retirement lifestyle creep

The armed forces teach men (and increasingly women) to be gentlemen (and ladies). This also often means not just the softer aspects like conduct and bearing but also the habits and things one inculcates. 

It may sound strange but using the proper cutlery for meals is a habit many officers inculcate only in the Armed forces. A liking for the finer things in life thanks to the affordability that CSD brings, becomes the norm. In the absence of rent to pay or regular money outflows that a civilian in the same position might be exposed to, the idea of lifestyle creep may seem foreign.

However, once you retire, lifestyle creep can be quite real as you, at least partly, come to terms with the civilian world. Lifestyle creep is just the year on year increase in your expenses, above and beyond normal inflation, thanks to rising income. 

You might most certainly have your own home at that point, perhaps a new job, and the pension of course. You are also likely to face the rampant consumerism that is the standard in any major city. Suddenly, you begin to see things that were rare in the Armed forces. 

Having a pension, savings, proper financial planning, etc. allows a person to maintain their lifestyle in retirement. Please notice the word, “maintain”. It rarely means “enhance”. While your pension and income from investments and a job might allow you to maintain a very good lifestyle, it will rarely allow for expenses that go beyond what is reasonable.

Between the field postings and peace stations that few know even exist, permanent commission officers can quite easily fail to notice the myriad trends that catch the fancy of those residing in the likes of Gurgaon or Bengaluru.

This means you are quite likely to add to your regular purchases what you learnt about only post-retirement when you actually lived in a major city. After all, just because you are in your 50s or 60s at this point doesn’t mean you have suddenly decided to stop having fun. You do want to live a little and enjoy. Unfortunately, this often means spending a lot more than our earnings allow.

Having a pension, savings, proper financial planning, etc. allows a person to maintain their lifestyle in retirement. Please notice the word, “maintain”. It rarely means “enhance”. While your pension and income from investments and a job might allow you to maintain a very good lifestyle, it will rarely allow for expenses that go beyond what is reasonable. Expenses mount up far quicker in the civilian world than in the relative isolation of a cantonment. So how do you, first of all, detect you are spending more than you should? Here’s how.

1.  When you can’t find enough cash for a sudden expense that is at least 50% of your monthly income.

2. When your “cash flow” is reducing month on month, or you find yourself unable to save anything.

3. When your monthly credit card bill goes up more months than not.

4. When your debt obligations (EMIs) are over 50% of your pension and other earnings.

Often post-retirement you still have obligations such as your children’s higher education, for which we hope you have saved and invested, or your children’s marriage. However, we have observed that considering the known nature of these expenses, most individuals plan for it in some way or the other. It’s the unplanned lifestyle expenses that slowly become regular that derail many a financial plan. So what should you do?

While you might have taken on a new job just after retirement, don’t count on its income for over 10-15 years unless you retired quite young. Working post 70 should be a choice and not an obligation.

While your pension will keep going up with inflation, your expenses can go up much more. Ensure that you always maintain a 20% buffer i.e., you live on only 80% of your income.

Just because you have assured income coming in, do not enter into risky ventures that you don’t understand well, for example, commercial properties or even cryptocurrency!

Always maintain an emergency fund equivalent to at least 4 months of pension. Even though you have access to ECHS and military hospitals for health care, you should be prepared for any sudden serious family emergency. This often requires big outflows that you could not have predicted. It’s better to have an emergency fund than to not have one, even with a pension.

Keeping in mind just these four points you can avoid a lot of heartaches and ensure that your retired life is both fun and hassle-free.