The majority of baby boomers are woefully unprepared for retirement, reports U.S. News & World Report. In large part, this is because baby boomers made too many critical financial mistakes. Here are some key ways boomers have failed at retirement planning and how you can avoid these errors in your own retirement preparations:
- Assuming what went up, will continue to go up. Many boomers bought homes or upsized to McMansions during the good years, often using highly leveraged, high risk, and unconventional loans. They assumed that this was a low risk activity because of the equity they hoped would accrue from continued real estate appreciation. They were wrong to assume this. The era of continuously increasing real asset values, equity markets, and bond yields is over, perhaps for years or decades. Boomers didn’t figure this out in time.
- Using dubious home equity as a primary retirement nest egg. For boomers who planned on using home equity as a retirement plan, their nest egg is now a cracked or empty shell. Homes are not investments. When they are paid for, homes deliver tax-free shelter services.
- Failure to diversify. Some boomers didn’t establish a proper allocation of investments into non-correlated asset classes. This takes careful study and thought. Instead, many boomers were oblivious to risk or focused on chasing returns from the hottest funds.