6 Risky Money Habits Retirees Use To Avoid Financial Stress — and Why They Backfire
Financial stress doesn’t disappear with retirement. Sure, those regular Social Security payments are nice, but you’re also dealing with mounting healthcare costs and soaring costs of living while existing on a fixed income and trying not to run out of money. (Having fun yet?)
Unfortunately, maladaptive coping mechanisms also don’t disappear in retirement. Because financial stress can feel overwhelming, retirees often make risky money moves to eliminate their anxiety in the moment. However, these moves wind up biting them in the long run.
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Here are six risky money habits retirees use to avoid financial stress that can be disastrous and costly for their retirement plans.
1. Foregoing/Decreasing Insurance Coverage
Many people forego or decrease insurance coverage in order to save money on monthly premiums and have more money for groceries. This all sounds great in the moment, but according to Steven H. Craft Jr, founder and principal at Lucleon Insurance, this merely passes along the financial risk to retirement savings.
For instance, many retirees forego flood insurance before then experiencing a natural disaster. Instead of a $1,000 to $10,000 deductible, they wind up with $50,000 in home repairs.
2. Keeping Too Much Money in Cash
According to Jordan Mangaliman, CEO and fiduciary wealth advisor at GoldLine Wealth Management, retirees often don’t want to take on financial risk in their older years. Instead, to sleep better at night, they keep more money than they should in cash, CD’s or money market accounts.
However, playing it too safe is even riskier. This results in losing the battle against inflation and missing out on thousands of dollars’ worth of compounding growth.
3. Taking Too Much Financial Risk
On the flip side, some retirees seek extremely high-yielding investments to close the gap between their safe, income-producing assets and what they need to spend. Instead of being patient and letting their assets slowly compound, they hope to make a quick buck.
Of course, per Jeffrey Christakos, co-founder of Christakos Financial, if one’s investment allocation exceeds their risk tolerance and the market dips, they may not have the requisite time horizon to hold their investments long enough to reach their goals. Ultimately, they’d just lose a lot of money.
4. Blindly Withdrawing Retirement Income
Nicole Schelkopf, financial advisor at Edward Jones, explained that many retirees withdraw income from whichever account is easiest to access instead of paying attention to tax consequences. They simply view all their accounts as one large pool of money and withdraw from whichever is most convenient.
Unfortunately, according to Schelkopf, “Different retirement accounts are taxed differently, and the order of withdrawals can have a significant impact on a retiree’s long-term financial picture." For instance, taking large withdrawals from an IRA can increase taxable income and push one into a higher tax bracket. In 2026, a retiree whose income crosses IRMAA thresholds could see their Medicare Part B premiums increase $82 per month.
5. Debt Dependency
According to Cheryl Evans, director of the Lifetime Financial Security Program at Milken Institute, many retirees use credit cards or loans to bridge routine income gaps caused by unexpected costs like healthcare or home repairs. Sadly, just because you can easily charge money to a card does not mean it’s easy to pay back.
High-interest payments erode net worth faster than a savings account can accumulate. Instead, Evans recommended retirees have an adequate cushion set aside for emergencies.
6. Foregoing a Budget
Melanie Musson, insurance and finance expert at Clearsurance.com, stated some retirees spend money without a plan in place, instead preferring to stick their heads in the sand and “just go with it.” While creating a budget and auditing one’s spending can feel stressful, budgets put retirees in control and eliminate unknowns. This curbs overspending and prevents going through retirement savings too quickly.
Musson provided the following example: If a retiree obliviously spends $300 more per month than they can afford, that’s $3,600 more per year and $36,000 more over 10 years that they can never get back. It’s an even greater loss when considering how much that money could have compounded.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.