It may not be obvious from their spending patterns, but many baby boomers have left the labor field and entered retirement. While they need to enjoy their retirement years, some aren’t maximizing their limited resources.
In 2008, the first baby boomers became 62; in 2031, the youngest will become 67. As a result, some people of this age have been retired for quite some time, while others have no plans to do so soon.
According to a Transamerica Center survey, baby boomers still working believe they’ll need $750,000 in savings to feel financially secure in retirement. In contrast, the average worker in this age group has saved just $202,000.
Those already retired can count on Social Security to supplement their income, but the average monthly payment is just $1,691.53. Many baby boomers in retirement may have to cut back on their spending to guarantee they have enough money to enjoy their golden years.
Are you a Baby boomer? Are you starting to sweat the size of your savings account? Now is the time to make preparations that will allow you to reduce spending without sacrificing the quality of your retirement years.
Seven expert-recommended strategies for determining where your retirement funds are going to waste and how to stop it are provided below.
#1 Strategic Vacation Planning
Retirement expert Steve Sexton of Sexton Advisory Group said that he would not categorize vacations or experiences as a waste of money; in retirement, baby boomers tend to spend more on these activities because they can check things off their bucket list, make memories, and learn new things.
However, he suggested being as strategic as possible in advance to cut costs throughout a trip. For instance, he continued, you can save hundreds or even thousands of dollars by planning your vacation outside peak travel season. Maybe think about nearby weekend trips you can drive to and avoid spending money on flights.
He advised becoming more resourceful if those strategies fail to provide results. To save money, he explained that some of his clients prefer to switch properties with friends who live overseas or agree to house-sit when they’re gone. Finally, choosing the correct credit card that gives travel rewards and points may be beneficial in saving vacation money.
#2 Spending a Lot of Money on Presents
Baby boomers frequently lavish on gifts for relatives and friends, according to Sexton. This is especially true of those who have grandkids. Although presents are nice, they are not the only means of showing appreciation.
Instead, he suggested creating creative methods to demonstrate affection for loved ones that don’t cost much or anything. He advised sending letters or baked goodies to show appreciation.
#3 Wasting Money on Health Services
Although Sexton would never call medical treatment a waste of money, he did note that how you handle medical expenses has a significant bearing on your financial situation.
He advised patients to always get an itemized medical bill to avoid being overcharged or paid twice for the same service. In addition, you can ask your provider whether they can eliminate costs, provide a financial hardship reduction, or put you on a payment plan without interest.
He added that the best way to avoid using down your savings or retirement funds to pay for unforeseen medical expenditures is to save ahead of time and build a healthy emergency fund.
#4 Financially Supporting your Adult Child
Michael Gennawey, CRPC, is an LPL-affiliated financial adviser with SoCal Financial Management and a father of two said he understands when it comes to giving your children the world. He warned that it could be costly to foot the price for your grown children’s ongoing expenses, such as housing, transportation, and a share of the family cellphone plan.
Gennawey advised that they weigh the costs and benefits of keeping up with bill payments. If you run out of money, who will they turn to for help? Will they be there for you when you become older?
He advised that parents confront the kid about taking up the payment for themselves if the payment has evolved from “temporary help” to a “permanent expectation.” He stressed this significance, saying that keeping up with the payments might put a monetary strain on your future plans.
#5 Thinking about a Timeshare Purchase as an Investment
Plenty of people often try to justify their timeshare as an investment, Gennawey added. They’ll justify it by saying it’s real estate on par with a rental property or an inherited IRA.
He said that timeshares shouldn’t be compared to traditional investments like equities, bonds, and real estate because this is rarely the case. Also, he added, timeshare owners tend to cease using their properties as they age, but that doesn’t stop the annual maintenance charge from increasing, and returning the keys will only recoup a small fraction of the initial investment.
Gennawey said that while timeshares are wonderful for family bonding, they do not offer the same financial benefits as other investment vehicles, such as exchange-traded funds (ETFs) or mutual funds. He advised anyone interested in timeshares to figure it into their financial strategy to make sure it is something they truly enjoy.
#6 Covering Retirement Expenses With a Loan
“Almost without fail,” Gennawey added, retirees ask him to include a sizable one-time expense in the budget for their first few years of retirement. Baby boomers should save money for these improvements before they retire to secure the best interest rates and financing conditions. He suggested calculating the real cost of major purchases to ensure they are within the budget.
#7 Finishing Pricey House Repairs and Renovations
Assuming you’ve saved enough money to retire, you’ll have much more free time. According to David T. Bowman, AAMS, LPL-affiliated financial advisor at Carolinas Financial Planning, this might motivate you to carry out pricey home improvement tasks.
He encouraged anyone who had the means to do so every two years. But, home improvements are an expenditure that can significantly influence the future in the case where retirement funds have limited cash flow projections. He advises those of us on a fixed income to be mindful of our spending and limit our demands.
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