Retirement. For many, this conjures up an era of leisure, travel, and pursuing one’s passions. The path to that golden age, however, requires careful planning.
Unfortunately, according to an AARP survey, 20% of adults ages 50+ don’t have any retirement savings. It is also estimated that more than half (61%) are concerned that they will not be able to support themselves in retirement.
Depending on your situation, you may be able to get help online. However, you should proceed with caution. Despite its value, the internet is also full of terrible retirement “tips” from broke investors that could leave you struggling in your golden years. As a result, you’ll end up living off ramen noodles and regretting that you could never take your dream vacation to Portugal.
With that said, here are 50 spectacularly bad retirement ideas to avoid at all costs.
1. Don’t bother saving for retirement; Social Security will be enough.
If you rely solely on Social Security for retirement, your living expenses may not be covered. There are also potential changes to the eligibility and benefits of Social Security in the future.
It is especially concerning that Social Security’s 2024 Trustees Report estimates that the Old Age and Survivors Insurance (OASI) Trust Fund will run out by 2033. There will be no cash reserves when that happens, and projected receipts will cover 79% of scheduled benefits.
Remember, in retirement, Social Security should not be people’s only source of income. Having additional savings can provide financial security and peace of mind.
2. Pit all your money into a speculative investment you hear will skyrocket.
Speculation is a risky investment strategy. Although it can sometimes pay off, it is more likely to generate losses when volatility is high, especially when markets are volatile. Speculative trades include investments such as cryptocurrency, IPOs, or penny stocks.
To put it more precisely, financial speculation promises higher returns in exchange for its promise of higher returns. If you hope to earn sky-high investment returns, such as over 10%, you should be prepared for the possibility of losing your entire investment or a substantial part of it.
For long-term investing, you should stick with research-driven index funds that align with your risk tolerance.
3. Take out a large loan to fund your retirement lifestyle.
Taking out a large loan to fund your retirement lifestyle may put you under considerable financial stress. With monthly payments and interest, savings can be depleted quickly. Your retirement security will also be compromised if you rely on loans to meet your daily living expenses.
4. Start a high-risk business without a backup plan.
Without a backup plan, a high-risk business can be severely financially unstable. Unless you have a safety net, you may be unable to cover operating expenses or live independently if the business fails. You can also suffer from mental and physical health problems due to the stress of potential failure.
5. Ignore healthcare costs; you’ll figure it out when the time comes.
If healthcare costs are ignored in retirement, it can lead to financial ruin. After all, you can quickly go into debt as a result of medical expenses that you do not anticipate. Medical expenses directly cause 66.5% of bankruptcies, making them the leading cause.
In addition, poor healthcare planning may prevent you from receiving necessary treatment, thereby reducing your quality of life.
6. Rely on winning the lottery as your retirement plan.
Lottery tickets are “definitely not good investments,” says Virginia Tech economics assistant professor Matthew Kovach. “They’re not even investments … there’s an expectation you will always lose money.”
For example, regardless of the jackpot size, the odds of winning a Powerball jackpot stand near 1 in 292.2 million. There is a 1 in 302.6 million chance of winning Mega Millions’ top prize.
7. Buy a boat or RV without considering maintenance costs.
Taking care of a boat requires regular maintenance, including engine maintenance, hull cleaning, and storage fees. There are also expenses associated with RVs, including routine engine checks, tire replacements, and winterization. It is essential to carefully consider these costs before purchasing since they can significantly increase the total cost of ownership. Take how much it costs and divide that by how many times you use this item each year. It looks way cool to your friends, but consider renting for the three times you use it each year.
8. Keep all your money in cash under your mattress.
Keeping all your money in cash under your mattress exposes it to inflation risk. As prices rise, cash’s purchasing power decreases. In the long run, this will erode the value of your savings, making it useless. Of course, you want some cash on hand in a safe, but the practice of cash under the mattress has been out for 50 years and won’t help you in the long run.
Instead, store your funds in a high-yield savings account or CD. In addition to protecting your money, these options provide interest, which helps it grow over time. It is also possible to get both security and returns by investing in low-risk bonds or mutual funds.
9. Give away all your savings to charity right before retiring.
Although generosity is commendable, ensuring you have enough savings to support yourself during retirement is crucial. While maintaining a solid financial plan for your needs, you might consider putting aside some of your savings for charitable donations. Consulting with a financial advisor can help you balance philanthropy and financial security.
10. Quit your job without having another source of income lined up.
Making such a decision can be financially precarious. When searching for new employment, having a plan and some savings is vital to cover your expenses — but keep your full-time job until another job is totally secure.
Financial stability reduces stress during career transitions, allows one to focus on finding the right job, and prevents one from dipping into retirement savings.
