Yahoo Finance Financial Planning Experts: 4 Dangers of Extreme Frugality in Retirement
You work hard your whole life, and after saving up, it’s time to hit the beach (or the golf course) and relax for the rest of your days. Of course, with inflation and our financial futures in the air, it can be tempting to hold on to every penny, even as you ease into retirement. Being fiscally responsible is smart, but obsessive penny-pinching might not be the best move.
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If you’re living in a constant state of deprivation and financial anxiety, it defeats the entire purpose of retirement. Living like a miser can strain your relationships, kill your retirement goals, and create stress and worry that’s just not necessary. Here are four dangers of extreme frugality in retirement.
Potential Health Issues
Being too cheap in retirement can have a huge effect on your health. If you try to cut corners on things like quality food, a safe living environment and proper healthcare coverage, you’re being extremely shortsighted.
“Neglecting health can lead to higher medical expenses in the long run, potentially offsetting the savings gained from being overly frugal,” said Evan Patzer, retirement strategizing specialist at LifeWealth Solutions.
For example, trying to save money by skimping on healthy foods could mean your body pays the price. A poor diet might make chronic conditions like diabetes, high blood pressure and heart disease much worse. And that, in turn, could lead to expensive medical bills that will drain your retirement savings faster than you think.
Likewise, if you’re on Medicare, don’t forgo supplemental healthcare coverage. If you choose the bare-minimum plan just to save a few dollars per month, you’re setting yourself up for some big out-of-pocket costs for anything that’s not covered.
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Missing Out on Experiences
Taking frugality too far can defeat the entire purpose of all the saving you did throughout your working years. Yes, you want your retirement nest egg to last. But if you’re not willing to spend any of your savings, your golden years will just be a disappointing slog. Don’t take your frugality to such an extreme that you can’t enjoy the retirement you worked so hard for.
“While it’s important to be mindful of spending, being too frugal can result in a monotonous or isolated lifestyle, impacting mental and emotional well-being,” Patzer said. “Additionally, overly strict budgeting may lead to a sense of deprivation, diminishing the enjoyment of retirement.”
Retirement is the time to fully enjoy your life — dive into new hobbies and rediscover old ones. You worked hard, and now you get to play hard for the rest of your days.
“Finding a balance between being frugal and enjoying life is crucial in retirement,” Patzer said. “It’s important to prioritize spending on things that truly matter for health, happiness and fulfillment while cutting costs on less meaningful expenses. Regularly reviewing and adjusting financial plans can help ensure a comfortable and fulfilling retirement without the risks associated with excessive frugality.”
Depriving Yourself of Small Indulgences
Pinching every penny really just deprives you of any fulfillment. If you don’t allow yourself to spend money on the things you enjoy, it makes all those years of scrimping and saving pointless. It might be just a small indulgence, like better-quality food or a more reliable product, but it can often make you happier if you spend just a bit more.
“The problem is that many millionaires got that way by saving and investing,” said Jay Zigmont, CFP, founder and CEO of Childfree Wealth. “They have built skills over the years to save money. All too many of my millionaires suffer from what I call the ‘blueberry problem.’ They are buying the frozen blueberries because they are a dollar cheaper than the frozen ones. My response is always the same, ‘Buy the damn blueberries!’ It isn’t always literally blueberries, but often they are holding back on spending that might be also holding them back from enjoying life.”
Of course, it’s important to be financially responsible. But don’t deny yourself the enjoyment that retirement offers. If you’re constantly underspending, it means that you’re not making the most of your golden years. Don’t let the impulse to save a few dollars prevent you from truly living and enjoying the things that matter.
You Might Retire Later Than You Should
Sometimes people can’t bring themselves to leave their job and start spending their retirement savings. They’ve been so focused on building retirement wealth that they’ve developed an intense scarcity mindset. No matter how much they’ve amassed, it never feels like enough. This can be difficult to shake, even when they are objectively ready to retire.
“People will work longer than they need to, because they fear they will not have enough money,” said Anthony DeLuca, CFP, an expert contributor at Annuity.org. “When in reality, they have plenty.”
By needlessly deferring their retirement, they end up losing precious time, energy and health reserves. They should be spending their time on new pursuits, travel and family time while they work for far longer than they need to.
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