If you’ve spent your working years working hard and investing wisely, you might feel ready to chart a course into retirement with a financial windfall in your sails. You tell yourself that you’ve done everything right to leave the workforce and enjoy a more comfortable life – whether you’re going to travel from coast to coast or simply become a regular at your local gardening club.
However, even if you’ve accumulated enough money to consider yourself a wealthy retiree, you’re not immune from making mistakes that can derail your plans for a relaxing retirement.
GOBankingRates talked to several financial planning experts to learn more about the most significant mistakes retirees of means can make.
You Don’t Change Up Your Strategies
After retiring with a healthy chunk of change in your accounts, it’s understandable that you might not want to risk cracking your nest egg by getting too bold with your investments. However, staying in the safe zone can actually limit your ability to grow your wealth in the long-term.
According to Ohan Kayikchyan PhD, CFP, founder of Ohan The Money Doctor, wealthier retirees can be risk-averse when it comes to protecting their wealth – even when it means missing out on opportunities to boost their net worth. He encourages retirees to look into financial planning to help manage their current wealth and guide them through successful estate planning.
Todd Stearn, founder and CEO of The Money Manual, says one of the biggest financial pitfalls for wealthy retirees is getting locked into the same long-term investment strategy. While a buy-and-hold stock investing strategy may have been tried-and-true during your working life, Stearn says that “retirement is no time to let the bulk of your money weather market downturns.”
He encourages retirees to consider moving larger portions of their money from high-risk investments like stocks to lower-risk options such as CDs, bonds, high-yield savings accounts, and money market funds.
You Cut a Little Too Loose
You’ve worked hard, and you deserve to play hard too, especially when you’re not expected back in the office bright and early. Unfortunately, while those whale watching photos from your latest cruise may wow friends and family, indulging yourself in too many major excursions or even local shopping trips adds up fast.
“You should absolutely enjoy the rewards of your efforts, and you’ll probably have a lot more time to do so now,” says Stearn. “But even a large retirement can be drained faster than you might expect if you’re taking luxurious vacations, going on shopping sprees, and returning to the same large home you raised your family in.”
He suggests that even wealthy retirees shouldn’t just assume that they have the money for everything they want upfront. Instead, they should plan on – and stick to – a monthly budget while also looking for ways to save money. Downsizing homes and researching more cost-effective plans for dream vacations can help ensure financial stability throughout retirement.
You Self-Fund Parts of Your Care
Sometimes, funding parts of your own healthcare can feel much easier than navigating the red tape and complicated forms involved with getting insurance for needs like long-term care.
But Chris Urban, CFP, RICP, founder of Discovery Wealth Planning says that you’d be wise to consider your maximum out-of-pocket exposure for any catastrophic medical issues that may come up, particularly issues that would require comprehensive care. Investigating your options now can help you prepare for sudden complications.
“Whether it’s employer-sponsored healthcare, a plan from the ACA marketplace or a Medicare/Medigap/Medicare Advantage plan, be sure to understand the total financial risk you face should the worst situation unfortunately arise,” he says.
You Pick Up the Phone and Open Your Bank Account to Scammers
Scammers have only gotten more sophisticated in recent years. As GOBankingRates has reported, criminals have found new ways of conning people by playing to their fears or trying to charm them. Even the savviest retiree might still be vulnerable to the latest dirty trick.
“If you’ve managed to amass a small fortune, it might be easy to think you’re simply not the ‘type’ to fall for a scam,” says Stearn. “But even active finance professionals have come forward to confess it’s happened to them, and wealthy retirees can be very attractive targets.”
He advises retirees not to pick up calls from unknown numbers or open emails from unknown senders. While hanging a no-soliciting sign on your day may deter fraudsters in the flesh, you’ll also need to stay aware of the latest online digital schemes, like spoofing your loved ones’ numbers – or even voices – to make you think they’re calling for help.
“Vigilance and a healthy dose of skepticism can go a long way,” he adds. “Always do thorough research before parting with any money or personal information.”