Spending your money wisely is always important, but it’s never more so than in your retirement years. You likely are on a limited budget, or are no longer working. While it’s important to enjoy your golden years, you must balance that with sound money management. This may involve avoiding certain costly purchases. With that in mind, these are 12 purchases baby boomers should avoid in retirement.
Table of Contents
Expensive Home Renovations
Unless you plan on extensive traveling in retirement, you will likely spend a lot of time in your house. Simple upgrades are a great way to enjoy your space more.
However, unnecessary upgrades can be a serious drain on the budget. If you’re making upgrades to increase the resale value, that’s fine when done wisely. Major upgrades just for the sake of doing them should be avoided.
Unnecessary Life Insurance
Life insurance is fantastic when you need it. By your retirement years, it will show itself as very expensive.
If you have family that depends on you, it still may be worth considering. However, if your children are grown and you have no debts, it’s best to spend your money elsewhere.
Timeshares
Timeshares have a lot of allure. You get to travel somewhere exotic and fun and have a home away from home.
Unfortunately, timeshares are often fool’s gold. Not only are they cost-prohibitive, but they’re also highly restrictive. Furthermore, they’re difficult to get out from under, and the expenses aren’t worth it. It’s best to spend your money on the travel you want, not a timeshare.
Things Your Children Should Be Buying
Spending money on your children and grandchildren is a fantastic way to show your love to them. Giving presents is one thing. Giving money for items they can and should be spending on themselves is different.
Regularly giving children money for rent or paying their monthly bills is a dangerous situation. Help your children develop some sound financial habits, and keep your money to yourself. You can’t finance retirement.
Purchasing a Brand New Luxury Car
New luxury cars are fun. They’re also highly expensive. If you’re struggling to stay on track financially or don’t have enough in your cash reserves, it might be best to avoid a luxury car purchase.
Treating yourself is okay in moderation. Just make sure that you do it wisely.
High-Interest Debt
High-interest debt is always problematic. Unfortunately, boomers have more credit card debt than other generations, on average. The typical boomer has credit card debt of nearly $7,000. If that’s you, don’t add to it.
It’s best to make a plan to attack that debt and eliminate it. You may even want to use a balance transfer card to temporarily lower your interest rate to zero percent so you can pay it off.
Annuities
Not all annuities are bad, but boomers need to be careful about purchasing them in retirement. Not only can it be difficult to withdraw funds, they can also be rife with fees and commissions.
Most importantly, don’t tie up all your funds in an annuity. Doing so limits your ability to manage your expenses and needs.
Spending Too Much On Healthcare
Healthcare costs typically increase as you age. That’s fine, but don’t spend more than you must.
Try to use in-network providers to keep costs in check. This includes which doctors you choose and where you have a procedure done.
Eating Out Too Often
There’s no denying that dining out has become more expensive over the past few years. Boomers tend to outspend other generations.
The Bureau of Labor Statistics reports that boomers spend over 65 percent more than Gen Z on food, much of which is eating out. You don’t have to eliminate it, but keep it in check. Doing so offers a dual benefit of keeping serving sizes in check, which helps foster healthy habits.
Over the Top Gifts
Treating loved ones is fun, but being extravagant can be troublesome. It sets expectations that you will do it again in the future. Worse yet, it can drain your savings.
Every situation is different, but it’s best to keep it in check.
Second Homes
Many baby boomers seriously look at purchasing a second home for their retirement years. Who doesn’t want to escape to a warm climate during the winter months?
It does make sense, but it’s also fairly demanding on your budget. Unless you’re paying cash, you have two mortgages, insurance, taxes, and more to manage. It’s best to tread lightly with this idea.
High-Risk Investments
Most retirees are concerned with maintaining their capital and creating cash flow. Complex investments may offer a possible higher return, but they also carry significant risk.
If the investment is something you don’t understand or makes you fearful, avoid it. The last thing you want is to needlessly suffer substantial losses.
Money Mistakes to Avoid in Retirement
Wise financial moves are essential in retirement. Falling prey to mishaps can be ruinous. Here are 13 money mistakes to avoid in your retirement years.
13 Ways to Avoid Going Broke in Retirement
11 Best Cities to Retire To
Are you looking for an affordable retirement destination that doesn’t limit fun? Here are 11 economical places to retire in to stretch your budget and maximize enjoyment.
7 Ways to Make Mailbox Money
Mailbox money is a lot like passive income. You only need a little money to start to receive checks in your mailbox. Pursue these options to grow real wealth.
Money Mistakes to Avoid in Your 60s
The 60s are an important decade for most. Unfortunately, it’s easy to derail your retirement plans. Here are 12 money mistakes to avoid in your 60s.
12 Money Mistakes to Avoid in Your 60s
How to Save Money On a Tight Budget
Saving money feels impossible when you’re struggling to make ends meet, but you can do it. Use these tips to save money each month, even on a tight budget.
How to Save Money on a Tight Budget
I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.
Leave a Reply