11. Spend all your retirement savings on a round-the-world luxury cruise.
Of course, you should enjoy the fruits of your labor. But that doesn’t mean blowing your entire retirement savings in one shot. In your later years, if you do not plan accordingly, you may be financially vulnerable when you need health care or other unexpected expenses.
Additionally, it eliminates the financial security that a well-planned retirement fund can provide. As you age, you may face increased financial stress and suffer a lower quality of life.
12. Invest in a friend’s “sure thing” business idea.
A friend’s “sure thing” business idea can be extremely dangerous — especially if the venture is unproven. Startups often fail within the first few years of operation, resulting in significant financial losses. Startups fail at a rate of up to 90%. In almost every industry, 10% of startups fail in their first year. However, 70% of new businesses fail in their second to fifth years. Especially when you are close to retirement — don’t invest in a friend’s “sure thing.” Just don’t!
Moreover, mixing business with relationships can strain friendships and cause emotional stress if the venture fails.
13. Take financial advice from someone who is not financially secure.
Poor investment decisions and financial hardship can result from taking financial advice from someone not financially secure. For this reason, it is essential to seek guidance from professionals with a proven financial success track record. Following their advice, you can build a stable and secure financial future according to your specific needs.
14. Assume you’ll never need long-term care insurance.
Failing to invest in long-term care insurance can expose you to significant financial risks as you age. Unless you have this coverage, you may have to pay for extensive medical and caregiving costs out of pocket, which can quickly deplete your savings. Nowadays, some insurance companies have you take a reverse mortgage on your home to pay for caregiving.
Going without insurance can increase your family’s financial burden, resulting in debt and instability.
15. Invest heavily in speculative cryptocurrencies.
Because these assets are highly volatile, this approach can pose significant financial risks. Prices can fluctuate dramatically, resulting in substantial losses in a short period of time. Furthermore, cryptocurrency markets lack regulation and oversight, which increases fraud and security risks.
“Cryptocurrencies are still relatively new, largely unregulated, and very volatile, which isn’t a great mix for a traditional long-term portfolio,” notes Rob Williams, Schwab Center Director of Financial Planning, Retirement Income, and Wealth Management. “Think of your retirement savings as the foundation of your financial house. You want to build your foundation out of strong, trusted materials.”
16. Count on inheriting money from relatives who are still alive.
People should never count on inheriting money from still-alive relatives because it is highly uncertain and risky. A relative’s financial situation can change, and unforeseen expenses may reduce or deplete the anticipated inheritance. This could even cause a rift between you and your family.
Financial instability, poor planning — and a likely sad situation can result from believing you’ll be in someone’s will. Reality says that that plan is an uncertain future. No windfall is ever a guarantee.
17. Start day trading without proper knowledge or experience.
Day trading may seem like a great way to make quick money. However, it is often a risky endeavor requiring extensive knowledge and experience and the ability to weather substantial losses. Seriously, I personally know more than a handful of friends who thought they could do day trading and make bank. Each one lost everything. Find and trust a true expert. A long-term investment, on the other hand, can provide more stability and security in the financial future.
18. Move to an expensive city with a high cost of living.
There are numerous challenges associated with living in an expensive city with a high cost of living. As housing, groceries, transportation, and other essentials become more expensive, your disposable income can shrink rapidly.
Furthermore, maintaining a particular lifestyle to keep up with peers can lead to financial stress and debt.
19. Go back to school for an expensive degree with no clear career path.
When considering an expensive degree, evaluating the potential return on investment is important. Assess whether the degree aligns with a high-demand field that can offer competitive salaries and job stability. Without a clear career path, you may end up with significant student loan debt and limited employment prospects.
Consider less expensive options, of which there are many. LinkedIn and other places offer help with Upskilling and Reskilling. Complete those types of schooling first. If you’re older and have significant expenses, like a home and kids, you are past the time when an expensive school would have helped your career. Best advice — upskill and move on.
20. Buy a timeshare without understanding the long-term costs.
In addition to the initial purchase price, owning a timeshare often involves significant long-term financial commitments. Maintenance, special assessments, and other hidden costs can quickly increase, making it a potentially burdensome investment.
It is also difficult to recoup your initial investment if you decide to sell timeshares because the resale market is notoriously weak.
21. Ignore estate planning and leave your affairs in disarray.
When estate planning is neglected, it can cause significant complications for your heirs. It is possible that your assets could be entangled in legal proceedings for years, causing unnecessary stress and expense. As a result, unintended beneficiaries may benefit from your estate, contrary to your intentions.
22. Spend all your time and money on hobbies that don’t generate income.
Although pursuing hobbies can provide a sense of fulfillment and relaxation, you must ensure they don’t compromise your financial stability. To achieve a sustainable and rewarding lifestyle, you should balance your passions with maintaining a secure financial foundation. This approach can protect your future without sacrificing your enjoyment of life.
