Kevin O'Leary Says Retirees Should Never Do These 6 Things With Money

As a well-known entrepreneur and on-air commentator, Kevin O'Leary regularly gives blunt, no-excuses advice about personal finance. While many people think he has a harsh approach to business and money, as evidenced by his persona on the hit TV show, Shark Tank, others appreciate his directness.

Over the past few years, he has made several comments in interviews stating that people are not saving properly in their 401(k) retirement plans. Here are some of the top mistakes he says workers make that could cost them their retirement, along with tips and advice that can help people overcome financial hardships and build a secure retirement.

Bringing high-interest debt into retirement

O'Leary is adamantly against high-interest debt, like credit card debt. Today, over 50% of Americans use credit cards to cover basic living expenses. Additionally, the total credit card debt in America is over $1.3 trillion, billions more than the previous quarter.

Because credit card interest rates are so high, using them without paying them off negatively impacts people's cash flow. O'Leary says that retirees who want to have adequate cash flow must pay down high-interest debt. Ideally, retirees can work toward being debt-free before retiring to reduce their expenses after they stop working.

Relying on Social Security as your only income source

Another mistake people make, according to O'Leary, is relying too much on Social Security or a 401(k). Neither was meant to be the only source of retirement income. Retirees will need more than one stream of income in order to maintain their lifestyles in retirement. Additionally, starting in 2033, Social Security will only be able to pay out 79% of benefits unless Congress passes a new law.

For those reasons, workers need to explore all their retirement account options, including 401(k)s, IRAs, HSAs, Social Security, and other sources of income, to ensure they have enough to live on. Consulting with a financial planner can help workers know whether or not they're on track for retirement.

Investing in wealth destroyers, like private sector businesses

O'Leary also cautions against investing in private-sector businesses, such as restaurants, bowling alleys, and bars. He says it's common for people to lose their money in these types of passion projects, and it's far better to invest in what you know.

Not fully understanding health care expenses in retirement

Many people don't realize that health care can also be very expensive in retirement. In fact, Fidelity data shows that people 65 and older can expect to spend over $170,000 in total on their health care needs. This number doesn't include dental, vision, or long-term care that people may need in a retirement home or in a memory care facility, which can cost thousands per month.

For this reason, many workers will likely need to have a larger nest egg than they realize in order to afford living expenses and health expenses in retirement.

Not having day-to-day spending discipline

One of O'Leary's biggest wealth-building principles is to have self-discipline. He frequently speaks about people's overspending habits, especially those with low income who spend heavily on unnecessary items, like lunches out.

To him, people are not saving enough for their retirement plans because they are spending too much on these unnecessary items. He explains that to be financially successful, people need to consistently exercise discipline for several decades.

Assuming retirement will work itself out

Finally, many people make the mistake of assuming retirement will work itself out. Many people invest in a 401(k) passively through their employer, but they don't actually make a plan for their retirement and subsequent withdrawal strategy. Instead, it's important to take an active approach to preparing for retirement, since fewer people can rely on pensions to fund their retirements as previous generations did.

O'Leary's advice is uncomfortable, but effective

Ultimately, O'Leary's main piece of advice for preparing for retirement is to learn how to live on less than you currently do. He is a proponent of disciplined spending habits, expense tracking, and budgeting. Many people find his advice harsh. If you're near retirement, it's especially important to practice living on less to make the transition from salaried employee to fixed-income retiree.

Bottom line

Kevin O'Leary believes that in order to have a stress-free retirement, people need to focus on their spending and saving habits. Ultimately, he says that people are not saving enough in their retirement plans, and many of them are relying too much on Social Security to support them in retirement. Plus, credit card debt is at an all-time high, and many people are spending more than they earn. To save adequately for a good lifestyle and retirement, O'Leary says it's important for people to learn discipline and practice living on less than they earn.