If you’re a boomer — also known as someone who was born between 1946 and 1964 — you’re either fast approaching your retirement years, or you’ve already arrived. Either way, the financial choices you’ve already made — and are making right now — can significantly impact your quality of life for years to come. Unfortunately, things that might not seem like a big deal, such as not planning for unexpected expenses or investing too conservatively, could end up putting a considerable squeeze on your retirement goals.
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Here are five boomer money traps that can hurt your retirement savings.
Failing To Account for Unexpected Expenses
Jeff Rose, certified financial planner and founder of Good Financial Cents, said that boomers do sometimes stumble into a few common money traps. “First, they might not account for unexpected expenses, like sudden medical bills or going a bit overboard on family vacations,” he said. “I once had a retired couple that paid for their entire family of 14 for an all-inclusive trip to Disney World.”
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What To Do Instead
“It’s super important to have a rainy day fund,” Rose advised. “Try to set aside a bit of your income regularly to cover those unexpected costs that life throws at you. This way, a sudden expense won’t derail your financial train.”
Not Having a Concrete Financial Plan
“Believe it or not,” said Rose, “some [boomers] just don’t have a concrete financial plan in place, which can really throw a wrench in reaching their financial goals.”
What To Do Instead
“This is a big no-no,” said Rose. “It’s never too late to start planning. Sit down, possibly with a financial planner, and map out your financial journey with clear goals and strategies. Having a roadmap can really help in steering clear of financial pitfalls and keeping you on track to achieving your financial dreams.”
Being Too Conservative or Aggressive With Investments
Kendall Meade, financial planner at SoFi, said, “Retirees might be struggling with the idea of transitioning from collecting a paycheck every other week to living off their savings, all while trying to avoid making any mistakes with their investments and Social Security. This makes the market swings especially daunting!”
What To Do Instead
Meade said that it’s important to plan ahead for all scenarios by defining a plan that accounts for unexpected events and healthcare costs in retirement. She recommends making sure that you have an appropriate allocation for your time frame or risk level.
“In retirement, you may prefer to hold a greater portion of less-risky assets, like bonds, cash and cash equivalents,” she said. “If the market drops, they are less likely to drop with it, as they are less volatile.
“This doesn’t mean that you should not hold any stocks, though. Keep in mind that your savings may need to last you another 20-30 years in retirement, and while stocks are more volatile, they also tend to have the highest return over time. By being too conservative, you may run the risk of running out of money sooner.”
Investing in a Timeshare
“There are many boomers who purchase something and forget that the strings attached could last the rest of their lives,” said Dawn-Marie Joseph, founder and president of Estate Planning & Preservation. “One of the major money traps for boomers is a timeshare. Timeshares come with annual dues each year that you’ll be required to pay. They are also very difficult to sell.”
What To Do Instead
“A simple way to avoid a timeshare is to not buy one,” said Joseph. “Consider purchasing a vacation annually when you have enough money saved up to afford it.”
Habitually Providing Financial Support to Adult Children
“Another money trap for boomers could be financially assisting adult children,” Joseph said. “Often, parents want to help their children financially, and it can become a bad habit.”
What To Do Instead
“It’s important boomers ensure their finances are in order and taken care of each and every month before handing out any money to their children,” Joseph said. “This includes paying off monthly debt and putting money towards savings. If a boomer must financially assist their child, they should consider putting a payback plan in place to ensure the money is eventually recouped.”
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This article originally appeared on GOBankingRates.com: 5 Boomer Money Traps That Can Hurt Your Retirement Savings
