Mark Cuban's Message to Near Retirees: Never Do These 4 Things With Your Money

If you're nearing retirement and worried you don't have enough saved in your 401(k) retirement plan, Mark Cuban has some advice and tips for getting financially ready to take the leap.

Cuban is well-known for his often blunt but straightforward advice for people who are struggling with money and want to find a way to financially prepare for the future. After all, those who are in their final few years before retirement are in a critical window where making financial mistakes could delay their retirement date.

The key financial mistakes people make before retirement

Many of the principles Cuban preaches are especially important for those nearing retirement. For example, Cuban encourages people to invest their money in the market, rather than just saving it, because simply saving it in a savings account won't help people meet their goals.

Here are a few other mistakes Cuban says to avoid when it comes to your personal finances.

Carrying high-interest debt into retirement

Cuban has said that paying off credit card debt is one of the best investments people can make in their futures because it's a guaranteed 20% return. This is especially important for people nearing retirement age, since carrying high-interest debt into retirement can negatively impact cash flow. 

Many people also start having more health issues as they age, which can be costly, so worrying about high-interest debt while trying to afford basic necessities may be a challenge.

Investing in expensive funds that you don't understand

Cuban warns people that many investments charge high fees, like management fees, which can cut into your retirement returns. He also cautions people against investing in any business that they can't clearly explain.

Those who are near retirement are especially vulnerable to expensive investments, especially if they believe an opportunity will garner them outsized returns. Ultimately, nearing retirement is a time to be more conservative and protect and add to your nest egg.

Retire without a large emergency fund

Cuban is also a huge proponent of having some cash on hand as a way to protect yourself from emergencies and also to have money available when opportunities arrive. He believes people should have a six-month emergency fund before investing for the future for this reason.

An emergency fund is even more critical for people who are nearing retirement. Having cash on hand can prevent people from withdrawing money during a market downturn or taking out a 401(k) loan, both of which can delay meeting retirement goals. Additionally, having an emergency fund provides insurance against job layoffs, since losing a job close to retirement is much more challenging to recover from financially than it is when you're in your 20s or 30s.

Using peak earning years to inflate your lifestyle

Cuban often derides lifestyle inflation. Instead, he encourages people to "live like a student" for as long as they can. He himself lived very frugally early in his career, drove old cars, and slept on a couch. He says that those frugal habits enabled him to to start his business.

Many people get to mid-life, when they are at their peak earning years, and upgrade their homes, cars, and vacations. However, high-earning years can be an opportunity to accelerate your nest egg growth and take advantage of catch-up contributions after age 50. 

Plus, if large, inflated expenses like a higher mortgage payment follow you to retirement, it may be harder to afford to live on a fixed income.

Cuban's advice isn't flashy, but it works

Ultimately, Cuban's advice isn't flashy. In fact, it's very straightforward and consistent between the many interviews that he does. 

Overall, he maintains many of his frugal habits and isn't interested in fancy watches or a chauffeur. He encourages other people to also be mindful of their spending habits so that they can enjoy financial security now and in retirement for many years to come.

How to get back on track after making financial mistakes

Everyone makes financial mistakes from time to time, but what's important is getting back on track quickly. 

So, if you've racked up credit card debt or had periods of high spending, improving your finances before retirement can help you stop working on time and have better financial management habits for your golden years.

Bottom line

Cuban says that overall, being on track for retirement comes down to the financial habits people have in the years leading up to stopping work. 

Following his advice means paying close attention to your money, avoiding lifestyle inflation, keeping an emergency fund, and staying away from credit card debt. These are simple principles that work because they help people manage risk and prepare their finances for decades of retirement.