Why ‘looking poor’ is crucial for a comfy retirement in America. How fake social status could be ruining your finances

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Showing off puts you at risk

Living at or above your means, especially in retirement, is risky.

If you’re reluctant to cut back spending to avoid looking poor, you’re more likely to plug the gap with debt.

Before you know it, you’re in your 70s and carrying outside personal loans and auto loan balances just to keep up appearances and impress your neighbors.

Senior debt is a growing problem, as highlighted by the AARP (4). Households headed by someone between the ages of 65 and 74 have quadrupled their average debt burden between 1992 and 2022. Nearly 65% of people over the age of 65 who have debt consider it a serious problem.

Indeed, the interest payments are a real risk when your income is fixed and inflexible.

What can you do?

If you think you’re overspending or borrowing too much, it may be a good idea to closely examine your budget and cut out anything frivolous or unnecessary.

Consider downsizing to save home maintenance costs.

A rental apartment may not be impressive to your friends, but it’s much healthier for your finances.

Similarly, you can follow a strict rule of thumb to keep spending on travel and vacations within a fixed ratio of your income. For instance, try not to spend more than 20% of your income on a car payment or more than 10% on an annual holiday.

Work with a financial adviser to see how much you can really afford to spend in retirement and try to spend slightly less than that to create a durable margin of safety.

Consistently living within your means will make your retirement much safer and more enjoyable over the long term.