By Greg Sullivan

There are a lot of nasty surprises that can waylay you in retirement. Because the consequences of financial mistakes can be dire, they are what we tend to focus on—but they are not the only way you can fail at retirement.

Underliving your wealth also represents a barrier to a happy retirement.

Is Fear Holding You Back?

Fear is probably the biggest reason people underlive their wealth. They think, “Something bad could happen, so I have to constantly protect what I have.” They fear that they could run out of money—that the markets could take a dive, the value of their property could tank, or they’ll run through their savings too quickly.

This anxiety runs through even some very wealthy people, whose portfolios are robust enough that they could sustain themselves through nearly any downturn. These folks could easily afford to travel or to indulge their interests in whatever ways they choose. But old habits die hard, and irrational fear of the future may take hold; sometimes people in retirement remain in full-on save and conserve mode even when there is no rational reason to do so.

Quite often, spending fears loom greater for one spouse or partner. It’s not unusual for one partner in a couple to really believe that they are in danger of outliving their wealth and to feed off that fear. That partner has a habitual pattern of thinking about money that goes like this: “Everything that can go wrong will go wrong, so we’d better not spend any money we don’t have to.”

Go Ahead and Enjoy!

Retirement is an opportunity to try new things, without the demands of work and daily care for children. If you have enough wealth to be comfortable financially and to explore new places and activities, go and do it! As long as your spending is not jeopardizing your lifestyle and risking your becoming an eventual burden to your children, you should enjoy what you’ve worked so hard to achieve.

Consider spending on experiences, especially those you can share with family. Research shows that people derive more happiness from spending on trips, entertainment, and special dinners out than on material items like TVs or cars.¹ My parents, for example, rented a couple of beach houses for a few weeks. They invited all of their kids and grandchildren to join them, and they covered the expenses. That was hard for any of us to turn down, especially early in our careers when we didn’t have a lot. The vacation was a huge success, and my parents took great satisfaction in seeing the whole clan having a good time together.

If you’re not sure that your spending levels are appropriate to your retirement savings, consult a financial advisor who can analyze your portfolio and your needs and offer some recommendations. There is a possibility that you don’t need to be quite as conservative as you think and that you can afford to take that trip or arrange an extended-family getaway.

Cheers,
Greg

To learn more about Greg or want discuss retirement visit, SBSB Financial Advisors.

1. Paulina Pchelin and Ryan T. Howell, “The Hidden Cost of Value-Seeking: People Do Not Accurately Forecast the Economic Benefits of Experiential Purchases,” The Journal of Positive Psychology 9, No. 4 (March 2014). Accessed September 2, 2017. http://dx.doi.org/10.1080/17439760.2014.898316.↩