7 Splurges That Will Spoil Your Retirement Plans

splurges, retirement plans

After slugging through 40 years or more of work, many Americans look forward to a relaxing and carefree retirement. Some dream about sipping thirst-quenching margaritas on a white sandy beach. Others plan to pursue adventure overseas. Some envision spending their days with grandchildren.

Whatever the goal, it takes a lifetime of squirreling away savings and accumulating enough through careful investments to finally be able to exit the work force for good. Between Social Security benefits, your workplace retirement plan and a pension — if you’re among the lucky few who get one — you’ve built up a nest egg intended to last at least two or three decades in retirement.

Read: 8 Reasons You Won’t Retire at 65

But financial mistakes, whether innocent or indulgent, could torpedo the best-laid plans. Avoid these seven blunders for a more secure future.

1. Bankrolling Adult Children

A recent survey found that a majority of parents gave money to help support their adult children’s lifestyle, get them out of a crisis or pay down debt. Financial planners say it’s a mistake for retirees to aid their kids if they have to compromise their financial security to do so. If retirees run out of money, who will fund their retirement years?

Consider discussing some of the details of your retirement with your adult children so they understand that you aren’t independently wealthy and have budget limitations.

If a grown child is facing a serious health issue or in a dire financial situation, by all means, lend a helping hand if you can afford to. If you must, withdraw money from a bank account first. But avoid raiding your retirement account, or taking on new expenses, if you’re not in a position to help.

2. Going on Exotic Vacations

One of the most common splurges among new retirees is taking vacations. Finally, they have time and money to go on that exotic trip to China or hop across Europe.

It’s tempting to book a flight or a cruise and start checking locales off your bucket list. But Some financial planners say it might be a good idea for new retirees to wait at least a year to get a feel for their day-to-day expenses now that they’re living on a fixed income. They might mistakenly believe they have more money to spend than they actually do. Taking withdrawals over the allotted amount to cover vacation costs could result in the need to cut back on necessities to make up the loss.

Related: 7 Reasons Your Financial Planner Can Replace Your Therapist

3. Withdrawing Too Much Too Fast

Once you’ve figured out your retirement plan withdrawal strategy, you’ll need to stick to it to avoid draining your account faster than expected. Scott Stratton, a certified financial planner (CFP) and founder of Good Life Wealth Management, said many experts recommend that retirees start with an annual withdrawal rate of 3 percent to 4 percent.

“That sounds easy in theory, but in practice, many retirees have trouble sticking to such a conservative spending plan,” he said. “If they have $1 million and decide on a $40,000 annual withdrawal, that amounts to only $3,300 a month before taxes.” Of course, that amount doesn’t include monthly Social Security benefits.

His point: Expenses such as a new roof or unexpected medical debt can add up quickly, causing retirees to blow their budget for the year.

Related: 5 Things You Should Never Do With Your 401(k)

4. Taking on New Debt

Household debt has been growing among retirees, leaving them with less money to cover their daily living expenses. According to data analyzed by the non-profit Urban Institute, the share of adults ages 65 and older with outstanding debt increased from 30 to 46 percent between 1998 and 2010. In addition, the inflation-adjusted median value of debt surged by 56 percent over that period.

Before you splurge on a major purchase such as a boat or a beach house that will eat up a chunk of your savings, run the numbers and make sure you can afford it without withdrawing more from your accounts than you had planned.

Wait and see how your expenses pan out for a year or two before considering plunking down money for a purchase that will likely reduce your discretionary spending.

5. Starting a Business

Starting a business to earn extra income or to realize a dream is not uncommon in retirement. In fact, more than one in four adults ages 55 to 64 started a business last year, according to the Ewing Marion Kauffman Foundation’s 2015 Kauffman Index.

New retirees might be considering opening a business like a bed and breakfast inn for lifestyle reasons. But it’s important to remember that a business needs to solve some problem or shortage in the marketplace to succeed.

The bottom line: Using a nest egg to fund a venture can be a risky and costly proposition. It took years to build up that nest egg. There are fewer years left to recover lost funds.

6. Renovating a Home

For those planning to retire and age in place, remodeling a home now to live independently later might make sense. And while you’re at it, if you’re going to be spending more time at home, why not upgrade a kitchen with the design, cabinets and appliances you’ve always wanted?

Not so fast. Financial planners urge new retirees to proceed with caution. Renovation costs can add up swiftly and unexpectedly, wrecking a budget or draining a retirement savings account. Remodeling to make a home safe and to help retirees avoid falls are important as long as the costs are not financially daunting.

7. Investing Too Aggressively

Now that you’re retired, should you be investing aggressively to grow your return? Generally, if you take more risk, you could earn a higher reward. But if you don’t have the funds in retirement to play with and possibly lose, then taking unnecessary investment risks for the potential of high profits seems unwise. You don’t want your financial security to be at risk and keep you up at night, worrying about whether your funds will last.

Gregg Cohen, CEO of JWB Real Estate Capital, put it this way: “New retirees should focus on making investments that produce consistent returns. Singles and doubles are the name of the game when you’re at retirement age, not home runs.

“Home runs are great when they work out, but recent retirees just don’t have the time to make up any potential losses that can result from riskier investments,” he said.