Many older Americans have worked hard their entire lives to build a comfortable nest egg. They saved, invested, and planned for the future. But some of the financial decisions they’re making now could mean there’s little left to pass on. Here’s what could be putting their inheritance at risk.
Spending Too Much in Retirement
Retirement is supposed to be about enjoying life, but some retirees are burning through their savings at an alarming rate. Between vacations, new cars, and expensive hobbies, they may not realize how quickly their money is disappearing.
With people living longer than ever, outliving savings is a real concern. If there’s nothing left by the time they pass, their children won’t be inheriting much, if anything at all.
Taking on Too Much Debt
Not all debt disappears when someone passes away. Credit card balances, personal loans, and even some types of medical debt can eat away at what’s left behind. Some older individuals continue borrowing well into retirement, thinking they can handle it. But without a steady income to pay it off, that debt can soon spiral out of control, leaving their estate drained.
Helping Adult Children Too Much
Parents want to support their children, but there’s a fine line between helping and hurting. Covering rent, paying off student loans, or funding extravagant purchases can slowly deplete retirement savings. Some boomers feel guilty if their children struggle financially, but sacrificing their own security to help out isn’t always wise.
Not Having a Will or Estate Plan
Many people assume their assets will automatically go to their children, but without a proper estate plan, things can get complicated. Failing to write a will means state laws decide who gets what, and that may not align with their wishes. Probate can also be a long, expensive process, reducing the inheritance even further.
Proper planning ensures assets go where they’re supposed to, rather than being tied up in legal red tape.
Falling for Scams and Fraud
Scammers often target older adults, knowing they may be more trusting or unfamiliar with modern financial tricks. Fraudulent investment schemes, fake tech support calls, or romance scams are all used to trick retirees out of millions Once that money is gone, it’s nearly impossible to get back.
Keeping a House That’s Too Expensive
Holding onto a large, costly home will drain retirement funds faster than expected. Between property taxes, maintenance, and rising utility costs, a home can quickly become a financial burden. Some retirees refuse to downsize, thinking they’ll leave the house to their children.
Not Planning for Long-Term Care Costs
Healthcare expenses can be devastating, especially if someone needs long-term care. Many boomers underestimate how much nursing homes or assisted living facilities cost, assuming Medicare will cover it all.
In reality, long-term care can wipe out savings very quickly. Without proper planning, these costs can leave nothing behind for their heirs.
Investing Too Aggressively or Not at All
Some retirees chase high-risk investments, hoping to grow their wealth quickly. Others play it too safe and let their money sit in low-yield accounts that don’t keep up with inflation. Both extremes can be damaging. Poor investment choices can lead to major losses, while overly cautious moves can cause savings to shrink in value over time.
Co-Signing Loans for Family Members
It’s one thing to lend money to a family member, but co-signing a loan is a whole different risk. If the borrower stops making payments, the co-signer is legally responsible for the debt. Many boomers don’t realize this until it’s too late.
A single defaulted loan can eat into savings, forcing them to cover payments they never expected.
Ignoring Taxes on Retirement Withdrawals
Pulling money from retirement accounts isn’t as simple as withdrawing cash from a bank. Taxes on 401(k) and IRA withdrawals can be hefty if not managed correctly.
Some retirees take out large sums at once, triggering higher tax bills that reduce their overall wealth. Without careful planning, more of their savings goes to the IRS instead of their heirs.
Buying Unnecessary Life Insurance Policies
Life insurance is always useful for those with dependents, but some retirees continue paying high premiums for life policies they no longer need. With grown children and no major debts, keeping expensive coverage doesn’t always make sense. That money could be better used elsewhere, but instead, it’s drained month after month.
Delaying Social Security Too Long
While waiting to claim Social Security can increase benefits, delaying too long can mean missing out on money that could have been invested or used wisely. Some people wait past the ideal age, thinking they’ll maximize their monthly check. However, if they don’t live long enough to reap the benefits, they’ll end up with less overall.
Spending Big on Luxury Purchases
Many retirees feel they’ve earned the right to splurge, and while there’s nothing wrong with enjoying life, excessive spending can drain inheritance funds. Fancy cars, high-end vacations, and expensive hobbies may bring short-term joy, but they also chip away at long-term security.
Not Understanding Inflation’s Impact
The cost of living is constantly rising, and some boomers don’t adjust their financial plans accordingly. What seemed like enough money 20 years ago may not stretch as far today. If they continue spending at the same rate without factoring in inflation, they might run out of funds sooner than expected. Without enough left over, their inheritance shrinks or disappears altogether.
Leaving Everything to One Child Without a Plan
Unequal inheritances can cause family rifts, but sometimes boomers don’t think through how their assets will be divided. Leaving everything to one child, whether intentional or accidental, can lead to disputes and legal battles.
If a proper plan isn’t in place, fights over money can destroy family relationships. Ensuring assets are distributed fairly and clearly can prevent future conflicts.
Not Talking About Finances with Their Kids
Some older people avoid discussing money with their children, thinking it’s a private matter. But without clear communication, their kids might be unprepared for what’s coming (or not coming). They may assume they’ll inherit a fortune only to be left with unpaid bills instead.
Talking about finances early helps set realistic expectations and allows for better planning, ensuring that any inheritance, big or small, is handled wisely.