Boomer’s Remorse: These Are the Top Five Big Money Purchases You Will Likely Regret in Retirement
The best way to evaluate any type of journey is to ask those who have traveled that road before. What are the lessons learned and the pitfalls to avoid? In the journey of retirement, it’s not hard to find answers to those questions – simply take a few minutes to read articles like this one recently published by MSN. In it, reported Brian O’Connor did some research to find out what expenditures retired baby boomers regret having made.
While the article may not contain many surprises, it should cause readers not yet retired to pause and think carefully before taking the plunge on a spendy trip, a fancy car, or a vacation home. Many of those so-called retirement dreams can turn into financial nightmares, especially when spending big bucks in the early period of retirement undermines your financial security in later years. The article is well-titled: “Boomers’ Remorse” Let’s look at O’Connor’s top five list of regrets.
Spending Too Much in the “Go-Go” Period of Retirement
It’s a common misconception that many retirees make, assuming that they’ll spend less in retirement than they did when they were working. But the opposite is more often true.
O’Connor writes, “Financial planners cite three retirement phases: Go-Go, Slow-Go and No-Go. In the Go-Go years, typically 65 to 75, healthy young retirees spend big on travel, hobbies and scratching life-long dreams off their bucket list. Retirees are less active between 76 and 85 in the Slow-Go years, and tend to spend their No-Go years of 86 to 100 quietly.”
As you might imagine, the “Go-Go years” are often the most expensive, as retirees make their long-awaited big purchases – only to end up with regrets. Here are a few of the most common.
Regret #1: Taking Too Many Expensive Vacations
It makes sense: in retirement, your schedule is suddenly wide open, and the temptation to make life a “never-ending vacation” can be immense. But O’Connor warns that this can cause a real problem for you later on.
“Travelers tend to underestimate daily costs, like meals, tips, resort fees, costs of excursions, airport costs and more, as well as paying for someone to care for your home while you’re gone,” O’Connor writes. “A four-day vacation within the U.S. costs on average $144 a day, while a 12-night international jaunt costs around $271 per day, based on analysis from ValuePenguin.”
It’s also important to recognize what this rate of spending could do to your investments. Big withdrawals early will limit your investment growth for the next 20 to 30 years, which could impact your ability to pay health care expenses down the road. If you travel, do so wisely.
Regret #2: Buying That Expensive Dream Home
Sure, finally buying that house you’ve always dreamed of seems like the perfect way to celebrate your retirement. But as O’Connor warns, that dream home could be a financial nightmare.
“After the initial expense, you’ll need to continue spending big on upkeep, maintenance and repairs that will eat into your retirement savings. And you may end up moving anyway,” O’Connor explains. “A 2021 survey from the National Association of Realtors found that, among people between 66 and 74, 16 percent would move because of life changes such as a birth, death or marriage; 25 percent for a change in a household member’s health and 8 percent would move to downsize.” If you can’t sell that dream house, you’re stuck.
Regret #3: Choosing A Luxury Car, Fancy Boat, or RV
Fancy toys may be shiny, but there’s a cost to keeping them that way. Sports cars, RVs, and luxury boats all require maintenance, storage, and insurance, and these costs can be far more expensive (and continuous!) than you might imagine. Factor in often-horrendous rates of depreciation and these toys typically become terrible investments.
“Don’t forget about operating costs, either: RVs quickly burn through expensive diesel fuel, a Maserati won’t run on regular and boats need a marina slip to call home,” O’Connor writes. “And the eventual physical limitations of aging can make operating them just plain uncomfortable.” Again, keep your impulses in check and avoid buyer’s remorse.
Regret #4: Borrowing Money to Help Your Adult Kids
The stats reflect a pretty dizzying landscape for retirees financially supporting their adult children, starting with the fact that this phenomenon is extremely common.
“A 2020 Merrill Lynch study found that 79 percent of parents of early adults offer them some financial support. But more shockingly, what they spend on their adult children is twice as much as what they set aside for their own retirement,” O’Connor explains. “And once the pandemic hit to disrupt everyone’s finances, 71 percent of retirees in an Edward Jones study said they’d be willing to jeopardize their own financial future to help their family.”
But O’Connor’s advice reflects that of most reputable financial advisors: “put on your oxygen mask first.” Before you start providing your adult kids with money, it’s important to set firm financial boundaries so you don’t drain your own assets and rely on your kids for support, later.
This goes for your child’s education, too. Personal finance expert Suze Orman warns, regarding borrowing money to help your adult children through school, “For the parents out there who are thinking they will tap some home equity to pay college bills, I want to advise a rethink. If you are not entirely confident in your retirement security, any borrowing of any kind for college is not wise.”
O’Connor advises, instead, to help your kids set up a budget, a debt counselor, a career coach, or even therapy before you make withdrawals from your own account.
Regret #5: Splurging on That Vacation Home
As much fun as it might sound to be able to “live” part-time in your favorite vacation place, it’s imperative that you consider all of the associated costs.
O’Connor writes, “Vacation homes are often in coveted locations, which generally means not only will the home and taxes be expensive, so will services and the cost of living, too. And besides having two places to insure, heat and maintain, you’ll need someone to take care of whichever property is empty. And then there’s the cost and hassle of traveling between two homes.”
Also, to conclude the article, O’Connor reminds us all that your tastes might change over time, including your love for a dream locale, fancy toys, and other expensive perks. Retirement is a journey, so make sure that you leave room for that kind of change as you embark on this new season of your life.
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(originally reported at www.msn.com)