martin-dm / Getty Images

martin-dm / Getty Images

Shifting your spending habits as you age is natural as your priorities and interests change. You’ll also likely be exiting the workforce and relying on your investments to cover your living expenses. It’s common to notice that changing your entire philosophy around personal finance can be challenging after years of saving and trying to plan for the future. This is why we’ll review the different ways you can approach your spending habits as you age.

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How should people approach spending money in their later years? Here’s what the financial advisors had to say.

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Create a Realistic Budget

“Throughout your life, spending in a budget-conscious manner is important,” commented Thomas Brock, CFA®, CPA and expert contributor for “It’s especially critical during your later years, as income streams tend to decline and healthcare costs typically rise.”

It’s critical to have a realistic budget so that you can plan your life accordingly as you age. You have to factor in that your income will change, and you’ll have additional health-related expenses that you may have avoided when you were younger. This may require you to discuss some uncomfortable expenses like hiring assistance or moving to a retirement community.

Brock elaborated on budgeting in your golden years:

“To make the most of your savings, prioritize your spending needs and be strategic about how you draw down your funds. This means optimizing the age in which you take your Social Security benefit, complying with the IRS’ required minimum distribution rules for traditional retirement vehicles and maintaining a diversified investment portfolio that enables you to comfortably raise money in different economic environments.

Learn: Retirement Planning: How Much the Average Person 65 and Older Spends Monthly

Strike the Right Balance

“When it comes to spending money in your later years, it’s all about striking the right balance between enjoying your hard-earned savings and ensuring you don’t outlive your funds,” said Taylor Kovar, CFP, CEO and founder of Kovar Wealth Management.

You worked hard for your money, so it’s time that you enjoy some of it. You just want to find that perfect balance so you don’t run out of money, which can be a struggle with the recent stubborn inflation figures.

“There’s no doubt you need to prioritize your spending on what matters most to you,” said Jeff Rose, CFP® and founder of “Maybe that’s travel, hobbies, or spending time with grandkids. Put your money where your joy is, but don’t bury your head in the sand to avoid overspending. It’s about finding that sweet spot where you can enjoy what you love without compromising your financial security.”

Financial advisors agree that you should set aside funds for the activities that will bring you joy in your golden years. The key is to find a plan that allows you to do this without running out of money.

Review Your Different Income Streams

“Start by creating a clear picture of your financial landscape, including all income sources like pensions, Social Security, and any investment income,” according to Kovar.

You’ll want to stay updated on your income streams to ensure you’re making enough to cover your expenses and verify that you’re keeping up with inflation.

When looking at how you spend money, you’ll have to directly compare it to how much you’re bringing in. This will require you to analyze your various income streams frequently.

Change Your Investing Strategy

“Consider adopting a more conservative approach to your investments to protect your capital, focusing on income-generating assets that offer stability,” Kovar said. “Regularly review your withdrawal rates to make sure they’re sustainable; many experts recommend the 4% rule as a guideline, but adjust based on your personal situation and market conditions.”

As your spending habits change, you may want to look into your investing style to ensure it matches your present risk tolerance. You may not want to take as many risks when you need your assets to pay you an income to cover your expenses in retirement.

Transition Toward Spending

“If you have a solid retirement plan in place, do not live out your golden years in an overly austere manner,” Brock said. “You have worked hard to build your nest egg. Now, is the time to responsibly transition from savings mode to spending mode. If you are having a tough time doing so, revisit your retirement plan with your financial advisor. He or she can help you understand your financial position and gain the confidence you need to live a fulfilling retirement.”

As you go through your golden years, you must consider how much you’ll be spending now that you’re not as aggressive about saving up for the future.

Kovar shared further insights on making this transition:

“It’s crucial to have a budget that accounts for your essential expenses, healthcare costs, and some wiggle room for leisure and travel, because you’ve earned it.”

Handle Your Estate Planning

“Don’t overlook the importance of estate planning,” Kovar said. “Ensure your will, healthcare directives, and power of attorney are up to date to protect your assets and your wishes.”

As uncomfortable as it can be to think about this topic, you must plan for your passing and what will happen with your assets. You want to protect your family when you’re no longer around.

Stay Flexible

“Life can throw curveballs, and your financial plan may need adjustments,” Kovar said. “Regular check-ins with a financial advisor can help you navigate these golden years with confidence and peace of mind.”

This is the final step because it’s critical to remember to adapt and pivot when needed. Numerous external economic factors that we simply can’t control exist, from soaring inflation to aggressive rate hikes from the Federal Reserve. Every financial plan relies on the overall economy in some sense, so you’ll want to be able to adapt if needed.

Closing Thoughts

There are various strategies for how to approach spending money in your later years. The goal is to work with a financial advisor to ensure that your finances are where you want them to be so that you can enjoy your golden years without stressing about how you’ll pay the bills.

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This article originally appeared on I’m a Financial Advisor: 7 Ways People Should Approach Spending Money in Their Later Years


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