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High-risk investments

Retirees should focus on preserving their capital rather than risking it unnecessarily. Complex or high-risk investments may offer potentially high returns, but they can also result in significant losses. As you age, you have less time to wait out economic downturns, so make sure stocks aren’t over-represented in your portfolio.

Rebalancing your portfolio on a regular basis can ensure the right mix of assets (including stocks, bonds, CDs and cash) and appropriate risk levels for your changing needs in retirement. It’s crucial to research and understand any financial products before investing. Be cautious of financial products with high fees or unnecessary features that may not align with your retirement goals.

You may want to quote a qualified financial professional to ensure you’re not missing anything.

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Expensive vacations

Boomers may have been reluctant to travel during the pandemic, but now they’re splurging on vacations, including big-ticket items like exotic cruises. And while travel is a great way to enjoy retirement, overly extravagant vacations can quickly deplete retirement savings.

Travel costs are on the rise, thanks to inflation and higher interest rates, and booming demand is driving up the price of flights and hotels. The cost of a trip can start adding up, once you factor in meals, excursions, tips and travel insurance.

Finding a balance between affordable and enjoyable travel is crucial. Consider traveling in the offseason when prices are lower and look for senior discounts offered by hotels and attractions.

Timeshares

A timeshare is often viewed as an “‘investment,” but in most cases it depreciates once you take ownership. Nor can you generate any income from it.

With a timeshare, you pay for partial ownership of a vacation property, which is accessible to you during the same week or month each year. But timeshares often come with high maintenance fees and limited flexibility, making them a costly and inflexible investment for retirees. It’s not easy (or possible) to change your time slot, but you’re still required to pay ever-increasing annual maintenance fees.

The average price of a one-week timeshare interval was $21,455 in 2020, according to the most recent publicly available data from the American Resort Development Association (ARDA), with annual maintenance fees ranging from $640 to $1,290.

When you do the math, it could be much cheaper to stay in a hotel or rent a vacation home.

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Second homes

Many boomers consider buying a second home in their retirement years — perhaps a summer home in cottage country or a winter getaway in a retirement haven like Florida or Arizona. Some view it as an investment property, or as part of their legacy to leave to their children.

But owning multiple properties can be financially burdensome. If you’re renting it out as a source of income, you’ll still need to pay the mortgage, insurance, taxes and maintenance, even when it’s sitting vacant — and those costs will be even higher if the property is located in another country.

Plus, managing a property takes a lot of work, and if you hire a management company to handle that for you, you’ll have to share the profits. So it’s important to carefully consider the costs before investing in a vacation home.

Large, impulsive purchases

Nearly half of boomers (48%) said they’d be comfortable in retirement if they “watch their spending,” according to a 2019 Natixis survey. That comes down to budgeting, which is important when living on a fixed income.

But it’s one thing to have a budget; it’s another to stick to that budget. Americans spend more than $300 each month on impulse purchases, adding up to more than $3,600 per year. When those impulse purchases are big-ticket items, like a luxury car or yacht, that can put a sizable dent in your retirement savings.

Ultimately, impulsive spending can lead to regret and financial strain. It’s important to take time to evaluate whether a big purchase is a genuine necessity or just a fleeting desire.

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About the Author

Vawn Himmelsbach

Vawn Himmelsbach

Freelance Contributor

Vawn Himmelsbach is an experienced freelance writer and editor since 2001. She has contributed to various publications, such as The Globe and Mail, Toronto Star, National Post, CBC, Moneywise, Zoomer, Wheels, CAA Magazine, Explore Magazine, Canadian Traveller, Travelweek, WestJet Magazine, Ottawa Life, Flare, and Consumer Reports. In addition to these, Vawn is a senior contributing editor of BOLD Magazine, a custom content writer, and copy editor. Moreover, she has previously worked as a freelance page designer for Metro News and is a co-founder of Chic Savvy Travels, a travel website for women.

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Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.