Nobody really knows what retirement holds for them until they get there, but that doesn’t mean you shouldn’t plan or prepare for the day you give up your career for good. Plenty of retirees have gotten to this stage already, and here are some truths they wish they had known before retiring.
There are no guarantees for your retirement investments
While many people prepare for retirement with investments, they should know that there are no guarantees when it comes to their returns. Just ask some of the retirees who collectively lost $3.4 trillion in the Great Recession. As you approach retirement, rebalance your portfolio to protect against these risks to avoid being wiped out.
You may not have saved enough as a young person
The earlier you start saving money for retirement, the better it will be for your financial health. Because savings and investments compound over time, you may regret it if you wait until middle age to start saving for retirement, as it will not be as effective as putting that money away as a young person.
It costs more to live longer
According to the World Health Organization, life expectancies grew by 5.5 years between 2000 and 2016, which is great for global health, but it could also impact your plans. You will need to save more money for retirement than your parents did, even with inflation taken into account, because you will probably live longer than them.
You’ll make more from social security if you wait
While many countries offer some form of financial assistance to people who reach retirement age, that amount can change depending on when you claim it. In the United States, you will receive 132% of the monthly benefit if you wait until age 70 to start claiming it, which can help you as you get older and require more care.
Tax-planning is complicated
Depending on the country they live in, retirees are generally responsible for calculating and paying their own income tax. For retirees, whose income comes in the form of government assistance and tax-advantaged savings accounts, it can be difficult to optimize income to pay the least amount of tax, but careful tax-planning can save you a considerable amount over the course of your retirement.
You need to consider healthcare costs
Most nations, including the United States, provide healthcare to their senior citizens, but few of them provide complete coverage. The average American couple spends $280,000 on healthcare in retirement, which can include prescription medication, dental and vision care, insurance premiums or medical devices not covered by insurance.
You will probably need long-term care
Half of Americans about to turn 65 will require some form of long-term care in their retirement, according to Forbes, and that long-term care can cost quite a bit. While it’s possible that your children will be able to take care of you, it is by no means certain and you should make sure that you have enough saved to make sure you will be comfortable in this period.
Inflation will eat your savings
Retirement investments may put your retirement savings at some risk, but simply storing your cash in a savings account is a sure loser. Inflation will eat away at the spending power of your money faster than even the generous interest from a savings account, which is why experts recommend investments, even if you don’t like risk.
You can’t borrow for retirement
Throughout your life, you may finance your education, your home, your car and many other things through debt, but that’s not an option for retirement. Consider this if you want to pay for your child’s education, for example. Your child could pay back their own loans in the future, but you will never get that money back for retirement.
You should have contributed to your employer-sponsored plan
When employers offer to make contributions to your employer-sponsored retirement portfolio (such as a 401(k) in the United States), take them. An employer contribution to such a plan is an automatic return on investment, even if it forces you to put aside a portion of your paycheque for future use.
Your house is too big
Maintaining a house can be expensive, even if you’ve paid off the mortgage. Conventional wisdom says that you will spend 1% to 3% of a home’s purchase price on repairs and maintenance every year. If you raised your family in a large house, you may want to downgrade before you give up your career.
You should have bought property
Should you buy or should you rent? More people are asking themselves this question as property values rocket in desirable urban centres like New York or Toronto, but purchasing property can provide you with equity as you pay your mortgage off, whereas rent payments are simply gone forever.
You may have to work part-time
When you budget your retirement dollars, you may come to the realization that you don’t have enough savings to maintain a comfortable lifestyle. If this is the case, you may have to find yourself some part-time work, like over 30% of Americans aged 65-69, whether it’s related to your former career or not.
Your children may not be financially independent
It’s taking longer for young people to start their careers, even when they benefit from an expensive college education, according to the Harvard Business Review. This means that your children might rely on your finances for longer than you think. Even if you want to retire, you might not have enough savings to pay for your children.
Your parents may still require your assistance
With people living longer than ever, it’s possible that your parents might still be alive when you decide to retire, and that they may require your financial assistance for long-term healthcare needs. While it will be a blessing to enjoy your parents’ company in their twilight years, it can also be a financial burden.
