Six things baby boomers are blowing their retirement on.
When I retire, I'm going on a month-long vacation. When I retire, I'm buying that 1965 Mustang Shelby or my dream Corvette. When I retire, I'm renovating our home from top to bottom. When I retire, I'm buying a house on the beach in Costa Rica. I love this. Believe me, that's a dream.
The problem is, Americans are not saving enough to fulfill their dreams. Your dreams.
They are miscalculating what they need in retirement and blowing it all. In the next few years, the youngest baby boomers will turn 67 years old in the year 2031. That means millions of baby boomers are still in the workforce, and if you're one of them, do not make these six mistakes that older baby boomers are making every day in retirement.
In our last video, I discussed that to retire on a $55,000 annual retirement, you needed to save at least $700,000. A lot of you are not happy with me. I'm sorry, but according to a recent study conducted by Transamerica Center baby boomers that have not retired, they're still working, believe that $750,000 is what they need to feel financially secure.
So we were not far off in our last video. Unfortunately, according to another study by Vanguard, the average retirement savings for Americans at the age of 65 is only $280,000 for baby boomers. It's even worse - the average baby boomer savings is just $202,000 at this time. The average Social Security benefit is just $1,681 per month for those who have already retired.
The news, you see it every day, is constantly reporting on the future, possible reduction in Social Security benefits and even the increase in the retirement age. Baby boomers must take control of their spending to guarantee they can live comfortably throughout retirement. Because we're all living longer.
If all of these news reports are causing you concern. Then, now is the time to start saving more money. Getting your estate plan in place and avoiding these six retirement mistakes.
Number one, spending too much time on that dream vacation. I know what you're thinking. You deserve a vacation and you know what you do. But vacations are expensive.
You only have so much for retirement, and any big lump sums taken off the top in the first few years are going to affect how much you can continue to draw down each year. You've probably heard others talk about the 4% rule, 4% from your investments annually without touching the principle
Plan your dream vacation within the 4% rule. Pay for it from the interest earned off of the principal and not the principal.
I know it can be tempting because you have all that money sitting there. If you cannot pay for that dream vacation from the interest earned off your retirement savings, then unfortunately you're going to have to save money from your retirement distribution each month until you have enough money in that vacation fund to go on that vacation.
Even better, if you know you want to take that dream vacation, then start saving now for it while you are still working.
Buying expensive gifts.
One of the first things our estate planning clients tell us all the time is they want to spoil their grandchildren with expensive gifts, even their children. And I get it. You love them, right?
And you want to do nice things for them. You know what? Make those gifts, spoil them. You know what I'm going to say? Keep it within the 4% rule. Can you see where I'm going with all of these? Only spend what you can afford and leave your heirs. What is left over as part of your estate plan. Remember, take care of you. Take care of yourself first.
Number three, paying too much for medical expenses. If you go to the doctor or receive treatment, well, you have to pay for it. Somebody does a service for you. You pay for it. But make certain you are not overpaying or paying that bill too early. Medical costs are out of control and people call us all the time in a panic when they get a medical bill for hundreds of thousands of dollars.
It happens every day in these instances. Many times, insurance has not yet determined what their benefits are. Hospitals and medical facilities are huge corporations these days, and sometimes the left hand doesn't speak very clearly to the right hand.
Always, always ask for an itemized medical bill and make certain make sure you are not double or even triple paying for those medical expenses when those astronomical medical bills do come in and they will.
Wait for and double check them against your health insurance companies Explanation of benefits.
A few years ago, I heard of a situation where four unmarried adult children all still lived with their elderly father. I'm not talking about children in their twenties or thirties. These were adult children who live their entire life at home on their father's dime.
When their father finally died, they were lost. The father paid from his monthly retirement savings, a car insurance, a mortgage, the utilities, the cable TV, the food to feed them all.
This was an extreme case that I heard about, but we see parents making similar decisions all the time. You must be the CEO of your life. It might be tough love, but you must take care of yourself.
You first know it's tempting to help an adult child out and only do it if you have the money and the savings to do it and if it's not going to have an adverse effect on your retirement.
Number five, buying a timeshare. Don't do it. Do not do it. I know it is tempting. You see those beautiful brochures?
Maybe you visited the property on the promise of free money or free tickets to a concert or a free vacation just for listening to their sales pitch. Do you think all this is free just because they're nice? You know, that's not the answer. It's a business. You know, it's a business. You buy a timeshare and you are locked into maintenance fees for the rest of your life and they are almost impossible to get out of.
Actually, I think they are impossible. Many will try to convince you and your kids that the timeshare automatically transfers to them, to your children at your death. They want to keep that money coming in. Many clients have tried to convince me what a great investment that condo in Puerto Vallarta is and that it will be passed on to their children.
That's a horrible estate plan. A timeshare is not an estate plan. In fact, when we probate estates, the heirs will disclaim.
A timeshare is not real estate. A timeshare is not an investment. A timeshare is a bad idea. As people get older, they quit using that week in paradise. But maintenance fees don't care how old you are or even whether you visited the property in years.
Maintenance fees are due every single year, and if that beautiful condominium complex starts to get older and it needs upgrades, guess what? You could be stuck with an assessment on top of the annual maintenance fees when it comes to timeshare. Please do not buy them.
Number six in retirement you are on a fixed income. You know this. You might get cost of living adjustments if you're lucky, but you're not getting a promotion.
And you know what I'm going to say? Only pay for those renovations if it fits into the 4% rule. That's the rule for all of these. Your dream is to do some major renovations and make that home you've been living in to into your retirement oasis, then plan for it while you are still working. If you're already retired, then start a renovation fund to make those renovations.Bottom line we all must live within our means during retirement. Talk to an Estate Planning An attorney and a financial advisor to make those dreams come true. And if you're still working, then start saving now for their retirement dreams. They're your dreams and you deserve them.