In 20 years of helping retirees transition to a retirement lifestyle, all too often, I see people make uninformed decisions which they regret later. I want to address this topic in the hope that we can help people avoid those regrets!  

Don’t buy this in retirement! The top 3 pitfalls that I have seen:  

• Luxury cars: A new car typically loses 10-20% of its value when you drive it off the lot. For retirees on a fixed income, this is a sizable loss. Over time, depreciation continues, with some luxury cars losing 60% or more of their value within 5 years. Would you buy a mutual fund or a stock that was likely to lose 60% in 5 years? I think not!  

• Timeshares: Remember that even if it seems like a good idea now, family needs and desires change over time. Timeshares are practically illiquid (you may be familiar with the fact that they are nearly impossible to resell) AND they do not appreciate in value – not the best purchase when you are retired. Also, even if/when you pay off the initial loan, there are still going to be maintenance fees and assessments ongoing. So, regardless of whether or not you use your timeshare, you will continue to pay for it forever. There are so many alternative vacation options that make much more sense for retirees – both for finances and flexibility.  

• Extravagant gifts: This can include things like houses and new cars purchased for your children or grandchildren. It may feel generous, but long term, it usually does not encourage financial responsibility. (Think “give someone a fish” vs “teach someone to fish.”) When you feel the desire to give a gift, pause and consider this: what are you trying to communicate with this gift? Is there another, less expensive way to express that? Is there a way you can help your loved one learn about how money works (like helping with a downpayment, but having them be responsible for the loan)? Financial knowledge and experience may help them even more in the long run than a gift. 

An additional note on gifts: I realize this can be a hard one, especially if you recognize that you have more resources than your loved ones. But in working with multi-generational families, I have also observed that younger family members will often say that they would prefer retirees to enjoy their hard-earned savings, rather than spending it on the kids and grandkids. This is especially true if retirees go into debt to purchase a gift! Debt should be absolutely distasteful to retirees who live on a fixed income (like Social Security), as it can ruin even the best-laid retirement plans. In addition, after you are gone, you could end up passing along a burden of debt to your heirs, rather than a generous gift – probably not what you intended. So please be mindful and consider the longer-term effects of your actions.