Retirees often surprise themselves with how they actually use their savings once the paychecks stop and the freedom of retirement begins. According to the Employee Benefit Research Institute, 36% of retirees say their overall spending is higher than expected, with housing, travel, and health care topping the list of unexpected costs.
As Bert Whitehead, president of Cambridge Connection, puts it, “It is a jolt when they discover how much it adds up to.” Financial advisors also note that many retirees shift their focus from strict saving to spending on experiences, family, and personal passions. Exploring these real-life choices can help future retirees plan smarter and enjoy their golden years with fewer financial surprises. Here are 15 things retirees do with their savings.
Supplement Daily Living Expenses
Many retirees depend on their savings to supplement daily living expenses, ensuring they can maintain a comfortable lifestyle after leaving the workforce. The Employee Benefit Research Institute reports that 60% of retirees use their savings to cover everyday costs such as groceries, utilities, and transportation. This financial support becomes especially important as fixed incomes from pensions or Social Security may not always keep pace with inflation.
Retirees often find that careful budgeting and strategic withdrawals allow them to stretch their savings further. Financial advisors frequently recommend creating a detailed spending plan to avoid depleting funds too quickly. Setting aside a portion of savings for recurring expenses can provide peace of mind and stability. By using their savings in this way, retirees can enjoy their golden years without sacrificing their standard of living.
Pay Off Debts
Many retirees use their savings to pay off lingering debts, aiming for financial freedom in retirement. According to the National Institute on Retirement Security, 40% of retirees prioritize paying down debts such as mortgages, credit cards, and personal loans. Carrying debt into retirement can increase monthly expenses and add unnecessary stress. Financial advisors often suggest tackling high-interest debt first to maximize savings efficiency.
Eliminating these obligations can free up cash flow for other important needs and reduce anxiety about the future. Retirees who successfully pay off their debts often report greater satisfaction and confidence in their financial situation. This proactive approach helps ensure that savings last longer and support a more secure retirement.
Cover Healthcare and Long-Term Care Costs
Healthcare and long-term care costs represent a significant concern for retirees, often consuming a large portion of their savings. According to the American Council of Life Insurers, nearly 70 percent of people who turn 65 today will need some type of long-term care services and support in their later years. Rising healthcare costs and increased life expectancy make this a key area for financial planning.
Many retirees allocate funds for insurance premiums, prescription medications, and potential stays in assisted living or nursing facilities. Financial advisors recommend building a dedicated healthcare fund to address these unpredictable expenses. Planning can help retirees avoid financial hardship and ensure access to quality care. By preparing for these costs, retirees protect their overall financial well-being and reduce the burden on family members.
Travel and Leisure
Retirees often look forward to using their savings for travel and leisure, embracing opportunities to explore new places and enjoy hobbies. AARP’s recent survey found that 45% of retirees set aside funds specifically for vacations and recreational activities. These experiences can enrich life, offering both relaxation and adventure after years of hard work.
Many financial advisors suggest creating a travel budget to ensure these activities don’t compromise long-term security. Retirees frequently prioritize visiting family, seeing bucket-list destinations, or pursuing lifelong passions. Engaging in leisure activities also supports mental and physical health, contributing to a more fulfilling retirement. Allocating savings for these purposes enables retirees to maximize their newfound freedom.
Help Adult Children or Grandchildren
Supporting adult children or grandchildren is a meaningful way retirees use their savings, often motivated by a desire to help loved ones succeed. Fidelity’s research reveals that 25% of retirees provide financial assistance to family members, covering expenses such as education, housing, or emergencies. This generosity can strengthen family bonds and provide a sense of purpose.
Financial advisors caution retirees to strike a balance between their own needs and the desire to help others, recommending clear boundaries and open communication. Some retirees establish education funds or make direct gifts to support major milestones. Providing this support can be deeply rewarding, but it’s essential to ensure it doesn’t jeopardize personal financial security. Careful planning helps retirees give confidently and sustainably.
Downsize or Relocate
Downsizing or relocating is a popular strategy among retirees seeking to optimize their savings and lifestyle. Boomers bought homes mainly to be closer to family and friends and to downsize, according to a 2022 National Association of Realtors report. Selling a larger home can unlock equity, reduce maintenance costs, and lower property taxes. Many retirees choose to relocate to areas with better healthcare access, a more favorable climate, or closer proximity to family.
Financial advisors often recommend evaluating both the financial and emotional aspects of such a move. Downsizing can also simplify daily life, making it easier to age in place. This approach allows retirees to stretch their savings further and enjoy a more manageable living situation.
Invest Conservatively for Growth or Income
Retirees frequently shift their investment strategies to prioritize stability and income over aggressive growth. Morningstar data shows that 70% of retirees favor conservative investments, such as bonds, dividend-paying stocks, and annuities, to protect their nest egg.
These choices help minimize exposure to market volatility while generating steady income. Financial advisors emphasize the importance of diversification and regular portfolio reviews to maintain a balanced approach. Retirees often work with professionals to align their investments with changing needs and risk tolerance.
