I’m a Financial Expert: Avoid These 6 Spending Traps That Could Crush Your Retirement Plans
Written by
Kerra Bolton
Edited by
Jenna Klaverweiden
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Saving for retirement takes time and discipline, but spending habits in retirement can be just as important as the years of saving. Overspending on lifestyle upgrades, overlooking hidden costs or carrying debt can quietly erode nest eggs.
What seems manageable at first can become a long-term burden on fixed incomes. Financial experts advise retirees to watch for common risks and avoid six spending traps that could undermine their retirement plans.
Supporting Adult Children
Helping adult children or grandchildren can feel rewarding, but it can also destabilize fixed incomes. Planners said ongoing support is one of the biggest retirement spending traps.
“Two thousand dollars per month to an adult child is $24,000 per year,” said Chad Cummings, a CPA and attorney at Cummings & Cummings Law. “If paid from a tax-deferred account, the gross withdrawal may need to be $30,000 or more and can push up Medicare surcharges and Social Security taxation.”
Cummings said families should adopt a written family policy that defines limits and duration to avoid turning financial help into a long-term spending trap.
Overspending on Travel and Leisure
Many retirees splurge on trips, hobbies and dining once they stop working. These costs can quietly exceed budgets and become a spending trap.
What begins as a well-deserved vacation or new pastime often turns into recurring expenses that drain savings faster than expected. Cruises, golf memberships and frequent dining out may seem manageable in the moment, but over time, they can erode financial security.
Setting limits and building leisure spending into a realistic budget helps preserve both enjoyment and long-term stability.
Carrying Credit Card or Loan Balances
Carrying credit card or loan balances into retirement is a spending trap that can quickly erode savings. Debt payments eat into monthly budgets and become harder to manage without a steady income.
High-interest balances are especially damaging, since retirees may pay far more in interest than they borrowed. Tackling debt before leaving the workforce, or creating a clear payoff plan, helps free up cash flow and protect long-term financial security.
Underestimating Healthcare Costs
Healthcare is essential, but many retirees fall into a spending trap by underestimating the actual costs. Experts said medical expenses often rise faster than inflation, leaving budgets stretched.
“Across a long retirement, a couple can face $300,000 to $500,000 of out-of-pocket premiums and expenses excluding long-term care, with assisted living or memory care commonly running $80,000 to $120,000 per year,” Cummings said.
He also said Medicare surcharges can add thousands of dollars each year if required distributions, Roth conversions or capital gains push income too high.
Cummings advised mapping coverage before and after age 65, setting aside funds or partial long-term care insurance for at least three years’ worth of facility costs, and timing Roth conversions carefully to avoid unnecessary surcharges.
Mortgage Payoff Trap
Rushing to pay off the mortgage can be a spending trap for retirees who still carry low, fixed-rate loans. Many believe eliminating this debt will bring peace of mind, but using a lump sum of cash to do so can backfire.
“If your interest rate is low and manageable, and your investments are earning more than your mortgage is costing you, keeping the loan in place can work in your favor, especially if only a few years remain,” said Nancy Butler, CFP, a business coach and founder of Above All Else. “Using a lump sum of cash to eliminate the mortgage means that money is gone forever. By keeping payments and letting your investments grow, you may create more financial security and flexibility for the years ahead.”
Hidden Housing Costs
Housing can be a major spending trap as well due to hidden costs, like property taxes, insurance and more.
“A $900,000 home at a 2.2% tax rate is $19,800 per year before assessments,” Cummings said. “Coastal insurance can add $6,000 to $12,000, and a roof or HVAC replacement can cost $15,000 to $40,000 in a single year.”
Cummings said retirees should cap housing costs, plan for repairs in advance and consider relocating for more tax savings.
“Cap total housing costs at no more than 25% of net retirement income, maintain a separate capital reserve at least 2% of home value for repairs, and obtain written quotes for premiums and deductibles before relocating,” Cummings said. “That is why I counsel many clients to move to states with no personal income tax such as Florida and Texas.”
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