There are certain purchases retirees know better than to spend their money on during retirement. Using their savings to buy a timeshare, for example, might seem like a good decision at the time but ultimately lock retirees into long-term agreements with little return on investment.
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Knowing what retirees shouldn’t do with their money, what are some of the best things a retiree’s savings can be spent on to ensure a rich life in the next chapter? GOBankingRates spoke to three financial professionals to learn more about what they recommend retirees put their savings towards and how these investments pay off.
Annuities
As the human lifespan gets longer, some retirees may have concerns that they will outlive their retirement savings. If this sounds like an issue you might face, or you would like some financial backup if Social Security and/or pensions won’t be enough to cover your retirement expenses, Thomas M. Buckingham, chief growth officer at Nassau Financial Group, recommends purchasing an annuity.
The process for buying an annuity is not as daunting as it sounds. According to Fidelity, products such as lifetime income annuities are obtained by paying a lump sum to an insurance company. Afterward, retirees receive a regular stream of income from their insurer for the rest of their lives.
Making this purchase, Buckingham said, provides retirees with peace of mind. If a retiree’s retirement journey is extended, there will be more guaranteed income available to help fund consistent spending.
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Travel and Experiences
All three financial professionals that spoke with GOBankingRates were in agreement that travel and experiences is money well spent during retirement. Retirees might decide to go on a cruise, fly to an international destination or attend a once-in-a-lifetime event, like the Olympics.
Hearing about the experiences retirees have with their families is something that Chris Urban, CFP and founder at Discovery Wealth Planning, always enjoys. He recommends retirees that want to spend their savings with purpose consider taking their children and/or grandchildren on an annual vacation. This not only helps take some financial responsibility off the plates for grown children but allows families to create memories that will last a lifetime together.
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Health and Wellness
Lauren Williams, CFP at ProsperPlan Wealth, remembers working with a couple in their 70s that had the kind of energy reminiscent of people in their 50s. Their secret, Williams said, was that they hired a personal trainer shortly after they had retired and worked out three to five days a week. Making this extra investment in fitness allowed the couple to maintain their strength, health and vitality.
Of course, not every retiree may have enough money to hire a personal trainer and that’s OK! They can still maintain their physical health with regular checkups at the doctor and engage in a wide variety of fitness activities. Urban recommends joining fitness groups and clubs, or participating in social sports like golf or pickleball.
Family
As long as you have set good boundaries, many retirees will put their savings toward family members. They may contribute to financing a home purchase or help pay for education. Williams said she has rarely seen the retired clients she works with hesitate to spend money on their loved ones.
“When I see a set of retirees glowing, they’ve often just spent the weekend with grandchildren,” she said. “Perhaps they splurged on a family vacation or buying something as simple as a new pair of Converse to send the grandkid off the new school year in classic style.”
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Home Upgrades
Some retirees will downsize or sell their homes, but many more will decide to age in place. For those retirees that stay put, they’ll naturally be at home more often and will start investing in home upgrades.
While some of these upgrades will be done to make spaces feel special, Williams said many others accommodate retirees with aging needs. She uses the example of her mother, who aged in place as a retiree and for whom her final 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” once they retire. Instead, they will share activities they are engaging in, like gardening or taking cooking classes, as a purpose-driven response that contributes to their narrative and gives them meaning.
Williams said she likes to ask clients if there are any nonprofit organizations or communities they like to support. Retirees with enough financial bandwidth may give back via charitable giving. This allows them to experience joy and savings on their tax bills.
Those that have a little less money can still give back to their favorite community organizations. Retirees, Williams said, may contribute their time and resources at spaces like churches or local clubhouses. There they can give the gift of love and enable others to engage in activities that add significance 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
