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Financial Health
December 18, 2019

Retirees: Don’t forget to budget this holiday season

Tips for holiday spending to help retirees spread holiday cheer for many more years.

If you’re nearing or in retirement, don’t be too quick to say “Bah! Humbug!” to the idea of budgeting for the holidays, especially if you’d like to host holiday gatherings well into the future.

“Retirees need to be thinking about budgeting for the long term, and truly considering the value of what they are giving,” said Craig Copeland, a senior research associate at the Employee Benefit Research Institute*, a nonpartisan, tax-exempt organization that has focused on supporting the security and well-being of U.S. workers, retirees, and their families since 1978.

Americans just reaching retirement or those newly retired are more likely to have debt — and higher levels of debt — than those who retired in the 1990s, according to EBRI. Many people are placing themselves at risk of running short of money in retirement. EBRI has found that among families with households headed by an individual age 75 or older, the percentage having debt has increased by nearly 60% since 2007. And families with heads aged 55 to 64 have been more likely to have debt payments exceeding 40% of their income than any other age group.

“Financial liabilities are a vital, but often ignored, component of retirement income security,” Copeland said.

Copeland also noted that most Americans who reach the age of 65 are likely to live at least 20 more years, a good reason to rein in spending for the long run. In Wells Fargo's 2018 Retirement study, nearly four in 10 workers said living past 85 would be a financial hardship. The 2019 Wells Fargo retirement study found that 71% of current workers say they are “afraid” that Social Security won’t be available to them when they retire.

“Many say the problem is that the grandkids won’t understand if you start to spend less on gifts or festivities,” Copeland said. “But there are thoughtful ways to reimagine the holidays to suit an adjusted or limited retirement income, which could make a difference for everyone’s future.”

Some tips for holiday spending in retirement:

Be realistic in evaluating what you can afford 

Copeland said retirees should refrain from splurging at Christmas and be very frank with themselves about realistic levels of spending. An online savings calculator can help get long-term budget planning underway.

“If you put yourself in a bad financial situation, you aren’t going to help your kids or your grandkids,” Copeland said. 

Reconsider “value”

“A lot of times, even a gift that costs nothing at all can be valued. So you may consider doing things that are special at different times of the year,” Copeland said. “Share a recipe or a skill. Offer to make the birthday cake. That makes it easier to be part of your families’ lives, too, instead of just sending a check.”

When giving gifts, consider those that have monetary value, like gift cards, so your money isn’t wasted on something that will never get used.

Don’t fall into a credit card debt trap

Minding the use of credit cards will be important for ongoing comfort and joy. Credit card debt can afflict families of any age, giving them high payments relative to their income, but credit card spending has been a notable issue for the baby boomer generation.

“Starting with the boomer generation, credit became easily available, and everybody had it,” Copeland said. “Now, after pretty much accepting the use of credit cards all their lives, people in their 70s are maintaining those balances.”

In 2018, according to EBRI’s research, about 47% of families with heads of household ages 65 to 74 had credit card debt, up from around 32% in the 1990s. Retirees should try hard not to add to that debt if they don’t want to spend their limited retirement income on credit card payments.

Join the “Christmas Club” club

It may be a dated term, but the idea of putting money into a savings account to accumulate for the holidays can become a new tradition.

“Some people may want to bequest money and save up for inheritances or trust funds. Others want to see their families enjoy the money while they’re around, so they give generously around the holidays,” Copeland said. “Having a savings account for your goals can help you do those things.”

Keep business contacts and consider the gig economy

After retirement, Copeland said, about 75% of retirees say they will rejoin the workforce, but only about 30% actually do. Yet this doesn’t account for the many who do short stints, or contract work, sometimes seasonally.

For them, it can be helpful to stay in touch with business contacts who can share opportunities aligned with their professions.

The notion of the gig economy is not reserved for the young. Taking side jobs, like driving for Uber, gift wrapping, or helping with catering at holiday parties, can be a great way to earn extra holiday cash.

“It is something you can keep doing year after year,” Copeland said. “A lot of companies like employees that they can count on around the holidays, and that makes it a benefit for you and for them.”


*As an EBRI member, Wells Fargo is among about 100 companies that support the organization’s independent, fact-based research mission.

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