It’s easy to splurge your post-retirement savings on impulsive spending. However, proper financial planning is crucial for a peaceful retirement. While some purchases make great assets, others might simply be a waste of funds.
As a boomer, here are 15 such purchases you should avoid during retirement:
High-end vacations
While retirement gives you time to travel, long vacations can drain your savings. Instead, make shorter travel plans or choose destinations closer to home.
Replace luxury hotels and expensive destinations with affordable food and stay. You can also look for deals on hotels and flights to make the most out of your budget.
Additional property
Reports suggest that the U.S. real estate market is going to slow down in the next five years. If you buy a second property, it may not yield great returns in the short term. You’ll also have to pay mortgages, taxes, maintenance, insurance, and other expenses.
Invest in a real estate post-retirement only if you absolutely need a second home.
Risky investments
Retirement isn’t the right time for high-risk investments like penny stocks and cryptocurrencies. Losing money in these can make financial recovery tough.
Focus on low-risk options like fixed annuities, savings bonds, and corporate bonds instead. Seek advice from a financial planner to pick the right investment for your savings.
Generous gifts
It’s natural to want to give your children, grandchildren, or relatives the best gifts. However, you shouldn’t compromise on your savings to help out your loved ones.
Giving expensive gifts also has negative tax implications on the receiver. To keep this financial habit in check, set aside a specific amount for annual gifting.
Timeshares
Timeshares may be a convenient way to vacation every year, but they might also be a financial trap. They come with expenses like high annual fees, maintenance charges, and restrictive contracts.
Timeshares are also difficult to sell or exchange if you want to switch locations. Vacationing elsewhere may not be an option, as you would have already invested money.
New car
A car is a depreciating asset that loses its monetary value when you purchase it. Buying a car post-retirement will barely give you any returns and add to your costs.
You’ll also need to pay expenses like registration, insurance, gas, and maintenance. It’s better to keep your current car in good condition and opt for public transport whenever you can.
Relocation
While retirement may seem like a good time to live at your dream location, it’s not the best idea.
Moving to a new place can involve a lot of costs, such as packing, shipping, and real estate fees. You might also lose touch with friends and family and may not have anyone at the new place. If you want to move, carefully consider all the pros and cons before making a decision.
Insufficient health insurance
Health care is a major expense after retirement. Without enough insurance coverage, unexpected medical costs can drain your savings.
To avoid this, make sure to check the coverage on your current health insurance and update it. You can also opt into your state’s wellness programs to minimize your medical expenses.
Out-of-budget purchases
Maintaining a budget is essential if you want financial security after retirement. Small out-of-budget purchases may feel okay once in a while. However, they can soon accumulate and lead to larger expenses.
To keep this in check, make a monthly budget and use the 50/30/20 rule to manage your savings.
Get-rich-quick schemes
Retirement is a time to secure your savings and spend it wisely. Ponzi schemes, pyramid schemes, and other schemes can steal your money and identity. They can also have legal or criminal consequences if you aren’t careful.
Steer clear of any scheme that promises unrealistic returns or is too good to be true.
Luxury spending
Retirement is a time to live comfortably but not extravagantly. Designer clothes, expensive jewelry, or branded merchandise can eat up your retirement savings.
Instead, spend money on high-quality things that are also reasonably priced. You can also choose minimalistic living and declutter to improve your lifestyle.
Lavish club memberships
It’s necessary to have a hobby after retirement to keep yourself occupied. Golf clubs, tennis groups, and other lavish memberships might adversely affect your savings.
You will also need to pay the membership fees and buy specific equipment from them. Instead, join free communities, invest in affordable hobby groups, or choose inexpensive hobbies.
Expensive electronics
While electronics are necessary, expensive ones may simply become a liability. Costly electronics like high-end smartphones, laptops, and TVs can be unnecessary expenses.
Choose electronics that are within your budget and have features you require. Maintain your smartphone or TV for longer and upgrade them only when needed.
Frequent dine-outs
Frequently eating out might be enjoyable, but it is also quite expensive. Restaurants also use low-quality or unhealthy ingredients that might adversely affect your health. This can lead to higher medical expenses, which you can avoid by making healthy choices.
Instead of dining out, buy good quality groceries and fresh produce to make your own meals at home.
New credit cards
During retirement, you should aim to decrease or end your debt but not increase it. New credit cards lead to additional debt. This might build up quickly if you miss a payment or don’t clear it on time.
To avoid this, use your current cards wisely and try clearing your credit card debts as soon as possible.