5 Dumbest Money Moves That Boomers Can Make

Boomers are either retired or approaching retirement; and, with this new phase of their lives, there are many steps they can take to avoid financial setbacks and enjoy their golden years.

Of course, this is not the time to dabble in risky investments or play the market, but there are a slew of additional mistakes they can make. Also see how much money you need to retire in every state.

Not Preparing for Healthcare and Long-Term Care Costs

As life longevity continues to increase, so will healthcare costs. These are not something to be overlooked. According to the Fidelity Retiree Health Care Cost Estimate, the average retired couple will need an eye-popping $315,000 to cover medical expenses in retirement, and that’s excluding long-term care.

“Long-term care is an essential part of retirement planning, and boomers should start considering their long-term care needs early on,” said Michael Collins, CFA, adjunct professor at Endicott College and founder of WinCap. “Not having a plan in place could lead to a huge financial burden later on in life.”

Supporting Adult Children

Another mistake boomers can make is supporting their adult children at the cost of their own financial well-being. The impacts can be enormous, from eating at retirement savings to accumulating debt.

“On the surface supporting adult children undermines the adult kids’ ability to be financial grownups,” said Bobbi Rebell, CFP, founder of Financial Wellness Strategies and author of “Launching Financial Grownups.”

“It can send a signal that you don’t have confidence in their ability to be financial grownups.”

”But the longer-term consequences are also concerning”, added Rebell.

“For example, if you continue to support them,” she said, “it could impact your own ability to pay for your life as you age. Even more concerning, if you ever need them to help support you in that case, it is less likely they will be able to not only support themselves but provide a safety net for you.”

Scams

”Falling for scams and financial fraud is a common mistake”, said Jack Prenter, CEO of DollarWise.

“Boomers should remain vigilant about protecting their assets and be cautious of potential scams,” Prenter said, “especially online and through unsolicited communications.”

Consumers 60 and older filed 467,340 fraud reports in 2021, with reported losses of more than $1 billion, according to the Federal Trade Commission. But, because most frauds are not reported, these numbers include only a fraction of older adults harmed by fraud.

Financial scams run the gamut, but older adults were nearly four times more likely than younger people to report losing money on a tech support scam; they were twice as likely to report a loss on a prize, sweepstakes or lottery scam; and they were 45% more likely to report a loss on a family or friend impersonation scam, according to the FTC.

Social Security

When it comes to Social Security benefits, there are potentially several mistakes boomers can make.

”The first is over-relying on it. While it’s an essential part of how many Americans finance their later years, it should not be the only support”, Rebell said.

In turn, smart planning also should include tax-advantaged investing through employers, such as 401(k)s and pensions.

“While we tend to focus on accounts that are labelled as ‘retirement’ because of the tax benefits that come with them,” Rebell said, “we can also save, invest and plan for retirement in endless other kinds of investments — whether that is a traditional brokerage account, real estate, fixed income, insurance products and annuities that can provide income streams as well.”

The sentiment is echoed by several experts who say that’s why planning is key — and the failure to do so will come at a huge cost later.

“And we’re talking 10 years prior to planned retirement. You’d maximize your wages, get overtime if you can, and so on,” said Tatiana Tsoir, CPA, and founder of The Bold Blog.

Part of planning is also contributing to both traditional and Roth IRA or 401(k) — whatever is available — so you can mix up your distributions. The reason is that up to 85% of Social Security can be taxable, depending on how much other taxable income you have. So strategy is critical.

Spending the Way You’re Used To

As they’re not relying on regular paychecks anymore, boomers should not tap into their nest eggs too fast and should properly take stock of their income flow, expenses and savings.

“The No. 1 hazard that baby boomers often fail to acknowledge when it comes to spending or saving in retirement is their failure to take a more tactical approach to determining where they should be sourcing their annual cash flow requirements for their retirement nest eggs,” said Doug Dahmer, CEO and founder of Retirement Navigator.

According to Dahmer, annual spending in retirement does not tend to be identical.

“Some years, when vehicles are purchased, renovations are necessary or big ticket bucket list vacations come along, it will result in peak cash flow demand,” Dahmer said. “Other years when spending is below average, there will be valleys in spending.”

“Unfortunately, too many people approach tax planning during retirement on a linear year-by year basis. As a result, they enjoy the luxury of low taxes during their early years of retirement, only to discover too late that they have pushed their tax problems into the future and have fallen prey to expensive retirement tax traps.”

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