Trap 1: The Reverse Pension Plan
Though they have faded in popularity over the past several years, reverse pension plans are a notorious scam and are always a bad idea. These plans come in a variety of forms, but typically try to convince you to pay a very small upfront fee, usually around $50, for a potential benefit of about $50,000 later on. If anyone comes to you offering a reverse pension plan and tells you how you can benefit from it, you should immediately walk away.
Trap 2: Carrying Credit Card Debt
This financial pitfall is so dangerous because it is so easy to fall into. When you are retired and no longer generating regular income, credit card debt that balloons out of control can quickly become a serious problem. To avoid getting killed on interest fees and credit card payments, you should always pay off the balance of each card you have at the end of the month. If you are unsure if you can pay off the balance, don’t use your cards at all. If you know you will carry a balance in advance, consider a card with a low or zero interest introductory rate, but always make sure you pay off the balance before that rate expires.
Trap 3: Long-Term Care Insurance
The chances that you will need long-term care of some kind are about one in two, while the chances that your house will be destroyed in a fire is about one in 1200. For this reason alone, long-term care insurance can be a great benefit and protect your assets from the associated bills required with long-term health care. However, if you don’t have a lot of assets, long-term care insurance may not be a good idea, and you should speak to a financial advisor to analyze your individual situation.