There are some purchases that retirees should avoid spending their money on during retirement. For example, using your savings to buy a timeshare may seem like a good decision at the moment, but it ultimately ties retirees into long-term contracts with low returns on investment.
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Do you know what retirees shouldn’t do with their money? What are the best things to spend your savings on to ensure a life of wealth in the next phase of life? GOBankingRates spoke with three financial experts to learn more about what they recommend retirees spend their savings on and how these investments pay off.
Pensions
As life expectancy increases, some retirees worry they won’t need their retirement savings. If this is a concern for you, or you want financial protection in case Social Security and/or pensions aren’t enough to cover your expenses in retirement, Thomas M. Buckingham, chief growth officer at Nassau Financial Group, recommends purchasing an annuity.
Purchasing an annuity is not as difficult as it sounds. According to Fidelity, products such as lifetime annuities are purchased by paying a lump sum to an insurance company. After that, retirees receive a regular income from their insurer for the rest of their lives.
This purchase, Buckingham said, provides retirees with peace of mind. As a retiree’s retirement extends, they will have a larger guaranteed income available to fund constant expenses.
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Travel and experiences
All three financial experts who spoke to GOBankingRates agreed that travel and experiences are money well spent in retirement. Retirees might opt to take a cruise, fly to an international destination or attend a once-in-a-lifetime event like the Olympics.
Chris Urban, CFP and founder of Discovery Wealth Planning, loves hearing about retirees’ experiences with their families. For retirees who want to spend their savings wisely, he recommends taking their children and/or grandchildren on vacation once a year. Not only does this relieve adult children of financial responsibility, it also allows families to create shared memories that will last a lifetime.
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Health and Wellness
Lauren Williams, CFP at ProsperPlan Wealth, remembers working with a couple in their 70s who had the energy of people in their 50s. Their secret, says Williams, was that they hired a personal trainer soon after they retired and worked out three to five days a week. This extra investment in fitness allowed the couple to maintain their strength, health and vitality.
Of course, not every retiree has enough money to hire a personal trainer, and that’s OK! They can maintain their physical health through regular doctor visits and participating in a variety of fitness activities. Urban recommends joining fitness groups and clubs or participating in recreational sports like golf or pickleball.
Family
As long as you have clear boundaries in place, many retirees will use their savings to help family members. For example, they may fund a home purchase or help with education. Williams said she has rarely seen the retirees she works with hesitate to spend money on their loved ones.
“When I see retirees beaming, they have often just spent the weekend with their grandchildren,” she said. “Perhaps they have treated themselves to a family vacation or bought something as simple as a new pair of Converse to send the grandchildren off to the new school year in a classic way.”
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Home Upgrades
Some retirees will move to a smaller home or sell, but many others will choose to stay in their homes. Those retirees who stay in their homes will naturally be home more often and start investing in home improvements.
While some of these upgrades are designed to add a special feel to the spaces, Williams says many others are geared toward the needs of retirees with aging needs. She cites the example of her mother, who aged in place as a retiree and whose last home purchase required spacious hallways to accommodate a wheelchair.
Community
A few years ago we wrote about the changing definition of retirement. Today’s retirees are less likely to answer the question “What do you do?” with “I’m retired” when they retire. Instead, they talk about activities they do, like gardening or taking cooking classes, as a focused answer that adds to their story and gives them meaning.
Williams said she likes to ask her clients if there are any nonprofits or communities they would like to support. Retirees with enough financial bandwidth can give back by making charitable donations. This allows them to experience joy And Savings on your tax bill.
Those with less money can still give back to their favorite community organizations. Retirees, Williams said, can contribute their time and assets to churches or local community centers, where they can give love and enable others to participate in activities that add meaning to their lives.
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This article originally appeared on GOBankingRates.com: I’m a financial expert: Here are the 6 best things retirees spend their savings on
