No matter how ready you feel for retirement, adjusting to life after work takes time—especially when it comes to money.
There are some common spending mistakes newly retired homeowners make that can lead to financial trouble down the line.
With a bit of foresight and planning, though, experts agree that these mistakes can be mitigated or avoided altogether, paving the way for a stress-free retirement as a homeowner.
Financial advisors and real estate experts agree that there are five spending mistakes newly retired homeowners tend to make in their first five years out of the workforce:
A lot of early retirees run into trouble because they underestimate the true cost of maintaining a home.
“Just because the mortgage is paid off doesn’t mean the expenses stop,” says real estate agent and investor Ron Myers of Ron Buys Florida Homes. “There are still repairs and regular maintenance. Things like roof leaks, plumbing issues, or A/C problems can pop up without warning. And when you’re living on a fixed income, those costs can hit a lot harder than expected.”
In fact, attorney and CPA Chad D. Cummings warns that “home maintenance costs will blindside you and bleed your budget dry.”
Making sure you have a cushion in your budget for these expenses is essential.
“Set aside two to three percent of your home’s value annually for these inevitabilities,” advises Cummings.
Spending on home renovations without factoring long-term financial sustainability is another common financial pitfall.
“Sometimes I see folks jump into big upgrades or take on extra expenses like buying a second home or doing a full remodel right after retirement,” says Myers. “The idea is to enjoy life, but if those decisions aren’t well thought out, they can drain your resources faster than expected.”
Long-awaited recreational activities can be an additional financial drain.
“Retirement can feel like a never-ending holiday, tempting you to splurge on travel and hobbies that you’ve been looking forward to,” says Northwestern Mutual financial advisor Harrison Hunter. “But even small indulgences can add up.”
Cummings says he’s watched retirees blow $80,000 on kitchen remodels or extended cruises, then spend the next decade quietly panicking as their portfolio fails to recover.
“That trip to Italy or that new sunroom feels justified, but it permanently reduces your future income,” he says, “That $80,000 could have paid you $300 a month forever. Instead, it is gone in six months. Delayed gratification is not optional in retirement—it is survival.”
Hunter recommends creating a balanced plan with a financial advisor to enjoy these pleasures at this new stage of life without risking long-term financial health.
Rising costs for health insurance, prescriptions, and unexpected medical needs can leave new retirees feeling financially pinched.
“Healthcare costs are not just rising—they are detonating,” says Cummings. “Most retirees budget for Medicare premiums but forget the out-of-pocket costs, dental, hearing, and prescription gaps.”
Since healthcare can literally be a matter of life or death, it’s crucial to be prepared for these elevated expenses.
“If you do not have a plan to handle six to ten percent annual medical inflation, you are gambling with your future health and your independence,” warns Cummings.
For those who qualify, Hunter advises exploring a Health Savings Account (HSA) as a way to prepare for rising medical expenses down the road.
Dipping into retirement savings too fast can reduce the longevity of your savings and impact future spending ability.
“Think about your retirement savings as a marathon, not a sprint,” says Hunter. “Withdrawing too much too soon can quickly run down your retirement portfolio, which can leave you in a tough spot down the line,” explains Hunter.
He says the safe withdrawal rate is about three to four percent annually, which is the recommended guideline for taking money out of your retirement accounts.
“Based on historical market performance, this is a safe percentage to withdraw that can be sustained for roughly a 30-year period, enough to get most people through their retirement years,” says Hunter.
Many retirees underestimate how the costs of property taxes, homeowners insurance, and utilities can skyrocket and stretch their budgets.
“Homeowners might be fine when they first retire, but a few years later they’re surprised by how much more they’re paying,” says Myers. “Especially here in Florida, property taxes can jump, and insurance rates often go up year after year, especially after storm seasons. These increases can eat away at your monthly budget.”
HOA fees also tend to go up over time, “particularly in 55-and-over communities with lots of amenities,” says Cara Ameer, a real estate agent with Coldwell Banker who operates in both California and Florida.
And then there’s the utilities to consider.
“Water, gas, electricity… none of it is stable.” says Cummings.
These sneaky expenses can creep up and put a dent into your retirement budget, so make sure you build in a buffer.
“If you are not modeling at least five to seven percent annual increases on these bills, you are lying to yourself,” says Cummings.
You can also take other proactive measures to help reduce certain costs.
Myers recommends checking in with your insurance agent to find the best coverage for the best price. “That kind of support is really valuable because it allows you to stay ahead of the curve and avoid overpaying,” he explains.
You can also lower utility bills by setting up smart thermostats, swapping out your lightbulbs for low-energy ones, and unplugging appliances when not in use.
When budgeting in early retirement, don’t underestimate all the costs that could possibly rise.
“Budget for retirement as you do now, but add a buffer for leisure activities and unexpected expenses, including inflation,” says Hunter. “This approach provides you with peace of mind and flexibility when you are no longer generating a steady income.”
Remember to prioritize essential expenses.
“Start with housing, utilities, healthcare, food and transportation needs,” says Hunter. “Once these are covered, you can allocate funds for discretionary spending based on your remaining retirement income.”
Having a robust emergency fund should also be a critical component of your financial plan.
“I recommend having between six to twelve months of liquid savings for unexpected expenses like home repairs or medical costs,” says Hunter. “This safety net can also provide a bit more security during market downturns.”
Hunter also recommends using tools like retirement calculators to assist with your financial planning.
“They are a great starting point to help you figure out roughly how much you should save,” he says. “They offer a baseline, but personalizing your retirement plan with an advisor can cover all your unique goals and vision for the future.”
According to Cummings, retirees should also do periodic financial check-ins.
“If you are not doing a six-month financial checkup, you are flying blind,” he warns. “Markets change. Medical needs emerge. Spouses decline. Without a hard look at spending, risk, and exposure twice a year, retirees drift into disaster. I have seen it too many times. The checkup you skip this year is the one that would have saved you.”
Balancing home ownership costs with lifestyle choices can be a delicate balance.
“In the end, the goal is to own a home that supports your lifestyle, not one that causes worry,” says Myers.
