Stop Buying These Popular Items When You Reach Retirement

Your lifestyle in retirement is often centered on a few key aspects of financial management. While there's no need to pare down your life to a bare bones existence, you'll find that over the top spending is equally important to avoid. Living large on your retirement income can ultimately lead to a major squeeze later in life that isn't easy (or always even possible) to rectify without painful sacrifices, or a return to work.

Fortunately, most retirees won't have to face these kinds of hard choices, so long as they make a few simple, yet impactful decisions throughout their retirement years. This might start with a hard look at the when, exactly, to retire given your unique circumstances. While delaying your retirement by a year or two might not be the ideal solution, it could give you a massive financial boost. Spending is a big area of focus as well. Cutting out a few key items from your budget can make a world of difference when it comes to balancing finances in this phase of life. Moreover, there are many items that retirees frequently purchase that simply don't need to buy. Seeking alternatives, or flat-out skipping, four particularly popular items can supercharge your retirement budget, and help you maintain good cash flow long into the future: life insurance, home renovations, new vehicles, and collectibles. 

Life insurance policies are frequently high on the priority list for adults in the prime working years of their life. Purchasing a life insurance policy can give workers a critical backstop to help support their families in the event that an unthinkable tragedy occurs. A sudden lack of incoming financial resources can compound an already traumatic situation, so by purchasing life insurance you can provide your family with the necessary support to help pay for things like mortgage bills, educational costs for children, and even basic necessities like putting food on the table.

However, in retirement the need for this kind of support asset diminishes significantly. There are certainly some instances in which life insurance can provide value to a retired person, however these tend to come in the form of whole life policies that people maintain as they enter their golden years. Purchasing a new life insurance policy in your older years will cost you far more than a policy does earlier in life. Plus, there are usually a number of alternatives that can provide better financial stability to a spouse or loved one who relies on your contributions. Investing in an annuity, or setting money aside in a high interest savings account, may be a better use of your finances. With that being said, burial insurance is sometimes organized as a life insurance product, and this can be a valuable addition to your financial picture if you have specific and perhaps expensive wishes surrounding your send off.

Many retirees will look at their home during this stage of life and consider ways to alter their real estate picture. Downsizing is a common strategy, allowing someone who might no longer need a larger home to extract critical capital from their property while moving closer to amenities, family, or even simply into a space that better fits their ongoing lifestyle requirements. While downsizing tends to provide an opportunity to purchase a new home at a lower cost, this might not always be the objective when moving during retirement.

One approach that retirees should avoid with their home involves significant renovation projects. While renovations can alter the fabric of your home — making it more accessible if you've lost some of your mobility later in life — or as a means to make the property more comfortable, it can be costly. Some people will also engage in renovations in an effort to boost their home's resale value before listing it on the market. Unless you absolutely need to make alterations to your home, engaging in major renovation works typically proves to be wasteful spending for retirees given just how many home improvement projects ultimately lose money. Extravagant upgrades can not only be costly, but can also significantly cut into your available retirement funding resources. Whether you have the cash on hand, or utilize a financing solution like a home equity loan, these kinds of large purchases don't often bring back as much (in resale value or lifestyle support) as they demand.

Buying used is a common piece of wisdom for any type of car buyer. Whether you're a young professional, a first time buyer who has just passed the driving test, or a retiree buying a vehicle for the tenth time, used will generally garner the best possible deal. Buying a new model year vehicle is simply a great way to overpay for something that you could get for a discount without any major sacrifices. Buying used vehicles also opens up a huge marketplace of options, while allowing you to enjoy significant price cuts. The typical car depreciates, and fast — losing up to 20% of its value in the first year, with further reductions around 15% for each of the subsequent three or four years that follow. With major stylistic changes taking place sparingly across many vehicle ranges, buyers frequently have access to cars that look and perform very much like the newest model on the road while paying significantly less.

With that being said, retirees need to be particularly mindful about the cost-versus-value trade found within the automotive market. In talking about investments, Warren Buffett famously holds that: Price is what you pay; value is what you get. This same approach can help guide your car buying experience, too. As long as you're buying a good car, you'll get the same basic value. Therefore, there's no need to splash out on a large price tag just for the sake of it.

Whether you're a baseball card collector or someone who can't get enough of the record scene, the desire to collect something within your hobby's orbit is a strong one. Hobbyist collectors might not be thrilled about the idea of minimizing their purchases in this regard. After all, a lifetime of collecting is likely the reason a collector may have amassed a significant catalog in the first place. However, when you retire a number of changes take place. You may be looking at moving into a smaller home, and your finances will certainly shrink by at least a small margin. For plenty of retirees, there just isn't enough space or financial mobility available to support the continued expansion in their collection of items. 

However, this can provide another opportunity that collectors might relish. Many collections can be worth a pretty penny, and selling off some of your collectibles might open up new financing avenues, and space, to purchase other (more valuable or even smaller) additions to your catalog. Alternatively, you might consider passing the baton to your children. If you've long collected jewelry or sports memorabilia, for instance, giving these belongings to loved ones can allow them to cherish the things you've held dear — plus it might even launch their own interest in collecting these same beloved treasures. Limiting your purchasing of collectibles doesn't have to be a sad sunset to a prior phase of life, but rather an opportunity to start a new tradition.