Most retirees can afford these 7 purchases. That's not the problem.The problem is that a surprising number of them quietly work against you throughout retirement, draining your portfolio, your time, and your energy in ways you never saw coming.In this video, we walk through the assets that wealthy retirees almost never buy, and the ones that other retirees almost always end up regretting. From timeshares and boats to complex financial products pitched at steak dinners, we cover the full list and explain why each one tends to disappoint.But this isn't just a list of "don'ts."At the end, there's a conversation I had with a Harvard researcher on money and happiness that reframes the whole question. It turns out, more money CAN make you happier, but only if you spend it in a specific way. The three spending principles she shared changed how I think about retirement spending entirely.Stay for the end. It might be the most valuable part.
[00:00:00] Hey, welcome to another episode of Retirement Made Simple. I'm your host, Kevin Lum. I'm a certified financial planner based in Los Angeles, and this podcast is dedicated to helping a million people retire without worry. As a quick reminder, every episode here comes straight from our YouTube channel. So this is just the audio, so you can listen while you're walking, driving, or living your life. Let's dive in.
[00:00:26] In one of our first meetings, this hardly ever happens, but the husband slides a brochure across the desk and he says, we're thinking about celebrating with a boat. What do you think? Instead of answering him, I simply asked him one question that ended up changing his mind about this purchase, and maybe that question will work for you, so I'm going to share it with you in a minute.
[00:00:48] So today, I want to walk you through seven assets that wealthy retirees almost never buy, and other retirees almost always regret. And it's not always because they can't afford them. They often can. It's because they realize that some of these purchases quietly work against them throughout the retirement.
[00:01:07] It's rare that I encourage people to listen to the end, although I always hope that you do. But I think the end of this video in particular has some really powerful information about how you can spend your money in retirement. So even if you're not interested in the list, go ahead and just skip forward to the end. So let's dive in. Let's start with the most predictable one. Can anyone guess what the number one asset that people regret investing in? It's timeshares.
[00:01:32] According to the ARDA, and this is the timeshare industry's own trade association. They show that the fees on owning a timeshare have jumped more than 35% in just the past four years. And that fee goes up whether you use that timeshare or not. And it's for as long as you own it.
[00:01:52] The part the sales presentation never covers is when you try to get out of that timeshare, you discover that the resale market barely exists. There are entire businesses built around helping people give away their timeshares. I had another client whose mother passed away and she owned a couple of timeshares. And he told me once, he's probably exaggerating. He said, settling that estate, just exiting those contracts took longer than everything else combined.
[00:02:19] So what should you do instead? In my opinion, you would be better off taking the money that you would invest in a timeshare or that rather you would sink into a timeshare and invest in trips to places you want to go. Because the reality is, at least what I hear from people, you get tired of going to the same place the 52nd week of the year. And while they tell you, you can switch and choose different weeks and different times, the process is so complicated that most people still regret it.
[00:02:48] Now, I have to say, I talked about this in a video once before and 90% of the people said I was right. I hate timeshares. But there was a vocal minority who said they loved their timeshare and it was one of the best investments they ever made. So let me know in the comments, are you on team timeshare or no timeshare? So that's the first. Number two, boats. And this is what the client at the beginning of this video was considering. Now, this isn't the most common retirement purchase, but it is definitely up there.
[00:03:18] And often the story goes something like this. You finally quit working, you're free of your work week, and you've always dreamed of owning your own boat. You have these images of literally sailing off into the sunset. But then you purchase the boat and you realize that a lot goes into owning a boat.
[00:03:36] The cost can add up quickly and they can end up being a drain, not only on your budget or your retirement portfolio, but also on your emotional well-being. The care and the upkeep take away from your mental energy and your time. And then all the other costs begin to drain your retirement savings.
[00:03:59] And before you know it, what was supposed to give you joy and freedom ends up tying you down and also draining your bank account. There's a rule of thumb in the boating world, which goes something like this. You should budget about 10% of the purchase price every single year for maintenance and all in ownership, right? Storage and insurance from fuel and repairs. And honestly, that can be a bit low. Sometimes it runs 10%, 15%, 20%.
[00:04:24] And the cost end up being way more than what most people calculate. And of course, like I said, the hassle is even worse. There's an old joke that goes this way. The two happiest days in a boater's life are the day they buy the boat and the day they sell it. So here's what I told my client. Dip your toe into the water. Consider maybe a fractional boat or even before you do a fractional boat or a boat club,
[00:04:51] maybe rent one for a weekend or a couple of weeks through a rental service so you can find out, am I actually a boat person? Does this bring me joy or is it just a pain and is it going to sit in the slip most of the time? In the end, this client did not end up giving boating. It was actually great for him and his wife. He joined a boat club. It was flat fee. He shows up. The boat is fuel and clean and he goes out in the water. And at the end of the day, he hands it back. He owns the experience, not the anchor.
