You've Been Warned: New Retirees Should Avoid This Popular Purchase

New retirees often find themselves eager to explore their newfound freedom, and that often leads them to make certain purchases they wind up regretting. Enter the timeshare. Rather than making moves to boost their retirement income, some retirees fall prey to smooth talking salespeople offering the promise of a responsibility-free vacation home in a wonderful location — sometimes with the choice of many locations — that you can share with friends and family. Along with other regrettable retirement purchases that retirees make, buying into a timeshare starts off as a great idea with the idea of making incredible memories in your Golden Years, but can quickly turn sour as you start to realize the downsides like the ongoing financial costs and lack of flexibility with your purchase.

A 2023 State of the Vacation Timeshare Industry report from the American Resort Development Association (ARDA), which studied the state of the industry during the calendar year of 2022, found that there were a total of 201,600 timeshare units spread across 1,541 timeshare resorts. Those units included properties across a range of accommodation types, including resorts, houses, condos, apartments, and campgrounds.

The timeshare industry as a whole had a 2022 value, according to Wesley Financial Group, of $10.5 billion, contributing approximately $73.1 billion to the economy. With this type of financial impact, timeshares clearly have a hold on American consumers, but that popularity does not necessarily equate to a wise investment for retirees who are looking to enjoy their newfound freedom to enjoy their time on their own terms.

According to Vacation Ownership Advisor, a company that offers vacation ownership management services, the modern timeshare concept dates back to the 1960s when the first timeshares were offered on the Hawaiian island of Kauai in 1965. Since that time, timeshares have grown into a multi-billion-dollar industry that has evolved with the times to remain relevant and continue to attract consumers.

The concept of a timeshare is actually quite simple. Ownership is divided among multiple parties, and buyers are able to secure a slot of time, usually about one week throughout the year, to use that property for their own personal use. In other words, when you purchase a timeshare, you are actually purchasing a time slot to use a property that recurs year after year. Owners can either visit by themselves or share their time with a friend or loved one if they desire. Timeshare resorts provide the management of the property, and some allow you to select from different locations or different units each time you visit.

Timeshares are sold either as lease contracts or in part-ownership pieces which correlate to length of time available for the consumer to stay throughout the year. Those lengths of stay can equate to several days or, more commonly, a one-week period of time. Along with the other owners or leases of the property, contract holders must share the available time slots with the other owners of that property.

Because ownership is shared among many individuals, it can be difficult at times to get your vacation for the exact time you want it, and it can be even more difficult to take that trip spontaneously on short notice (which is contradictory to the retirement lifestyle that many seek to enjoy). There are also costs involved. These fees include yearly taxes and fees for maintenance and management, which can get aggravating when you realize that you are limited to only using your timeshare for a designated period of time each year, usually one week.

While, according to the ARDA report, some timeshare providers allow owners to trade in their accrued days for other vacation options such as cruises, this is not representative of the industry as a whole. Some resorts offer multiple locations to choose from or multiple units, but this luxury sometimes comes at a cost with the owner having to pay more to upgrade to a specific time period, a specific location, or even a bigger unit. You are also limited to the locations your particular timeshare company has units in. This limits your vacation options — people who are already committed to a particular vacation destination find themselves limited when wanting to explore new destinations.

Lastly, timeshare contracts can be difficult to sell once you want out. If you are looking for a way to increase your savings so you can vacation where you want, when you want, and as long as you want in retirement, there are better investment options, such as annuity strategies that will give you a better return on your investment than investing in a portion of a property that you don't actually own and can't do what you want with.