Holiday Planning in Retirement: How to Budget for Gifts, Travel and Winter Surprises
Fall is here and the holidays are almost 2 months away. There is something special about the holidays in retirement. You may have more time to travel. You may be able to host the family meal instead of rushing home from work. You may want to spoil the grandchildren a little—or simply enjoy traditions that have meant something to your family for years.
But retirement can change the way you think about holiday spending. When you’re working, an unexpected expense may be absorbed by the next paycheck. In retirement, there may not be another paycheck coming. That makes holiday planning in retirement about more than making a shopping list. It becomes part of your overall retirement income plan.
Your Holiday Budget Should Include More Than Gifts
When I talk with people about retirement income, I encourage them to think about the expenses they know are coming—and the expenses they may not have considered.
Holiday spending can include:
- Airfare, hotels and rental cars
- Gas and other travel expenses
- Gifts for children, grandchildren and friends
- Charitable giving
- Groceries and special meals
- Restaurants and holiday gatherings
- Decorations and entertainment
- Winter clothing or equipment
- Home repairs
- Vehicle maintenance
- Unexpected travel changes
The holidays have a way of making several of these expenses arrive at once.
That doesn’t mean you shouldn’t enjoy them.
Quite the opposite.
The goal of planning is to help you enjoy the season without wondering in January how you’re going to recover financially.
What Happens When Winter Brings an Unexpected Expense?
Winter can add another layer to the holiday budget.
A dead battery.
A cracked windshield.
New tires.
A heating-system repair.
An unexpected vehicle repair after a winter-weather incident.
These expenses aren’t necessarily part of your holiday budget, but they can happen at exactly the same time you’re already spending more.
So I like to ask a simple question: If something unexpected happened this winter, where would the money come from? Would it come from dependable retirement income? Would you have a cash reserve? Or would you have to sell investments or make an additional withdrawal from retirement savings?
That last option isn’t necessarily wrong in every situation. But relying on retirement savings for every unexpected expense can put additional pressure on a retirement income strategy.
Don’t Confuse Savings With Retirement Income
One of the most important transitions into retirement is learning to think differently about your money. During your working years, you receive income and save for the future. In retirement, your savings may become one of the sources used to create your income.
That’s a big difference.
Your retirement plan should answer: “Where will our monthly income come from?”
Social Security may be one source. A pension may be another. Investments and retirement accounts may play a role. But you want to understand how those pieces work together before you begin spending. The Social Security Administration notes that retirement benefits can begin as early as age 62, although claiming before full retirement age results in a lower benefit. Delaying benefits can increase the monthly benefit through age 70. That makes Social Security timing one potential component of a larger retirement income strategy.
Consider a “Holiday Bucket”
One practical exercise is to estimate your seasonal spending before the holidays arrive. Think about what you typically spend from October through January—not just December.
Then ask: Is that spending already accounted for in our retirement income plan?
SF Financial Services has previously discussed the bucket strategy as one way to organize retirement savings according to when the money will be needed. A short-term bucket can be designed around near-term expenses while other assets are positioned for longer-term needs. The concept can be useful when thinking about holiday spending, too.
Instead of looking at your entire retirement portfolio as one large account, think about which dollars are intended for immediate needs and which are intended for the years ahead.
Retirement Should Include Room for Joy
I never want people to think retirement planning means eliminating the things they enjoy.
It doesn’t. If anything, thoughtful planning should make it easier to say yes to the things that matter.
- A family trip.
- A holiday dinner.
- A thoughtful gift.
- A weekend with the grandchildren.
Those moments are part of the retirement you’re planning for. The key is making sure today’s generosity doesn’t create tomorrow’s financial stress. That’s one reason my approach to retirement planning is centered on Financial Endurance. SF Financial Services describes the Financial Endurance Plan as part of its personalized approach to helping families prepare for retirement, with Barbara’s “Safety First” philosophy at the center of her work.
Three Questions to Ask Before the Holidays
- What holiday expenses do we expect?
Write them down. Travel, gifts, meals and traditions all count. - What unexpected winter expense could disrupt our plan?
Think about your home, car and health—not just the presents under the tree. - What source of income will pay for these expenses?
If the answer is, “We’ll just take it from savings,” take a closer look. Your savings have an important job to do throughout retirement.
As I often discuss through Retire Financially Fit, the goal isn’t simply to accumulate money. It’s to have a thoughtful strategy for using your resources throughout retirement. SF Financial Services describes the program as a place where I share strategies designed to help people keep their retirement assets on track.
This holiday season, plan for the presents—but don’t forget to plan for the future you’re giving them from. A well-designed retirement income plan should leave room for both financial responsibility and the joy of being generous.
This article is for educational purposes only and does not constitute individualized investment, tax, Social Security or legal advice.
“Investment advisory services offered through Brookstone Wealth Advisors, LLC (BWA), a registered investment advisor and an affiliate of Brookstone Capital Management, LLC. BWA and SF Financial Services are independent of each other. Insurance products and services are not offered through BWA but are offered and sold through individually licensed and appointed agents.”