[00:05:22] Number three, it's the RV. And I want to be careful here because for some retirees, an RV is a genuine lifestyle and worth every penny. An RV is the quintessential retirement dream. You get all the comforts of home. In fact, you get to pull your home along with you and you don't have to worry about lodging. You can go where you please. You imagine yourself traveling across the country, visiting in national parks and all the amazing places that you could go visit.
[00:05:50] But as someone who bought an Airstream during COVID, let me tell you, it is not all roses. Now, that doesn't mean I don't enjoy having an RV. In fact, we just took a week in Santa Barbara with our family. It was amazing. And it doesn't mean you won't enjoy having one either. But like a boat, before you buy, try. Why? Well, because new RVs typically lose 20 to 30% of their value in the first year alone.
[00:06:17] Class A motorhomes can lose over 30%. So if you end up buying an RV and then turns out you're not an RV person, you just lost 20 to 30% of the purchase price. And then even if you do love the RV experience, there are tons of other things that begin to add up. You have storage fees and maintenance fees and the insurance. And it can just keep going on and on and on. And often they just end up sitting in storage. Honestly, we probably only use ours once or twice a year.
[00:06:46] We always have an intention of using more often. But we rarely do. And sometime I will tell you about being locked out of our airstream in Death Valley during the middle of the summer. Or the giant snake that we found underneath our sink in Yellowstone that the park service told us was probably a rattlesnake. But those are stories for another day. Now, before I get to number four and four is honestly one of the ones that really makes me upset. If you find this content helpful, would you do me a favor?
[00:07:15] Would you hit the subscribe button? Hit the like button. It helps this channel. Reach new viewers. And like I've said over and over, it's great for my ego and gives me something to brag about to my daughter. Okay, number four. Whole life insurance or permanent insurance policies. This could be whole life or it could be an IUL that is sold to retirees as an investment. And this one makes me upset because it's not a lifestyle purchase you enjoy. It is a product that gets sold to people often as they age.
[00:07:44] Term life insurance for the same death benefit can cost a small fraction of what you would spend for a whole life policy or an IUL. Often a permanent policy can be five to 15 times more expensive than a term policy. And here's the bigger question that almost no one that is selling you one of these policies takes time to ask. What is the insurance for? Life insurance exists to replace your income for people who depend on it. If you're retired, often your kids are fully grown.
[00:08:13] And if you're married, your spouse is probably going to be provided for by Social Security and your portfolio. And in many cases, there's really no income that's left to insure. Now, there are legitimate uses for permanent policies. It can be great for a special needs dependent and also certain estate planning situations. But those are specific problems with specific solutions designed with a plan in mind.
[00:08:40] Not a product pitched at a stake dinner. If someone is pitching you a policy as a private pension or as a tax-free retirement account or as an investment vehicle, ask them these two questions if you want to watch them squirm. Number one, how much commission are you making on this policy? And then you can follow it up with, are you acting as a fiduciary? So number four, stay away from permanent life insurance policies unless it makes sense in the context of your plan.
[00:09:08] Number five, complicated high-fee investment products. And the poster child here is the non-traded REIT, right? These get sold to retirees with a really seductive pitch. Real estate income, steady distributions, no stock market volatility. And honestly, the same could be said for private equity investments and also private credit investments. But here's what the brochures often gloss over.
[00:09:31] They gloss over the upfront fees and the commissions and the really expensive fees that are often built into these products. And over the years, I've reviewed a lot of portfolios. And what I've discovered over and over is often that the wealthiest people I run across have the most boring portfolios. Index funds, some bonds, maybe some individual real estate, and maybe they own their own business. Things that you can explain as an owner in one sentence, right?
[00:09:59] My rule for clients is something like this. If you can't explain an investment to, I don't know, your smartest grandkid in 60 seconds, don't buy it. Complexity in these products isn't sophistication. It's often sold as sophistication. You're getting access to things that only the wealthy are able to get access to. But often it's just hiding high commissions and high sales fees. Number six, the vacation home.
[00:10:23] You know, you go on that trip, that one you visited last summer, and you said, what if we just bought a place here? We love it. Now, some people love their vacation homes, and they will tell you it's been a wonderful investment. In fact, talking about vacation homes is probably one of the things I've received more pushback on than anything else, especially from people who have purchased their homes in the last 10 years, because we need to remember that the past 10 years have been a very unique time,
[00:10:51] and real estate markets have increased dramatically. But the math that people often don't think of in the moment they're purchasing these properties is the all-in carrying costs on a second home. Taxes and insurance and maintenance and utilities and possibly HOA. And they can commonly run 1% to 2% of the home's value per year if paid in cash and a lot more if it's built into your mortgage. One analysis found that a $400,000 vacation home can cost over $30,000 a year to carry.
