at some point in retirement, it's likely your thoughts will turn to spending – maybe even on items that aren't necessities. And that's not necessarily a bad thing. In fact, it can be a good – even great – thing.
"Just as we insist on retirees having an emergency fund available for unknown contingencies, we encourage them to also have a 'splurge fund' when possible for any planned or spontaneous special things they would like to do," says William Stack, founder of Stack Financial Services in Salem, Missouri. The best approach involves splurging with excess funds, Stack adds: "Don't borrow or spend your emergency fund for something extraneous. Splurge on meaningful pursuits, but only with additional, nonessential funds set aside for that purpose."
You can set up a splurge fund to have occasional infusions from growth accounts when times are good, or you can simply take extra income that you don't need each month and add it to your splurge fund. You could even combine these two methods if it fits your lifestyle.
Follow these guidelines to make the most of your retirement splurges – with zero regrets.
1. Get a pet. You can expect to spend at least $395 on a dog during the first year of ownership and a minimum of $328 every following year, according to PetFinder. Before getting an animal, you'll want to think about initial costs, such as adoption fees, vaccinations and training. Also keep in mind ongoing expenses, such as food, toys and grooming. Yet the benefits can be potentially high: Caring for a pet can reduce depression, provide companionship and even lower your risk of heart disease.
2. Eat well. Buy fresh fruits, vegetables and salads – and eat them, suggests Pablo Solomon, who is semi-retired and lives with his wife, Beverly, near Austin, Texas. Your grocery bill will likely go up, but you may save on medical costs, Solomon adds: "We take no medications. We feel we can get the vitamins, nutrition and minerals needed for good health by eating well."
3. Get extra medical attention. Concierge care, which typically costs between $1,500 and $2,000 a year and is not usually covered by insurance, can provide a long list of medical benefits. Also known as membership medicine, retainer medicine or direct primary care, it "allows patients to have same-day appointments, next-day appointments and longer appointments," says Dr. Matthew Mintz, an internist in Bethesda, Maryland. Some services even offer 24/7 access to your primary care physician.
4. Take a trip. Whether it's a nearby getaway, an international trek or a long-awaited reunion, retirement is the perfect time to make the most of your travel opportunities. "A nice tour, cruise or extended vacation would be a worthy splurging opportunity, especially when loved ones or family can be involved," Stack says. "The great experiences shared can help create lasting memories to cherish later."
5. Visit loved ones. A flexible schedule in retirement allows you to spend more meaningful hours with those you care about. "Time with family and friends will likely yield the greatest benefit over material purchases," says Andy Whitaker, a financial planner for Gold Tree Financial in Jacksonville, Florida. If your loved ones live in different states, consider setting up a visiting schedule or planning visits far in advance. This gives you the chance to estimate travel costs, plan activities and prepare your place for time spent away.
[See: 12 Great Things About Retirement.]
6. Connect with the younger generation. Consider nurturing a relationship with one or two young people, suggests Sara Zeff Geber, founder and president of LifeEncore, a retirement coaching business. If you don't have grandchildren, look to nieces or nephews, younger siblings or acquaintances. "This is especially important for retirees who don't have children," Geber says. By building a strong relationship, you may be able to rely on these individuals if you need help later. As you connect with younger people, you may want to provide financial assistance, such as helping with college costs, travel expenses or a car purchase.
7. Remodel the house. Consider updating kitchen cabinets, painting rooms, modifying spaces or adding vinyl siding to give your home a new look. "During retirement you will be spending more time at home, so it's important to beautify your surroundings," says Roslyn Lash, a financial educator and coach.
8. Upgrade your vehicle. Whether you want to travel long distances or have a comfortable ride as you run errands around town, splurging on a new car can have a long-term impact. "Updating with a vehicle purchase will help ensure safe and dependable travel for the years ahead," Stack says.
9. Start a business. Now that you're not tied to an office or a set work schedule, you're free to try your hand at something else, like a second act. Maybe you want to take upconsulting, sell crafts on Etsy or turn your garage into a woodworking shop.
Before taking out a large amount from a retirement account to fund the startup, consider tax ramifications. "Depending on your typical annual income, a splurge from an IRA could bump you into a higher tax bracket, increasing your cost," Whitaker says. Consider spreading out a large purchase over 13 months, or three tax cycles. For instance, you could take out one-third of what you'll need in December 2018, another third in January 2019 and the final third in January 2020 to stay below the breakpoints in the tax tables.
10. Winter in the south. First, "try out several warm-weather spots and rent comparable places in each," Zeber suggests. If one place stands out from the others, consider purchasing a residence there. "Be sure to have your financial advisor or tax accountant sit down with you and go over all the responsibilities you will be taking on with owning a second home," Zeber says. You'll want to keep in mind the expenses involved, including taxes, insurance, HOA dues and maintenance.
11. Travel internationally with a reason. Heading abroad to volunteer is a worthy cause, but you'll find that most organizations ask for donations or charge to cover certain costs. If you can swing the expense, you'll have the satisfaction of making a lasting impact. Go Overseas and International Volunteer HQ offer programs and opportunities for seniors.
12. Take up a hobby. If you've dreamed of learning to paint, playing the piano or tackling a new language, there's likely a class available in your area. Just be sure to start slow: "Hobbies can be very expensive and could easily transcend from a splurge to a burden," Lash says. So sign up for a few art classes at a local shop before turning a spare bedroom into an art studio.
