Baby boomers admit biggest money mistakes
Younger generations could learn a thing or two about money from baby boomers. Not because the boomers have done everything right. In truth, this generation — made of individuals born between 1946 and 1964 — has made its fair share of financial missteps. Boomers have been there, done that and learned from what they did wrong.
Here, three boomers offer up their best money advice:
Cashing out a 401(k)
Tom Corley, author of “Change Your Habits, Change Your Life,” said his biggest money mistake was cashing out a 401(k). He took $40,000 he had in a retirement account with a former employer and invested it in the stock of a company that hired him.
Putting all of your money into a single investment is a mistake — one Corley learned the hard way. “My employer eventually filed for bankruptcy, and the value of my stock went from $150,000 to $0,” he said.
Plus, if you cash out a 401(k) before age 59 1/2, you’ll be hit with a 10 percent early withdrawal penalty on top of regular income taxes on the amount withdrawn.
Buying too much house
It’s easy to fall in love with a house that costs more than you can afford. Cathy Curtis, a certified financial planner and founder of Curtis Financial Planning in Oakland, Calif., said she made this mistake — and still regrets it.
Curtis decided to sell her two-bedroom, 1,500-square-foot home to buy something a little larger with her husband. They didn’t want to buy too much house but found a 3,000-square-foot home they loved. The house was a little out of their price range.
“I don’t think either of us thought hard enough about what it means to buy a house double the size of what we had lived in,” she said. Not only did their mortgage payments increase dramatically, but they had to shell out money to furnish their larger home. Buying too much house can also leave you with less money for things you enjoy — and for your retirement.
Investment scam
Gary Weiner, founder of the Super Savings Tips website, learned the hard way that if a deal seems too good to be true, it probably is. In his 20s, Weiner heard his sister’s ex-husband touting his new business, The Sports Hall of Fame, on the radio. Weiner thought it would be a good investment opportunity.
The former brother-in-law said there would be a huge profit for the venture’s investors. “After a few days, he accepted my check for $10,000 and I received a stock certificate from him,” Weiner said.
After a few weeks went by without hearing from his former brother-in-law about — and failing to reach him by phone — Weiner went back to the New York offices where they had met. “To my shock, the offices were gone, and not a single person in his building knew of him or any office,” Weiner said. He reported the con to the police and learned a year later that the former brother-in-law had gone to jail for swindling three dozen people out of hundreds of thousands of dollars.