Offering too much financial support to adult kids
It’s natural to want to help your children financially. After all, making the transition to adulthood is tough. But too much help could come at the expense of your future retirement income. For example, a January 2024 Pew Research Center report says that 18% of parents surveyed mentioned that living with their young adult children has hurt their finances.
As the saying goes, put on your own oxygen mask before you help others. It’s possible to help your adult children while prioritizing your financial well-being. To do so, look at your budget and determine how much you can reasonably afford to help your child. Have an open conversation about the help you can offer and what you can’t.
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Discover the secretBuying luxury ‘toys’ such as a car or boat
Purchasing a luxury item like a fancy car or boat doesn’t end with the loan payment. You’ll also need to pay for maintenance costs, gas, insurance and, over time, repairs.
In other words, luxury “toys” will increase your budget, now and during your retirement years. Plus, the loan payments could be going towards your retirement accounts instead.
Depriving yourself of the finer things in life isn’t helpful, but you need to get clear on your priorities. Are you willing to work longer to afford a nice car or boat? Or would you rather forgo it and prioritize early retirement?
It’s possible to live a good life more frugally. Besides, there are ways to enjoy luxuries without owning them. For example, you can rent a luxury car or boat occasionally. Doing so means you’ll probably spend much less than owning it.
Not saving enough for medical care
If you’re like many, your employer takes care of your healthcare insurance premiums. Medicare kicks in when a person turns 65 years old. But if you decide to retire at 60, you’ll have about five years to be on the hook for health insurance.
Yes, you have to pay for Medicare — it depends on which plan you choose — but the costs are probably much less than private health plans.
In its research, Millman, an international actuarial and consulting firm, found that if a person retires at 60 years old, they can pay anywhere from 56% to 89% more in healthcare expenses compared to waiting until 65.
Even if you’re a healthy person retiring at age 65, you can still expect to pay $128,000 to $147,000 in healthcare costs over your remaining lifespan.
These numbers confirm that medical care later in life is expensive, and you must have enough saved up. If you decide to retire earlier, you’ll need to save even more.
One thing you can do to help is open and contribute to a healthcare savings account (HSA) and take steps to be as healthy as you can well into your golden years.
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