Retirement involves a mental shift in your relationship with money. Before retirement you were in savings mode, making sure to continually put away money for the future. At retirement you get to change your mindset. I have seen people who are retired, who have done a great job of putting away money but are too afraid to spend the money they earned and invested.
Anyone who knows me knows that my answer to this (like most things!) is to start with a budget. Gather the information of your retirement income such as social security, pensions, RMD (required minimum distributions) from IRA and 401K accounts, estimated interest and dividend income.
I've created a special worksheet for retirement budget planning. The expense page is much the same, but the income page is slightly different. Retirement income is more likely to be received monthly or annually as compared to working income received weekly or bi-weekly. You may be surprised to find that you have more annual income from retirement than you had expected. There are many reasons for this such as you are no longer paying money toward your retirement, or the required distributions from various retirement income sources are higher than you had expected. The expense totals may be lower as well. This could be due to your children are now on their own, you socialize differently, or general lifestyle changes since there are none of the job expense requirements (gas, lunches, wardrobe, etc.). It doesn't matter what the reason is, the important thing is to look at what your new reality is and consider how this changes your options.
If you do find that you are now in a time of some financial excess, enjoy it. You've worked hard to put away money to be able to retire. Now is the time, if you can afford it, to enjoy that money. If your annual distributions and earnings are in excess of your annual expected expenses, it's ok to say more yes to yourself. It may be hard to change from save mode to spend mode, but this was the goal of your working life.
You still need to make intentional decisions about your money habits. Make sure you have savings available for emergencies and try not to spend more in a year than you earn in that year from your various income sources (social security, retirement distributions, interest, dividends, etc.). But if you were able to save enough to be in the position to have more in income than expenses in your retirement years, spoil yourself. You earned it.
Retirement Budget Worksheet
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Thoughtful and useful information - thank you!