Avoid These 3 Common Boomer Financial Mistakes

The nice thing about getting older is that it often means getting wiser. But the moves older generations have made aren't necessarily the most financially savvy ones out there. Here are some mistakes baby boomers have been known to make, and why you should avoid them.

1. Putting your kids' college ahead of retirement savings

It's natural to want the best for your kids, and to want them to make it through college without taking on loads of debt in the process. But many older people have already made the mistake of putting their kids' college ahead of their personal needs.

In fact, a 2019 T. Rowe Price survey found that 53% of parents identified saving for college as a higher priority than saving for their own retirement. And needing money for college was among the most commonly cited reasons for taking a recent retirement account withdrawal.

Here's the thing, though. It's possible to borrow money for college. And while it may not be the most awesome way for your kids to start off young adulthood, the option exists.

Borrowing to fund your retirement could be a lot harder. You may have home equity you can borrow against in a pinch, but that's not an ideal solution. So rather than put college ahead of retirement savings, prioritize your nest egg. Or try to rework your budget so there's room to save for both.

2. Relying too much on Social Security

Many seniors today rely heavily on Social Security for retirement income. In fact, the Social Security Administration says that among recipients age 65 and older, 37% of men and 42% of women receive 50% or more of their income from Social Security.

But with an average monthly benefit of just $1,907, it's not a ton of money to live on. And with the possibility of benefit cuts in the future, depending too much on Social Security could lead you to a bad place financially.

A better bet? Save independently for retirement so you have income to rely on outside of Social Security. If you contribute $400 a month to an individual retirement account (IRA) or 401(k) over 30 years, and your investments in that account give you a 10% annual return, which is consistent with the stock market's average, you'll end up with a nest egg worth about $790,000.

3. Underestimating senior healthcare costs

You might assume that your healthcare costs will rise a little in retirement. But you may be shocked to learn that last year, Fidelity estimated the cost of healthcare in retirement at $157,500 for someone retiring in 2023 at age 65.

Of course, there are many factors that will determine what senior healthcare costs end up amounting to for you. But it's not a bad idea to assume the worst and save accordingly.

One thing it also makes sense to do is contribute to a health savings account (HSA) during your career and reserve those funds for retirement. The nice thing about HSAs is that they don't force you to spend down your balance on a yearly basis, so you can hang onto that money for the future. In fact, another great thing about HSAs is that your investments get to grow tax-free, so it's a good thing to leave your money alone for as long as possible.

The opportunity to learn from the mistakes of others is truly a gift. So do what you can to prioritize your retirement savings, have a realistic view of Social Security earnings, and get a firm handle on what healthcare will cost down the line, so you can save for it accordingly.