There are many fantastic things about the "golden retirement age" that we are eagerly anticipating, yet these amazing promises conceal some unsettling realities. Despite the fact that we are constantly taught about certain aspects of this time period, some of them are glossed over in order to not frighten those who are ready to retire.
Even though it may be upsetting to hear, those things must be said in order for those of us who are close to retiring to know what to expect and for those who are a long way from retirement to know how to effectively plan for those years.
There are many aspects of retirement that aren't discussed, ranging from the unanticipated medical bills that people don't like to talk about to a lot of expenses and things people have to do but don't expect. This can be a problem. For this reason, we have compiled these sobering facts about retirement that you should keep in mind while you consider it, especially if the time is approaching.
#1 If you time your Social Security benefits incorrectly, you could lose a lot.
The money you withdraw from your Social Security account before you are eligible for retirement is not replaced. The truth is that there is no way to recover back the money you are actively deducting from your monthly paycheck. Your future monthly payment will go down as soon as you start making early payments.
People who have already gone through this advise waiting as long as you can before beginning to get Social Security benefits. The amount will increase rather than decrease with each check, giving you more money overall. However, there are numerous factors that can be taken into account, so it would be wise to consult an expert or use an online optimizer to determine when it is best to take out loans.
#2 Inflation may cause your nest egg to lose value
The harsh reality of everything going on right now is that one of the biggest dangers to your retirement savings is inflation. Although the United States hasn't experienced a significant increase in inflation over the past 20 years thanks to the Federal Reserve, we all know that nothing is guaranteed. It is always possible for inflation to soar rapidly that it exceeds 10% annually in a couple of weeks, according to experts.
This concept is more important than ever given how recent global events have demonstrated their influence on our inflation shooting up and everything getting more expensive. Most retirees could wind up bankrupt due to inflation. We make plans based on how much money we saved at a given moment in time, but inflation can cause costs to rise so high that your savings account may be exhausted sooner than you had anticipated.
Since real estate and Treasury inflation-protected securities (TIPS) are investments that are vulnerable to inflation, you should constantly try to diversify your portfolio whenever you can to avoid losing money over the long term.
#3 You might need to take a part-time job.
Although it may not have occurred to you, many American retirees live with this reality. This is due to the fact that some individuals want to work in such a position because it offers numerous health advantages and allows them to remain physically and intellectually active. Some people find retirement tedious after spending so many years in the workforce; a part-time job helps them maintain a routine.
However, the unpleasant reality is that some retirees are forced to continue working because they cannot afford to stop. Whether you choose to or are forced to, it's something to keep in mind. We all enjoy thinking about how we would unwind once we are retired, but the truth can be quite different. even just being bored.
#4 Because life expectancy is higher, your figures might not be accurate.
This might not be a problem right now, but it might develop into one later in life, or it might have even started to pop into your head amongst other ideas. The Centers for Disease Control and Prevention found that in the US, the average life expectancy increased to 78.6 years. Even though this is fantastic news, it also raises the issue of the fact that many retirees don't actually have that much money.
The reality is that since this depends on a lot of circumstances, you might live much longer than that. We also cannot foresee how long we will live or whether our retirement savings will be enough to support us for the remainder of our lives, despite our best efforts. Many seniors are now really concerned about this, so it's a good idea to start planning ways to avoid outliving your income before you do. Look into products like indexed annuities that provide a guaranteed income!
#5 Medicaid won't cover everything, according to medical fact No. 1
Many people don't give the hard truths about the medical side of things much thought, largely because they wind up being healthy and experiencing no such issues. However, this still has the potential to be a major shock and drain your finances much more quickly than you would anticipate.
Since access to Medicare is not a given, it is good that it exists. And even though many of us who are in good health tend to forget about it, this service won't end up providing everything you could need in your later years. Although it's unpleasant to consider, the fact is that health declines as we age and that each of us has unique demands, some of which Medicaid does not cover.
Even in a nursing home or assisted living facility, long-term care is not covered, nor are things like hearing, vision, or dental problems. You run the danger of having to pay hefty deductibles and co-pays as a result, therefore we advise that you budget for medical costs while you are setting money aside for retirement. You should start planning for this potential problem right now, whether it's by setting aside a little extra money each month or enrolling in a supplemental insurance plan.
#6 You cannot sacrifice retirement in order to pay for college.
Unfortunately, a lot of parents today experience this. Many of us struggle with the dilemma of having to choose between helping our children pay for college and attempting to save for retirement due to how costly college has gotten. Even though it could be tempting, you shouldn't sacrifice your retirement savings merely to assist others.
One of the biggest blunders you can make is to put a lot of money into a college fund but none into retirement savings. We're not arguing that you shouldn't assist your children, of course. However, you should consider what you can accomplish and how much you can afford to contribute before deciding how much of the remaining costs can be paid by grants, loans, and other perks.
Although we know it will be challenging, the reality is that having a sizable education fund will do absolutely nothing to assist you in preparing for retirement. And if you begin saving money only a few years after your children leave for college, you might find that you are unable to raise enough money to live comfortably.
Medical fact no. 2: You'll spend more money on your health than you think.
The cost of healthcare and maintaining it will be much higher than you could ever anticipate, which is the second difficult thing to accept. We're not simply saying this to frighten you, either! According to a 2019 study, an average 65-year-old couple who retires will have to pay $285,000 in medical expenses alone for their whole retirement period. Additionally, not all of those will be covered by Medicaid, as we already mentioned.
If you decide to invest in items like HSAs (health savings accounts), which will be distinct from the rest of your savings accounts, that is for the best. As a result, those assets will be able to assist you if you incur any unanticipated medical expenses after retiring. Furthermore, being able to withdraw funds from that account rather than your 401(k) plan or another possible nest egg can be a lifesaver. Even when you are young, it's wonderful if you can create this account and then completely forget about it!
After all, it's best to be ready because you never know when medical bills may arise.
#8 You might have to relocate, but it wasn't your choice to do so.
Even though we all adore our homes, there are occasions when you may need to consider moving, even if it's not the best option. This may be the case both because a new home will enable you to live more comfortably and stretch your funds further, as well as because it will likely ease your tension and worry about not being able to afford a comfortable retirement.
If you have extra money to relocate and purchase property, you can rent your old house and earn some extra money from that. Alternatively, you can view this move as a great opportunity to be closer to your grandchildren, move to a climate that is more comfortable for you, or simply get to enjoy a community with more senior residents. There are many reasons you might wish to relocate, so if retirement is causing you too much anxiety, check out this possibility!