You’ll have to think about what comes after death
Retirement can allow you to explore your interests and enjoy life, but it won’t make you any younger. As you get older, you will need to prepare your will, outlining inheritances and specific funeral arrangements. It may not be the most enjoyable part of your retirement, but preparing for death is, unfortunately, a part of life.
It’s hard to pay off debt in retirement
Paying off mortgages, car loans and credit card bills is a normal part of life, but it’s not very sustainable in retirement. Expect and plan to live on 70% to 80% of your pre-retirement income in retirement, which won’t allow you the same amount of leeway in paying off debts.
You may not be able to afford the retirement you want
Many retirees dream of travel, adventure and luxury when they finally give up their career, but the reality can be very different. The high cost of travelling means that you may be spending more time than you expected at home, or finding low-cost options rather than the luxurious vacations you once dreamed about.
Staying healthy will save you money in retirement
Taking care of your body will pay off in retirement as you can avoid the high costs of healthcare and the toll of frequent hospital visits or long-term care. While good health means you’ll live longer, it also means you’ll find it easier to save money, and to work into your retirement years if necessary.
You should have diversified your investments
There is no single portfolio that works for every person. While you may be comfortable taking bigger risks in your youth, you should ease out of these high-risk investments and diversify as you get older. Overall, the market tends to grow, while specific industries and companies can crater as the world changes.
You may have to follow family at some point
As you retire, your children will likely be starting careers of their own that may take them away from their hometown. If you want to be close to your family, or if you expect to live with your children in old age, you may have to move to a new place, whether or not that was in your original retirement plan.
You should have looked at the fees
The amount of fees you pay for your investments could have a huge impact on your retirement savings, with high-fee investments sometimes costing up to 50% of your return. You can avoid high fees by investing in ETFs, a low-fee investment option that tracks market indexes, rather than higher-fee mutual funds.
You could have used catch-up contributions
In some countries, such as the United States, individuals approaching retirement can make “catch-up” contributions to their tax-advantaged retirement savings plans. This is especially helpful for individuals who may not have saved much money for retirement when they were younger and may struggle to reach their savings goals.
It gets boring
Sometimes, the problem with having nothing to do is that, well, you have nothing to do. Studies show that this can lead to depression and even cognitive decline for some early retirees, but you can avoid boredom by ensuring that you have a full and rewarding social life, along with hobbies and activities to keep your mind and your body active.
Unexpected costs can be quite a burden
Annual budgets in retirement may not account for unexpected costs, such as the need for a new car, or the bill for a major home repair. Life doesn’t abide by tightly curated budgets, so ensure that you have an emergency fund in your retirement budget that will ensure you don’t break the bank when the unexpected happens.
You’ll probably only be able to spend a portion of what you spent before retirement
Financial advisers sometimes suggest you save enough to spend 70% to 80% of your pre-retirement income when you retire, and some retirees don’t reach those goals. While many retirees no longer have to worry about dependents in retirement, some will have to get used to their new financial realities.
Divorce is becoming more common among retirees
If the children have moved out of the house and your career has come to a close, you may be spending more time with your spouse, so you better make sure you want to be with them. Divorce rates for couples over 50 have doubled since the 1990s, which can be traced to greater longevity in retirement as well as a reduced social stigma toward separations.
You could be forced into early retirement
Early retirement isn’t always a choice. Often, people take an early retirement due to poor health or a late-career layoff, which stunts their ability to save money effectively and their ability to pursue the lifestyle they would like to live in retirement.
Dividends are not a reliable source of income
Some people hope to live off stock dividends when they retire, but companies may reduce or stop paying out dividends altogether if they’re not profitable. While retirees can still invest in stocks that pay dividends, they need to be mindful of the risks, and realize that those dividends may not always be there.
It can get lonely
Retirement is an exciting time for you to pursue your interests and live life to the fullest, but one in three retirees also find it very lonely. You can prevent loneliness by maintaining friendships from before retirement, keeping in touch with family, and filling your time with social activities.
The expenses that come with buying, renovating and decorating a home can add up, but fortunately, there are ways to save money every step of the way.
We asked real estate insiders for their best tips on how to save money on every part of your home, and their advice can help cut costs for anyone looking to buy a new home or renovate the one they currently have.
Click through to get tips on how to save money on your home.
If you have focused all your planning energy on your 401(k), you may be missing a key piece of the retirement puzzle: Social Security.
