Discretionary Spending in Retirement: Plan your Golden Years

Your retirement years are approaching, or you may already be enjoying them. Now is the time to figure out how to handle your extra spending in retirement.

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When planning your retirement strategy and income, always include your planned discretionary spending.

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Some people dream of traveling or settling down in a new city, while others picture cozy reading corners at home.

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No matter what your perfect retirement looks like, you need to budget for those expenses.

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Your retirement goals will help you decide how much to save and how to create a spending plan, which will also influence your discretionary spending.

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This guide will teach you the basics of managing discretionary spending in retirement.

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What is Discretionary Spending?

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Discretionary spending is any money you spend beyond your basic needs.

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These expenses, which are not essential, can range from small costs like a cable TV subscription to bigger ones like a vacation home or leaving money to your family or a charity.

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Even though these expenses aren’t necessary for daily living, they can improve your golden years.

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When reviewing your income plan, you may need to adjust your discretionary spending based on your fixed expenses, since this area usually has more room for flexibility.

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Common examples of discretionary spending in retirement include:

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• Donations and gifts.
• Hobbies.
• Travel.
• Financial support for your children or grandchildren, such as for travel, education, gifts, or leaving a legacy.
• Entertainment.

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Your spending habits may change over time, so keeping track of these expenses is important to reach your retirement goals.

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Non-Discretionary Spending

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Some expenses are necessary for daily living and cannot be avoided. 

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Non-discretionary expenses include living costs, debt, taxes, insurance, and healthcare. 

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Since these expenses are mostly predictable, planning for them is a good starting point to determine your budget for discretionary spending.

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How Can Discretionary Affect a Retirement Strategy?

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Discretionary spending in retirement is often overlooked or underestimated in retirement planning, especially if you’re not working with an advisor like Bloom Financial.

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The truth is that if you don’t consider discretionary spending, you might end up with too little money for retirement.

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Your retirement years should be about more than just covering basic needs; they should also be enjoyable. To do this, you need to plan for discretionary spending.

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The amount of discretionary spending you have will depend on the kind of retirement you want, so it’s important to have a clear vision of your future.

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For some people, discretionary spending might stay about the same. 

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However, for those who plan to travel or give to charity in retirement, their discretionary spending may increase.

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If you don’t factor in your discretionary spending based on your plans, you could run out of money sooner than you expect, and your retirement income will go below the average. 

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Create a Retirement Budget That Includes Discretionary Income

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Your discretionary spending may change a lot after you retire.

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You might finally have time to enjoy hobbies you've always wanted to try, or take that big trip you've always dreamed about.

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To create a budget that includes discretionary spending in retirement, start by figuring out what plans do you have. 

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• Where do you want to travel and when?
• What money will you need for your hobbies?
• What plans do you have for your family?

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Once you have this information, you can begin estimating the costs for these plans.

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While it’s important to make good estimates, you don’t need to plan every detail of your discretionary spending perfectly.

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Are You Looking for Assistance with Your Retirement Planning?

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Discretionary spending can have a big impact on your retirement savings. 

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It’s important to know what kind of retirement you want to develop a solid plan.

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If you're already retired and don’t have a spending plan, don’t worry—it’s not too late to start.

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Schedule a meeting with Bloom Financial here to help ensure you can enjoy your retirement years in peace.

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