Are You Being Too Frugal During Your Early Retirement Years?

retiring at any age, piggy bank

Have you ever found yourself tightly holding onto every extra dollar that finds its way into your bank account, even after reaching the comfortable early retirement stage? You’re not alone. Many pre-retirees and early retirees live much more frugal lifestyles than what is required in their early -retirements, even if their financial situation does not require that level of frugality. 

While disciplined saving and budgeting are commendable, there comes a time when spending some money can add more quality to your golden years.

As Buffalo Grove retirement planning specialists, we frequently observe a phenomenon among our clients that results in underspending during early retirement. This is a two-edged sword. After years of dedicated savings and investment discipline, it is difficult to part ways with your hard-earned capital. But, once a retirement planning professional has evaluated your financial situation, and builds a comprehensive retirement plan, it can become evident that you are far better off than you thought.. This revelation can pave the way for an enhanced lifestyle during your early retirement years. We call this a “license to spend.

So what is a “license to spend”? 

It’s a green light to start doing the things you’ve always dreamed of but have not pursued due to concerns about your financial security late in life. It might be the European vacation you’ve dreamt of, purchasing a second home, a long-desired home renovation, or even acquiring some smaller lifestyle purchases. 


Read our latest Quick Guide: “Guide to Retirement Planning in Buffalo Grove, IL. 


Think about it: you’ve worked tirelessly for years to accumulate and save for an enjoyable retirement. The license to spend starts after you create a conservative,  well-constructed retirement plan that confirms your ability to enjoy the fruits of your labors during decades of working for others.  

CFP for retirement planning

A critical part of crafting this plan is understanding your retirement cash flow. This key financial indicator gives you a clear vision of your income streams after expenses and taxes during retirement years – be it from investments, pensions, Social Security, or part-time work. Your spending decisions should align with this cash flow, ensuring you can enjoy your retirement without prematurely depleting your savings.

Certified Financial Planners™ in Buffalo Grove excel in devising retirement plans tailored to your unique financial situation and goals. This personalized approach ensures your plan aligns with your cash flow and spending patterns. And a well-crafted plan helps you determine the necessary spending from the discretionary spending for what might be considered luxury items you don’t need.  

At this point, it’s worth asking – do you have a retirement bucket list? Retirement is the perfect stage of life to start ticking off items from that list. You have the time, but do you have the means without sacrificing your future financial security? Whether you want to tour Europe, remodel your home, or even start a small business based on a hobby, when your financial advisor gives you a license to spend, you can start accomplishing these dreams without the risk of any future financial instability.

The last topic we’ll touch on is the importance of working with a financial advisor to help you develop a retirement plan. There are several important benefits that a financial advisor brings to the table:

  1. Expertise and knowledge: Financial advisors are professionals trained to understand the financial markets, investment options, tax laws, and retirement planning strategies. Their experience and knowledge can be particularly helpful when dealing with complex retirement planning alternatives. 
  2. Personalized plan: Because everyone’s financial situation is different, a qualified retirement planner should create a highly personalized plan based on your financial goals and risk tolerance. Your retirement plan should consider your income, expenses, life expectancy, major life events, estate planning, and charitable donation strategies. 
  3. Long-term strategy: Given increased life expectancy, your retirement plan should be focused on the long-term. Say you retire at 65 and live to be 97. Your plan should account for this to ensure you don’t outlive your retirement savings. 
  4. Risk management: Understanding and adjusting your risk tolerances is an important retirement plan component. A financial advisor can help diversify your investments to ensure a proper balance between risk and reward in relation to your future time horizon. 
  5. Estate planning: Your retirement plan should also factor in estate planning. You want to ensure that your wealth is passed on to your beneficiaries as tax-efficiently as possible. 
  6. Behavioral coaching: Many people make mistakes due to emotional investing, such as panic selling or buying at the top of markets. A financial advisor can provide objective advice and investment discipline and prevent you from making decisions that may not be in your best long-term interest.

Remember, while a financial advisor can be an asset, ensuring you work with a trustworthy, competent professional is crucial. It is one of the most important financial decisions you will ever make. Be sure to understand the advisor’s fee structure and any potential conflicts of interest before hiring.

Spending money before and during retirement should not be considered a financial misstep but part of a well-rounded retirement plan. Conservative spending has its place, but so does spending to enhance the quality of life, especially when fulfilling life’s long dreams. Remember, retirement is not just about surviving; it’s about enjoying your golden years. 

If you’ve spent your life working hard and saving diligently, you owe it to yourself to enjoy your golden years. Don’t let an overly cautious approach to finances steal away the joy of exploring new experiences and fulfilling long-held dreams.

If you are contemplating retirement planning or seeking ways to enhance your retirement lifestyle, we invite you to consult an SGL financial professional. Our team of retirement planners and financial advisors in Buffalo Grove is committed to helping you develop a comprehensive retirement plan. With an array of planning and investment strategies at your disposal, our capability to leverage sophisticated financial planning software and reports set us apart. 

Remember, there is always an opportunity for fresh starts. The SGL Financial team stands ready to provide support, answer queries, address concerns, or offer a fresh perspective regarding your retirement plan. With a clear understanding of your financial well-being and a comprehensive retirement plan, you’ll be free to pursue your retirement as you’ve always envisioned, complete with the occasional splurge. After all, you’ve earned it.

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