In your 60s and 70s, the goal should be to retire well, not to impress your friends and family.
Unfortunately, it’s easy to forget this simple principle. Many retirees quietly sabotage their financial future just to keep up appearances.
According to LendingTree, nearly 1 in 12 baby boomers (8%) aged 60 to 78 say they feel some social pressure to exceed their means and keep up with their peers’ finances(1).
This is a small group of people, but if you fall into this group, your personal finances may be at risk. That’s why “looking poor” is a key part of ensuring a comfortable and sustainable retirement.
Social pressure to live within one’s means and refuse to appear wealthy can lead to structural advantages that compound over time.
First, flaunting your wealth may put you at risk of attracting the wrong kind of attention. According to the Federal Trade Commission, adults over the age of 60 are more likely than other age groups to report losses of $100,000 or more due to financial fraud(2). In 2024, the organization lost a total of $81.5 billion to fraudsters.
If you brag about your investment portfolio, dividend income or luxury vacations on Facebook, you’re likely to attract the attention of increasingly sophisticated scammers.
Second, a moderate lifestyle can provide a margin of safety for your investment portfolio.
If you only spend 70% or 80% of your actual capacity, you have more room to adjust your spending when an economic crisis or wave of inflation hits your assets. Unlike many seniors, you don’t have to cut back on spending or adjust your lifestyle during a downturn if you’re living beyond your means.
Finally, “looking poor” can give you peace of mind.
According to the 2024 National Poll on Healthy Aging conducted by the University of Michigan, approximately one-third (33%) of adults over the age of 50 express concerns about money (3).
Worries about running out of money in retirement, or making uncomfortable sacrifices to make ends meet, keep many seniors awake at night. Living within your means can reduce this risk and help you sleep better at night.
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Living within or above your means is risky, especially in retirement.
If you’re unwilling to cut back on spending to avoid looking poor, you’re more likely to take on debt to make up the difference.
Before you know it, you’re in your 70s, carrying outside personal loans and car loan balances just to keep up appearances and impress the neighbors.
As highlighted by the American Association of Retired Persons (AARP), senior debt is a growing problem(4). The average debt burden of households headed by persons aged 65 to 74 increased fourfold between 1992 and 2022. Nearly 65% of people over 65 with debt believe it is a serious problem.
In fact, interest payments are a real risk when your income is fixed and inflexible.
If you think you’re overspending or borrowing too much, it might be a good idea to go through your budget and eliminate anything frivolous or unnecessary.
Consider downsizing to save on home maintenance costs.
Renting an apartment may not impress your friends, but it’s much healthier for your finances.
Likewise, you can follow strict rules of thumb and keep your travel and vacation expenses within a fixed percentage of your income. For example, try not to spend more than 20% of your income on car payments or more than 10% of your income on annual leave.
Work with a financial advisor to see what you can really afford to spend in retirement, and try spending just below that to create a lasting margin of safety.
Always living within your means will make your retirement more secure and enjoyable in the long run.
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Lending Tree (1); Federal Trade Commission (2); Institute for Healthcare Policy and Innovation (3); AARP (4)
This article provides information only and should not be considered advice. It is provided without any warranty of any kind.
