As the second largest generation in the U.S., baby boomers are now in their retirement age. However, many are ill-prepared financially and risk falling into poverty later in life. There are numerous pitfalls that can make retirement uncomfortable for many of them, be it insufficient savings or unexpected medical expenses. These are some of the ways baby boomers may end up poor in their golden years, and provide tips on how to avoid these common traps.
Improper Planning For Unexpected Circumstances
There will always be some unplanned expenses, like a car breaking down or house repairs. If these costs are not covered in the budget, boomers will have to use their credit cards to pay them, which puts them into more debt.
Having an Impractical Budget
When many people enter retirement, they fail to control their spending habits and even forget to budget their finances. This leads to irresponsible spending, which in turn makes their financial lives more difficult as they seek to regain their stability.
Poor Social Security Claim Strategy
Once you hit 62, you can start claiming your Social Security benefits, which means you will receive a lower payout than if you waited until you turned 64, 67, or 70 years old. The longer you wait, the higher the payout will be, so if it’s possible, consult a financial planner and weigh your options.
Bad Credit Card Management
Not clearing your credit card balance in good time means you’ll pay interest on the debt you owe. Considering that one will be transitioning into retirement, paying off the debt becomes more challenging because there’s less income. If left unwatched, the debt can turn into a financial nightmare.
Poor Investments Management
While market volatility is inevitable, it’s essential to know when to sell and when to hold an investment. Many baby boomers fall into the trap of selling their stakes immediately after the market dips, which leads to losses and missed future gains. Consult a financial advisor to help you keep your investments safe.
High Housing Expenses
It’s not unheard of for someone to be house-rich but cash-poor, and high housing costs cause this. Generally, the costs should not exceed 30% of one’s income. To reduce expenses, one can rent out part of the house or, better yet, downsize to an affordable space.
Not Having a Proper Retirement Plan
One of the ways many baby boomers fail in their retirement is a lack of proper planning. It’s important to plan for all income sources and expenses when one stops working; it goes a long way in curbing irresponsible spending and financial instability.
Healthcare Expenses
The older we grow, the higher the healthcare costs. When not taken into account, these expenses can quickly lead to debt. Make sure you get a healthcare plan that suits your needs and doesn’t overlook any healthcare costs that might come up. Plan and save accordingly.
Falling Victim To Scams
Unfortunately, the elderly are more often than not a target for financial scammers, who seek to rob retirees of their hard-earned cash. To avoid this, keep all important financial and personal information private, and always consult a financial advisor before making any impulse investments sold to you by anyone over the phone.
Not Investing Wisely
Sometimes, one has to be proactive to secure one’s retirement financial future. Not jumping on investment opportunities can be detrimental in the long run. Instead of only having savings as a retirement plan, consider getting some assets that will ensure consistent income in the future.
Living Extravagantly
When some boomers finally retire, they forget they’re not on a steady paycheck and continue living above their means. Spending more than you have is a sure way to land you in debt, and it’s important to curb extravagance before you burn your savings.
Having Little To No Savings
Many boomers ignore the importance of savings before retiring. Early saving for retirement means that one has more spending power when they stop working, and those funds will go a long way in ensuring financial stability. The earlier one starts, the better; they’ll have a two-times bigger retirement fund.