Conservative investing supports long-term financial security and provides confidence during economic uncertainty. This approach helps retirees preserve capital and maintain their desired lifestyle.
Delay Social Security or Pension Drawdowns
Delaying Social Security or pension drawdowns can significantly increase future monthly benefits for retirees. Data from the Social Security Administration indicate that 20% of retirees choose to delay claiming benefits, allowing their payments to grow. Each year of delay can boost Social Security income by up to 8%, according to experts.
Financial advisors help retirees determine the optimal timing based on their health, life expectancy, and other income sources. This strategy requires careful budgeting to cover expenses during the waiting period. Retirees who delay benefits often enjoy greater financial flexibility later in life. Making this decision thoughtfully can enhance long-term financial security and peace of mind.
Home Improvements and Maintenance
Maintaining and improving the home remains a priority for many retirees, who use their savings to ensure comfort and safety. The Joint Center for Housing Studies reports that 50% of retirees invest in home repairs, upgrades, or modifications. Projects might include updating kitchens, installing accessibility features, or enhancing energy efficiency.
Keeping the home in good condition preserves property value and supports aging in place. Financial advisors recommend budgeting for both routine maintenance and unexpected repairs. Retirees often find that a well-maintained home contributes significantly to their peace of mind and overall quality of life. Investing in these improvements can also make the home more enjoyable and functional for years to come.
Charitable Donations and Legacy
Charitable giving and legacy planning are essential goals for many retirees who wish to make a positive impact. According to Giving USA, 30% of retirees include charitable donations in their financial plans. Donating to favorite causes or establishing a legacy fund allows retirees to support their values and community.
Financial advisors often help retirees structure gifts to maximize tax benefits and achieve a long-term impact. Some retirees create donor-advised funds or leave bequests in their wills. These acts of generosity can provide deep personal satisfaction and a sense of purpose. Planning ensures that charitable intentions are fulfilled and that the retiree’s legacy endures.
Handle Unexpected Emergencies
Unexpected emergencies can disrupt even the best-laid retirement plans, making emergency savings a vital resource. Bankrate’s survey shows that 55% of retirees maintain a dedicated emergency fund to cover sudden expenses. Emergencies might include medical bills, home repairs, or family crises. Having a financial cushion helps retirees manage these situations without derailing their overall plan.
Financial advisors recommend keeping three to six months’ worth of living expenses readily accessible. Quick access to funds can reduce stress and prevent the need to liquidate long-term investments at a loss. Being prepared for the unexpected supports long-term financial stability and peace of mind.
Start Small Businesses or Passion Projects
Retirement offers the freedom to pursue small businesses or passion projects, turning hobbies or expertise into new ventures. The Kauffman Foundation notes that 15% of retirees start businesses, often seeking purpose and supplemental income. These projects can range from consulting to crafting or online sales. Financial advisors encourage retirees to develop a business plan and budget for startup costs.
Engaging in entrepreneurial activities keeps retirees mentally active and socially connected. Many find that pursuing a passion project brings fulfillment and a renewed sense of identity. Utilizing savings to launch these endeavors can yield both personal and financial benefits.
Pursue Education or Personal Development
Lifelong learning remains a priority for many retirees who invest in education or personal development to stay engaged. The National Center for Education Statistics has observed a 10% increase in retirees enrolling in classes, workshops, or certification programs. Expanding knowledge and skills can boost cognitive health and open new opportunities.
Retirees often choose subjects that interest them or relate to previous careers. Financial advisors recommend setting aside funds for tuition, materials, and travel expenses. Personal development activities also foster social connections and a sense of accomplishment. Investing in learning ensures retirement is both stimulating and rewarding.
Gifting to Loved Ones
Gifting to loved ones is a heartfelt way for retirees to use their savings, share their success and support family members. Merrill Lynch’s study reveals that 20% of retirees allocate funds for gifts to children, grandchildren, or friends. These gifts might celebrate milestones, assist with major purchases, or provide a financial safety net.
Financial advisors recommend considering the tax implications and ensuring gifts do not compromise personal security. Many retirees find joy and satisfaction in helping loved ones achieve their goals. Thoughtful gifting can strengthen family relationships and create lasting memories. Planning for regular or special gifts makes this generosity sustainable.
Enjoying Life’s Little Luxuries
Enjoying life’s little luxuries is a crucial part of retirement for many, enabling retirees to savor the rewards of years of hard work. Transamerica’s research shows that 40% of retirees spend on small pleasures such as dining out, entertainment, or hobbies. These indulgences can bring happiness and enhance daily life. Financial advisors often encourage retirees to budget for discretionary spending to avoid guilt or overspending.
Treating oneself occasionally supports emotional well-being and makes retirement more enjoyable. Retirees often find that these moments of joy contribute to overall satisfaction. Using savings for life’s little luxuries ensures retirement feels truly rewarding.
