Why Retired Homeowners Should Spend Their Nest Egg on Home Improvements

Most homeowners spend decades saving for retirement. 

However, when the time finally comes to quit working, many are afraid to spend their savings. 

In fact, Corebridge Financial’s decumulation survey found that 38% of retirees have spent less than they wanted during their nonworking years. And that’s not because they don’t have the funds. They’re simply anxious about shrinking their nest egg.

If you’re a retiree or plan to be one soon, it’s essential to prioritize smart spending, especially on your home.

“The home is the most impactful place to spend and upgrade in retirement,” says Evan Mills, associate financial advisor at Scholar Advising in Winston-Salem, NC. 

By investing in your property, you can improve your mental health, live there longer, and avoid costly repairs and health issues down the road. 

The psychological hurdle of “decumulation”

Decumulation refers to converting your savings into income that can support your retirement lifestyle. 

Corebridge describes the spending anxiety of many retirees as a “planning gap between the accumulation and decumulation phases of retirement.”

According to Stephanie Lewis, therapist and VP of clinical operations at Epiphany Wellness in Blackwood, NJ, decumulation presents psychological challenges because most retirement plans only focus on building wealth during one’s working years. 

“However, relatively few retirement plans help individuals prepare for the emotional process of transitioning from contributing to their income, accumulating wealth, and using those accumulated resources to sustain themselves,” Lewis explains. 

Therefore, someone who understands the financial aspects of decumulation can still emotionally experience each expenditure as potentially threatening their economic security.

Mary McLaughlin, couples therapist and discernment counselor at Mary D. McLaughlin, LLC, Vienna, VA, sees this struggle all the time with her clients. 

“Even though people know they’ve saved enough to live comfortably in retirement, it can still be very hard to shift from saving to spending. The habit of saving for decades and watching the numbers grow creates a sense of security, pride, and confidence about the future,” McLaughlin says.

It can be difficult to watch those numbers go down, even when the spending makes sense. 

“Your nervous system may perceive the shrinking balance as a threat, even though intellectually you know you can afford to spend. That’s when you have to slow down, review your financial plan, and make decisions from a place of logic—not fear,” McLaughlin adds.

The lack of certainty can also create an added layer of anxiety.

You might not know how long you’ll live, what medical bills you’ll incur, or whether an economic downturn will reduce your savings. 

“And this uncertainty can lead to an all-or-nothing perspective in which taking anything out of your savings feels like the start of losing control,” says Jonathan Goelz, licensed clinical social worker and executive director at All in Solutions in West Palm Beach, FL. 

Why it’s crucial for retirees to use their nest egg to maintain their homes

Homes are particularly complex because they’re more than just assets—they’re places filled with memories and emotional value. 

Maintaining your home might raise concerns about how much of your nest egg will remain.

“However, delaying the inevitable home repair or modification needed to ensure safe living conditions can result in increased cost and increased risk to the homeowner in the future,” says Lewis.

Maintaining your home can also benefit your well-being. 

“Research has found that things like natural light, views of nature, and access to outdoor space can be tied to better mood, sleep, and overall mental health. Your physical space matters and is worth investing in,” McLaughlin says.

While the numbers in the account might go down, a well-maintained home can improve your overall quality of life in retirement. 

How to create a safe spending strategy 

To reduce anxiety about spending on your house in retirement, create a simple budget. 

“Many experts suggest putting 1% to 3% of a home’s value toward a home maintenance fund, but retirees may need to allocate more if they’re contracting out more services and foresee more significant improvements or remodeling,” says Michael Micheletti, chief communications officer at Unlock Technologies in San Francisco. 

Leveraging your home equity is also a good idea. You can take out a home equity loan, home equity line of credit (HELOC), or home equity agreement (HEA) to cover home repairs and updates without depleting a huge chunk of your savings at once. 

“Many retirees are now looking at a home equity agreement (HEA), an option that allows them to access a portion of their home’s equity by obtaining cash up front in exchange for part of the home’s equity when the agreement ends,” Micheletti explains.

Additionally, try reframing how you think about home improvements. 

“If you frame your renos in terms of maintaining your independence instead of using up your savings, this could make your feelings toward home improvements less negative,” says Goelz. 

Installing handrails to make getting around easier, installing motion-sensitive lights to reduce tripping hazards, replacing a leaky roof, or converting one floor of your home into a bedroom can all reduce your stress about what the future holds and allow you to stay in your current living space.

“The goal here is not to spend irresponsibly. Instead, realize that having money provides both financial security and emotional security during retirement,” Goelz adds.