23. Support adult children financially at the expense of your own savings.
Even though it’s natural to want to help your adult children, it’s important to set financial boundaries for your own financial well-being. After all, too much financial support can threaten your retirement savings and create dependency problems. In addition to allowing your children to become financially independent, you ensure your long-term security by establishing clear limits.
24. Invest in a volatile commodity market without diversifying.
Investing in a volatile commodity market without diversification may expose you to significant financial risks. In addition to geopolitical events, weather conditions, and supply chain disruptions, commodities’ values can fluctuate dramatically. If the market falls, you risk substantial losses without a diversified portfolio.
25. Choose a financial advisor based solely on their personality.
While working with a friendly, approachable financial advisor can be appealing, assessing their qualifications and track record is essential. If you rely solely on personality, you may receive poor financial advice that can negatively impact your investments. Evaluating an advisor’s credentials, expertise, and client testimonials is essential to ensure financial success. It is unwise to use a relative, a friend-of-a-friend — or a neighbor.
26. Ignore inflation and its impact on your retirement savings.
If you ignore inflation, your savings will lose purchasing power over time, reducing your ability to maintain a comfortable standard of living in retirement. With inflation, the same amount of money will buy less as the cost of goods and services increases.
Considering inflation, you’ll ensure your savings will grow to meet your future needs.
27. Start a new hobby that requires expensive equipment or memberships.
It is possible to quickly deplete your bank account with “way cool” types of hobbies, leaving you with less money for essential expenses. In the long run, membership fees, maintenance costs, and upfront costs add up quickly. Because of this, they can compromise your financial stability and long-term savings. In addition, make sure any hobby is what you want, not what a friend does for their hobby that you buy into, equipment and all, just for the relationship.
28. Borrow against your home equity to fund retirement expenses.
If you cannot make the payments, your home could be at risk if you cannot bear the debt. In addition, borrowing against your home equity can reduce your equity, affecting your future financial security. In the event of a housing market decline, you may end up owing more than the value of your home. There is rarely a good reason to borrow against your home.
29. Delay applying for Medicare and health insurance coverage.
If you delay Medicare and health insurance coverage, you may be exposed to unexpected medical costs. Even minor health issues can significantly strain a family’s finances if they are not covered by insurance. In addition, delayed medical care can worsen health conditions and raise long-term costs.
30. Assume you can rely on part-time work to cover all your expenses.
Maintaining a stable financial plan when working part-time can be difficult due to inconsistent hours and fluctuating income. Securing a stable financial future when working part-time without health insurance can also be challenging.
Simply put, relying solely on part-time employment leaves you vulnerable to economic downturns, job shortages, and unplanned expenses.
31. Neglect to create a budget for your retirement income and expenses.
During your golden years, you will need a budget that accounts for your retirement income, lifestyle, and expenses. By planning ahead, you avoid outliving your savings in the event of unforeseen emergencies or leisure activities.
Ultimately, without a budget, you risk financial insecurity and debt.
32. Give away assets to avoid taxes without proper planning.
Tax evasion can result in significant legal penalties and fines if assets are improperly transferred. Furthermore, it can result in unintended financial hardships for both parties. In addition to audits, tax authorities may also increase their scrutiny if missteps are made in asset transfers.
33. Buy a vacation home in a location prone to natural disasters.
In the event of a natural disaster, extensive damage can occur to property, requiring costly repairs and insurance premiums. In addition, if the house is used as a rental property, this can interfere with rental income. Depending on the severity of the loss, you may even lose your vacation home entirely, resulting in a significant financial loss. Always do due diligence with property purchases.
34. Ignore your spouse’s financial concerns and goals.
Ignoring your spouse’s financial concerns or goals can strain your relationship and cause mistrust. Due to this lack of communication and alignment, poor financial decisions may be made that impact everyone in the household. Eventually, financial disagreements can lead to emotional distance or even divorce. Consider that your spouse or significant other may see something you do not or have not noticed. Pay attention to what your spouse is worried about; you may be enlightened.
35. Cash out your retirement accounts early, facing penalties and taxes.
You may be subject to significant penalties and taxes if you cash out your retirement accounts early. The amount you withdraw may be subject to an early withdrawal penalty of up to 10% and income taxes. In the long run, these penalties can jeopardize your financial future by significantly reducing your retirement savings.
36. Trust a financial product that promises unusually high returns with no risk.
Investing in such products is often a scam or a very high-risk investment. Getting high returns with no risk is unrealistic and can lead to serious problems. For example, in these schemes, you can lose your money and possibly face legal issues if the product turns out to be fake. Yes, yes, yes — “If it seems too good to be true — it probably is.”
37. Spend lavishly in the early retirement years without a sustainable plan.
You can quickly exhaust your savings when you spend lavishly in your early retirement years without a sustainable plan. In your later years, healthcare and daily living costs can become too expensive, leaving you with insufficient funds.
