Retiring with a healthy nest egg is an exciting moment. You suddenly have all the time in the world to pursue your bucket list, enjoy leisurely days with family, and kick back when you want.
Many retirees underestimate how much money they will need to maintain their quality of life and make careless financial mistakes.
There are many ways to shrink a nest egg, from falling for financial scams to not considering inflation, not being price aware, and giving too much money to your children.
We have chosen 16 of the most common ways retirees waste their nest eggs so you can avoid these costly mistakes.
1. Overspending
Your healthy nest egg can make you feel like you have more money available than you have. Feeling flush, retirees may overspend and later realize they won’t have enough money for the next 10-20 years.
It’s advisable to discuss your finances with a trustworthy financial advisor and create a monthly budget. Set aside an amount for luxuries and avoid spending more.
2. Falling for Financial Scams
Before making significant financial decisions, it’s best to consult a professional financial advisor. Individuals who perpetrate financial scams invest time and effort in creating a business opportunity that looks legal, and so many retirees get caught in their web of deceit.
A retiree in my circle put $100,000 into a pension that turned out to be a scam. These people often use scarcity or time-themed tactics, so vulnerable retirees feel compelled to part with their money.
3. Not Downsizing
Retirees may want to remain in their family home because of the treasured memories. Moving to a smaller house can also seem overwhelming. However, with rising utility rates, property taxes, maintenance, and insurance costs, downsizing could free up a considerable amount of money.
Downsizing allows you to meet new people, start afresh, and enjoy more luxuries without dipping into the nest egg.
4. Investing in Risky Opportunities
Try to avoid taking risks with your finances. It’s too easy to get lured into high-risk, high-reward opportunities. If something sounds too good to be true, it probably is. It’s better to put your money into steady, safer investments. The return may be lower, but it reduces the risk of loss.
A financial advisor with investment experience can provide advice on where to invest your money.
5. Failing To Account For Inflation
Your nest egg might seem like a lot of money, but in 10 years, inflation could dramatically influence its value. It’s one of the biggest careless mistakes that many retirees make.
Consider the long-term impact of inflation and manage your budget so you keep your withdrawals within your designated limits.
6. Missing Senior Discounts
Multiple senior discounts are available for retirees. You may not be aware of most of them, so search online or contact a local senior community to see what discount opportunities are available.
For instance, you may be eligible for Meals on Wheels deliveries, free public transport, store discounts, and more.
7. Being Too Generous With Adult Children
Of course, you love your children and grandchildren and want to help them. But the big bank of mom and dad can quickly deplete if you constantly lend or give money to your children.
If you want to support your family, set a fixed budget so you know how much free money you have available. Instead of paying off your child’s mortgage, treat them to a nice meal instead.
8. Failing To Seek Professional Financial Advice
Financial advisors spend considerable time learning about investments, savings, and more. They are the experts and can help you make the most of your nest egg.
A financial advisor is the best person to help you avoid making potentially catastrophic financial mistakes or getting caught in a scam. Book an appointment and choose an advisor you can relate to.
9. Remodeling Your Home
Remodeling a home is expensive and can eat into your nest egg. It’s an extravagance that you may not be able to afford. It’s best to avoid remodeling unless you have a consistent income stream from investments, realty, or other sources.
If you want to make changes to your home, it might be worth looking at finding a property that doesn’t need any work.
10. Neglecting Home Maintenance
Maintaining your home is essential to avoid costly bills. Disregarding even minor tasks can lead to bigger issues later. Consider putting together a home checklist to work on daily maintenance.
Keep your home and yard in good order. Deal with repairs as they occur and find a local person you trust who may offer a senior discount.
11. Dining Out Daily
Having so much free time is lovely, but dining out can become a daily habit. You might enjoy the decadence of eating out, but it can become expensive. Many retirees find it challenging to give up this habit.
To make your savings last longer, consider dining out once or twice a week and then make home-cooked delicious, healthy meals into a special occasion.
12. Owning Multiple Homes
Perhaps you own a holiday home and feel reluctant to give it up. Consider the upkeep costs, utility bills, real estate taxes, and more. In addition, as you get older, you may lose mobility, and it becomes more challenging to manage a second home.
Chat with your financial advisor about selling the second home to understand the tax implications. A sale could add to your nest egg.
13. Failing to Be Price Aware
Retirees can save money by becoming price-conscious. Compare prices across several supermarkets because you can save multiple dollars per shop. Those additional savings could pay for dining out, fuel, or other costs.
Take care of your nest egg by shopping for bargains for all purchases. You might discover it’s fun to save money this way.
14. Owning Several Vehicles
Now you’re retired, do you need the luxury of two cars? It means double the cost of insurance, maintenance, and fuel costs. You likely have a fixed income, so managing your savings is essential to maximize how you live your life.
Additionally, consider downsizing to a smaller, eco-friendly car for further savings.
15. Not Canceling Subscriptions and Memberships
Perhaps you had subscriptions or memberships when you were working that you no longer use. Check your bank accounts for monthly subscriptions that you can cancel.
If you have luxury memberships, such as at a golf club, consider the cost of a day pass rather than an annual fee.
16. Not Prioritizing Preventative Care
Health issues such as high cholesterol and raised blood pressure may become more prevalent as we age. Taking care of your health is essential to minimize the cost of healthcare.
Consider taking a daily walk, eating a healthy, nutritious diet, and cutting out sugar, drinking, and smoking. You may notice you have more energy and fewer health issues.
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