Home Retirement I Saved Too Much for Retirement: Here Are the 3 Best Ways To Spend Big in Your Golden Years

I Saved Too Much for Retirement: Here Are the 3 Best Ways To Spend Big in Your Golden Years

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When discussing the topic of retirement, we often look at how to ensure that one has sufficient financial resources to live one’s desired lifestyle in one’s golden years. One scenario rarely discussed is what happens when you save too much for retirement. There’s a real possibility that you could be too frugal in your attempt to prepare for the future that you end up saving too much for when you’re in your golden years.

While this seems like a good problem, there could still be some complications you have to deal with when you have too much saved for later on. 

How Can You Save Too Much for Retirement?

“I knew we were always saving 25% a month, but I had no idea it would turn into this much,” said Joan, who preferred to remain anonymous.

Joan is a retiree who saved too much for retirement without realizing it until it was too late. Joan and her husband saved 25% of their income and invested in the stock market and real estate. One year into a late retirement, Joan’s husband passed away and left her with more financial resources than she could spend. After a lifetime of saving and embracing frugality, Joan doesn’t know how to spend all of the money she has access to.

How Much Does Joan Have Saved in Retirement? 

Joan’s husband left her with a significant real estate portfolio, a paid-off primary residence, a small ranch, around $2 million in mutual funds, $300,000 in cash and zero debt. With over 16 apartment rental units, Joan lives off less than the rental income. 

While saving too much for retirement seems a bit absurd for those currently struggling, the reality is that some people prioritized long-term savings over short-term living. Joan finds herself in a unique situation as she worries about what to do with all her money without giving it to her children and relatives before she passes. 

What Happens When You Save Too Much for Retirement? 

“Households sometimes end up saving more than they need for their retirement,” said Brian Kuhn, CFP®, SVP financial advisor at Wealth Enhancement Group. “This can occur if individuals are natural savers or enjoy high incomes, or if they inherit more than expected or receive pensions from their employment that cover their basic expenses. In such cases, individuals must make decisions as spending more may not necessarily be in their nature.”

Kuhn spoke to us about working with clients who have saved too much for retirement and how they’re struggling to change their spending habits after decades of frugality. When you save too much for retirement, you have to worry about taxes, estate planning and spending your money while you’re still alive. You don’t want your hard-earned finances throughout your lifetime to go to waste. You also want to ensure that your finances are structured in a way that makes sense for you and your survivors. 

Joan’s Concerns

In this unique situation, Joan feels like she’s cursed with all this money as a retiree since her husband has passed away, and she’s constantly stressing about her family being broke. She can’t get into the habit of spending money. She buys a new car every eight years, eats the same meals and has the same habits.

The one major change is that she’s constantly stressed out because family members ask her for money, and she’s unsure how to spread it out. She also feels as if they’re waiting for her to pass away to collect her money. She has even noticed that many relatives are constantly arguing over how to spend the inheritance before they’ve even received it. 

What Are the Best Ways To Spend Big in Your Golden Years? 

Kuhn elaborated on how clients who saved too much can end up spending their funds: “They may opt for charitable planning, gifting to family members, or estate planning, such as shifting assets into trusts for future generations and Roth conversions. These decisions do not necessarily involve spending, but instead, it is a restructuring of the assets. Alternatively, individuals may choose to keep the money as a source of peace of mind in retirement. The money does not have to be spent to provide value.”

Here are the three best ways to spend big in your golden years if you’ve saved too much for retirement.

1. Travel

One of the best ways to spend big in your golden years is to treat yourself to all the luxury travel you couldn’t afford in your younger years. You could finally go on that cruise or stay in those fancy hotels that didn’t seem like a wise move when you were putting your children through college. 

Unfortunately, many people may experience deteriorating health levels as they age. That trip that was an enticing idea in your 40s will feel exhausting once you’re in your 70s and your health isn’t cooperating. But if health is on your side, make a go for it.

2. Charity

You could use some of your funds to contribute to charitable causes that you believe in and will allow you to leave a legacy behind. While many retirees may wait until after they pass to leave the money, your funds could have a greater impact at this very moment. You could also see the results of your finances being put to a good cause while you’re still alive. The goal is to find charitable causes that you believe in and want to support. 

3. Gifts To Family/Early Inheritance

Your money could go a long way in helping out one of your relatives right now instead of waiting to leave everything in your will. You could spend big in retirement by helping your family get into real estate or treating them with lavish financial gifts.

This is also where things get tricky, as you’ll have to decide how to spread your money out. You’ll want to speak with a financial planner to ensure that you share your finances in the most tax-efficient manner. 

Closing Thoughts

While it’s common for an individual to not save enough for retirement, there are also cases where people have saved up too much. We heard from other readers who told stories about how their family was so focused on saving for the future that they barely enjoyed the present. 

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