[00:11:20] You take that $30,000 and you divide it by the number of nights that you'll actually be there, and it can be a very expensive place to stay. If you use it four weeks a year, that's over $1,000 a night to stay in the same place every time and to spend half of your time fixing the water heater. And then there's a second issue that nobody thinks about at the moment. Will your future self be able to keep up the home as you age?
[00:11:46] Maybe you're keeping the cost down currently because you're doing all the repairs on your own. But as you age, will you be able to keep this property up? Now, if you'll be there three months every year and the grandkids gather there every summer, that's a different equation. That's a family hub and it might be the best money that you ever spend.
[00:12:09] But be honest about the difference between buying a gathering place and buying a memory of one nice vacation. You go and you're like, I could live here forever. And then you buy a home and you realize, actually, I don't want to live here forever. So if you decide to make that purchase, go into it with your eyes wide open. And number seven, honestly, isn't that big a deal, but it's kind of my personal hobby horse. Extended warranties. Consumer Reports has studied this for years and the numbers are pretty remarkable.
[00:12:37] For major appliances, they say that the average repair only costs about $26 more than the warranty itself. For extended auto warranties, buyers paid about $1,000 on average to get back around $700 in benefit. And a large share of buyers never used the warranty at all. And ultimately, extended warranties are insurance against a risk that most of us can already afford.
[00:13:03] If you have a solid retirement portfolio, a broken dishwasher is an inconvenience, not a catastrophe. Wealthy retirees self-insure the small stuff and save the real insurance for real catastrophes. Things that could actually ruin their financial situation. Health costs, liability, long-term care. So when I'm checking out and somebody asks, would you like to add the warranty on this? My answer is almost always no. I will say the one exception is an extended warranty on a used vehicle.
[00:13:31] We buy used vehicles and we typically will buy the extended warranty all the way to $100,000. Two weeks ago, I took my car in to get the oil changed. They said they found $6,000 in repairs that need to be made. It was covered by warranty. I was incredibly glad that my vehicle with 90,000 miles on it had an extended warranty. Okay, let's bring this home. So we've talked about timeshares and boats and RVs and whole life policies and IUL, kind of lump all those together.
[00:14:00] Which get pitched as an investment. Complex products that you can't explain. Think about private credit. Can you explain to me what private credit is? The two-week vacation home and extended warranties. Which brings me back to my client at the beginning. The couple with the boat in the brochure. Here's the question I asked them. And it's honestly the one that changed his mind. I said, would you rather own the boat or the ability to be on a boat any Saturday you want?
[00:14:30] And he sat with that for a moment. And he realized what he actually wanted was to be on the boat on Saturday, right? He imagined the water and the friends and the sunset. Not the slip fees and the winterizing and the repairs. So the question is, do you want to own the thing or own the freedom? But I don't want to just leave you with a list of don'ts. So let me tell you about a conversation that changed how I think about how I spend money. I once had the opportunity to speak with a researcher from Harvard about money and happiness. And I brought up an old study.
[00:14:58] The one that says, past a certain amount of income, more money doesn't make us happier. Think the amount is like $70,000 or $75,000. And the researcher replied to me. They said, that's partially true. But more money can make you happier if you spend it in the right way. And she gave me three ways of spending money that actually do bring more happiness. The first is buying back your time. If you hate doing the yard work, hire a gardener. But here's the key.
[00:15:27] Only if you take that reclaimed time and pour it into something you love. First of all, hire the gardener so you have time to go play tennis or go hiking or see your friends. Buy back time and then spend it on something you enjoy. Second, buying experiences instead of things. This is the whole video in one sentence. Some of my family's best memories are the trips we took together, right? Things like taking my mom to New York City and having high tea with her granddaughter at the Plaza Hotel or going with our in-laws to Italy.
[00:15:56] Those are things that don't depreciate. They don't need a maintenance fee. And often they get better every time you remember them. And the third way to increase happiness through spending or having more money is investing in others, right? Your charity, your church, a cause that you care about. The research is clear that people who spend on others, not just themselves, are measurably happier. And so that's the message, right? Rent the boat. Book the villa. Take the trip.
[00:16:26] Buy back your time. Buy experiences. Invest in people and causes you love. And own investments you can actually explain. That's how wealthy retirees actually live. And honestly, it can be way more fun and way less stressful. But I'd love to hear in the comments what your reaction is. Which of these have you bought? Have you bought any of these? Do you regret any of these? Was it worth it? Or do you wish you had the money back? Hey, thanks for listening.
[00:16:53] If you enjoyed this content, if you'd do me a favor and just leave a review on whatever podcast app you're using, Apple or Google or Spotify. And also you can find us on YouTube. Just search Foundry Financial or Retirement Made Simple. You should be able to find us by searching both. And then you can find our website at foundryfinancial.org. Thanks for listening. Thanks for listening.