The result may be financial insecurity, downsizing your lifestyle, or re-entering the workforce at an advanced age.
38. Start a collection of expensive items with no resale value.
If you invest in expensive items with no resale value, you miss out on the opportunity to grow your wealth through more productive investments. It is possible that these items, rather than appreciating over time, will depreciate or become obsolete, offering little or no return on investment. You don’t need some goofy thing from every country you visit to remember it — look at your photos instead.
Earned income or enhance your financial security with the money you would have spent on something basically worthless. Invest the money wisely instead. I’m not saying you shouldn’t have mementos and other amazing items that enhance your life—but don’t buy just to buy.
39. Pay off all debts before retirement without keeping emergency funds.
A balanced approach that prioritizes debt repayment and emergency fund building may be more effective than paying off all debts at once. This strategy safeguards your financial flexibility by ensuring liquid assets are available for unexpected expenses. Diversification can also help you stay on top of your investments, manage risks, and adapt to changing financial situations.
40. Choose investments based solely on past performance.
Because historical returns do not guarantee future performance, relying solely on past results can be misleading. Many factors influence markets, and these factors can change over time. Investments that did well in the past may not perform the same in the future, resulting in financial losses.
41. Keep working in a stressful job long past retirement age.
Sure, you might be compensated well and have a sweet retirement package. However, prolonged work stress can lead to health problems such as heart disease, high blood pressure, and depression. In addition to weakening the immune system, it can also make individuals more susceptible to illness.
Moreover, chronic stress can negatively impact mental health, resulting in anxiety and burnout.
42. Assume you’ll always be able to downsize or sell your home for a profit.
Housing markets are notoriously unpredictable, and economic downturns can cause property values to plummet. Market fluctuations can sometimes make it difficult for you to sell your home for a reasonable price or even at all.
In general, relying on the assumption that property values will increase consistently can be risky if you’re banking on it for retirement.
43. Ignore the need for disability insurance or other protections.
Disability insurance offers financial support in the event that an injury or illness prevents you from working. If you don’t have it, you might face significant financial hardship, struggling to cover everyday expenses and medical costs.
With disability insurance, you can focus on recovery without being stressed about financial instability.
44. Skip regular financial check-ups and reviews of your retirement plan.
The best way to maintain long-term financial health is to review your retirement plan regularly. This can help you stay on track with your savings goals, adjust to changes in your financial situation, and align your investments with your risk tolerance and retirement timeline.
In short, regularly reviewing your retirement plan can help you achieve financial security and a comfortable retirement.
45. Choose investments with high fees that erode your returns.
Over time, high fees can significantly reduce your investment returns. The advantage of choosing low-fee investments is that more of your money can grow over time, compounding your wealth more efficiently. The lower your fees, the more likely you are to maximize your potential gains and reach your financial goals.
46. Rely on your children to support you financially in retirement.
Your children may not be able to support you financially in retirement. In many cases, your children may have difficulties assisting you financially when they are faced with their own financial challenges, such as job loss, medical expenses, or raising a family.
Furthermore, depending on your children could strain your relationship and add undue stress to both parties, resulting in emotional and financial strain.
47. Buy into a retirement community without researching its reputation.
Choosing a retirement community without researching its reputation can result in unpleasant surprises. For example, there may be inadequate (or unfinished) facilities, poor healthcare services, or a lack of engaging activities. Aside from unexpected costs, you may also experience a lower quality of life.
48. Overspend on “luxury” retirement products and services.
Spending too much on luxury retirement products and services can quickly deplete your savings. As a result, you may run out of funds sooner than you planned, leaving you vulnerable to financial hardships. Ultimately, this might compromise your ability to maintain your lifestyle and cover essential expenses.
49. Spend retirement savings on extravagant gifts or purchases for others.
You may be jeopardizing your financial stability by neglecting your own financial needs to spend retirement savings on extravagant gifts and purchases for others. This behavior can quickly drain your savings, leaving you without the funds to cover your living and healthcare expenses. For example, you may have to buy the grandkids a $50 Holiday gift after retirement instead of the $200 before you retire.
In the end, if you prioritize others’ financial well-being over your own, you could compromise your retirement quality of life.
50. Keep all your financial assets in one place without diversification.
You must diversify your financial assets to protect your wealth and mitigate risk. A diversified retirement portfolio reduces the impact of a poor-performing asset on your portfolio by investing in stocks, bonds, and real estate. With this strategy, you can ensure more consistent and stable returns, safeguarding your financial future.
Conclusion
Many everyday financial pitfalls and misconceptions can threaten retirement security. When planning for retirement, it’s important to consider diversified investments, understand future needs, and take a realistic approach.
Most importantly, you should avoid any of the retirement tips listed above. Each is a red flag that can make you broke and leave you in a bad spot when you have retired.
Image Credit: Karolina Kaboompics; Pexels
