5 Money Habits That Can Destroy Middle-Class Retirees’ Finances
Written by
John Schmoll
Edited by
Zuri Anderson
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“What’s my number?” is a common question many soon-to-be retirees ask themselves as they plan their golden years. The answer helps guide retirement planning and gives retirees an idea of what post-life work will look like.
Various poor money habits can derail even the best of planning, making retirement living challenging. Living the kind of life you want is possible, but it’s necessary to avoid certain financial habits.
GOBankingRates asked ChatGPT what money habits can sabotage finances for middle-class retirees. Here are five money practices the generative AI recommended sidestepping.
Carrying High-Interest Debt
High-interest credit card debt can hamper any budget. Such debt can be even more debilitating for retired Americans. Unfortunately, credit card debt continues to rise for retirees.
Nearly 70% of retirees with debt say they have credit card debt outstanding, according to the Employee Benefit Research Institute (EBRI). Eliminating the debt is essential for retirees.
“Focus on paying down debt before retirement. If already retired, prioritize paying off high-interest balances first, or look into a low-interest balance transfer or debt consolidation strategy,” said ChatGPT.
Claiming Social Security Too Early
Social Security benefits constitute a significant portion of many retirees’ income. Payments comprise roughly 30% of the income of people over 65, according to the Social Security Administration (SSA). Although retirees can claim benefits at 62, waiting until full retirement age (FRA) has significant benefits.
The SSA reports that payments can be reduced by at least 25%, depending on your birth year.
“If possible, delay claiming benefits until full retirement age or even 70 to maximize payments. Those with limited savings or health issues may still need to claim earlier, but knowing the trade-offs helps,” noted the AI tool.
Claiming benefits is personal, but claiming early will directly result in receiving substantially less.
Underestimating Healthcare Costs
Healthcare costs are a significant expense for many retirees. According to Fidelity, a 65-year-old retiring in 2025 will spend $172,500 on health care expenses in retirement. ChatGPT noted this can pose a significant problem.
“Medical expenses typically rise with age, and Medicare doesn’t cover everything. Without planning, retirees may need to dip into savings faster than expected,” said the AI. It recommended including costs in retirement budgeting to help stave off financial problems.
“A Health Savings Account (HSA), supplemental insurance or long-term care policy can help ease the burden,” noted ChatGPT.
Underestimating costs can easily ruin plans for retirement. Taking advantage of available resources is key to staving off problems.
Failing To Downsize or Adjust Lifestyle
It’s likely that many retirees won’t have the same needs as they did during working years. Failing to make changes can erode savings.
“Hanging onto a large home, multiple vehicles or costly hobbies can drain savings unnecessarily,” said ChatGPT.
This isn’t to say that enjoying retirement life is bad, per se. However, making adjustments can stretch your budget. It’s best to reassess your needs in retirement. Look for opportunities to claw back resources, such as downsizing your home and curbing needless spending.
Not Having a Large Enough Emergency Fund
Emergencies don’t stop in retirement. You may incur a major car repair or need to replace the air conditioner in your home. Unplanned expenses can easily derail a retirement plan if they occur too often and you’re unprepared.
“Unexpected expenses… can force retirees to dip into retirement accounts, potentially at inopportune times, like during a market downturn,” noted ChatGPT.
Financial expert Suze Orman suggests retirees have an emergency fund of up to 12 months of living expenses saved. Think of having emergency savings as a means to protect your wealth. Not having such savings can have ruinous effects.
Retirement can be a rich time, creating memories and doing things you’ve always envisioned. Following wise money habits is paramount to making the lifestyle you want a reality.
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