Most of the advice out there tells retirees they need to buy more. More insurance. More gadgets. More “just in case.” Kevin Lum disagrees. The certified financial planner sees it differently. He thinks most of these purchases just drain your savings without actually buying you security. It is easy to spend money to feel safe. It is harder to save it by doing nothing.
The Insurance Illusion
What is an insurable interest really? Lum asks that question for a reason. Life insurance isn’t about peace of mind. It is designed to replace income when you die so your dependents don’t starve. Simple as that. But about 90% of retirees buy it anyway. They do it for comfort. They don’t actually need the income replacement. If nobody depends on your paycheck anymore, do you really need a policy paying out nothing but fees?
Annuity Fees Bite
Variable annuities sound safe. They are marketed as guaranteed. But there is a catch hidden in the fine print. Fees. We’re talking three or four percent a year. These are often called “wrap fees” and they are incredibly sneaky. Tucked inside expense ratios. Buried in contracts. Even experienced investors miss them.
What looks like a minor charge on paper can siphon off tens or even hundreds of thousands over a lifetime.
The math is brutal. You pay more for the privilege of letting someone else manage your fear of losing money.
Paying Too Much for Funds
Are you paying a high expense ratio? You probably should stop. Lum suggests asking yourself what the fund actually achieves. Often, it’s not much. Morning Star points out that cost matters less when you’re young, but when you’re retired? Low costs are king. You need tax efficiency. You need cash flow. High fees eat into that. Why pay more when index funds offer the same exposure for pennies on the dollar? Keeping costs low means more money stays in your pocket to buy groceries and pay rent.
Warranties You’ll Never Use
Consumer Reports did the math. Most people who buy extended warranties spend more on the contract than they save on repairs. It is a losing game. Appliances rarely break during the extended window. And if they do, the repair cost is often cheaper than the annual fee you’ve already paid. Check your credit card. Some cards automatically extend warranties. You might already be covered for free.
Cars are different, maybe. If the vehicle has high repair costs or you plan to keep it forever, an extended warranty makes sense. But for the toaster? Skip it. Put that money in an emergency fund instead. Cash is flexible. Paper guarantees are not.
The Hard Truth
Buying things isn’t the solution to retirement anxiety. Planning is. Lum stresses that if you cannot clearly explain how an investment makes you money, do not buy it. Period. It is that simple. Most retirees fail not because they lack assets but because they let others define what those assets should look like.
Does silence look expensive to you? Maybe. But paying for unnecessary security feels expensive every month. The question remains: what are you buying that isn’t buying you anything?