You can influence your eventual payout from this safe, dull old-age safety net to a surprising degree by making some adjustments and changes in your planning.
Now is the time to get started pumping up your Social Security checks, even if you’ve got decades to go before retirement.
Here are some ways to do just that!
If your ideal place to retire in America is by the beach, you’re in luck — many beach cities have affordable housing options and a sizable 65 and older population.
To find the most affordable places to retire near the beach, we looked at 59 beach cities and narrowed down a list of locations where people ages 65 and older made up at least 10 percent of the population. The study analyzed factors such as home values and healthcare expenses, both of which can help you determine your retirement costs.
Why many retirees outlast their savings
As 10,000 baby boomers turn 65 every day and count down the minutes to retirement, they’re also counting their savings – and their fears. They’re not alone. According to the latest Transamerica Retirement Survey, the single greatest retirement fear is outliving savings, which was cited by 52% of those polled. Indeed, 38% of workers aren’t confident they will be able to retire with a comfortable lifestyle, the survey found, and 46% don’t believe they are building a large enough retirement nest egg.
It’s time to face your fears. Before you start your retirement journey, learn more about the common reasons why some retirees wind up broke in their golden years. More importantly, learn what you can do now to avoid that fate.
Click ahead for 15 reasons you’ll go broke in retirement!
If you’re thinking about relocating to somewhere cheaper in retirement, you’re not alone — many Americans lack sufficient retirement savings to afford the cost of living in their home states after their working years are over. Moving to a more cost-effective area can help stretch your funds further in retirement, alleviating some uncertainty about your financial future.
To help you choose the perfect place to retire, GOBankingRates evaluated all 50 states and determined where you can live out your golden years for less than $45,000 annually. The study analyzed factors like groceries, housing, utilities, transportation, healthcare and the overall cost-of-living index in each state, all of which contribute heavily to your yearly expenses in retirement.
These indices were then multiplied by the average annual expenditures of Americans aged 65 and older, which provided the final ranking of the top 26 states. The figures quoted in this article are per household. The most recent Census lists the average number of people per household as 2.5.
To prepare for retirement, take a look at places to live that will cost you less than $45,000 annually!
Stretching your nest egg as far as possible is something that’s most likely front of mind for most retirees who aren’t very wealthy. With no new sources of income aside from Social Security or possibly a pension, it’s important to find a place to retire that won’t drain your savings. You don’t want to have to tap your retirement savings early.
However, getting a clear sense of exactly how long your money will last you requires understanding how much it costs to live in the state you’re calling home. As anyone trying to get by in somewhere with a high cost of living can attest, even basic necessities can quickly start to winnow down your retirement account. And it only gets more complicated if you decide you don’t want to spend your entire retirement in the same place, as your costs won’t be consistent throughout your retirement.
That’s why GOBankingRates performed a study to compare the cost of living in every state and determine how long you can survive off of $100,000. Granted, $100,000 won’t buy you a lot of time. But it will give you a sense of just how much you need to save to prepare for the retirement you want.
Click ahead to where $100,000 will last the longest in retirement.
Not everyone likes getting old, but that doesn’t mean we can’t take advantage of it.
Many retailers across the nation offer a wide variety of “senior” discounts to people as young as 50. Some entail stipulations beyond age, such as an AARP membership. But not all places have that requirement.
The following stores offer senior discounts that don’t require an AARP membership. At most, you may have to show identification to prove your age or join a store’s free loyalty program to qualify for the discount.
7 Things You Can Do If You Regret Retirement
Many of us punch the clock for decades dreaming of the moment when we finally can retire. But what happens if you retire only to find that post-work life is less thrilling than you imagined?
Following are seven things you can do if you regret retirement.
Trade War? 15 Things That Will Cost You More Under Trump’s Tariffs
President Donald Trump’s tariffs could tax your wallet even as they attempt to spur U.S. job growth.
In January, Trump announced tariffs on washing machines and solar panels.
Proposed are additional tariffs on 1,300 products — around $60 billion worth — imported from China. Trump says he wants to reduce the U.S. trade deficit with China, the difference between U.S. exports to and imports from that nation, which hit an all-time high of $375.2 billion in 2017. The proposal isn’t final, and Trump is considering tariffs on an additional $100 million worth of goods made in China.
Here’s a look at the 15 most likely tariff-driven price hikes to expect.