We all work hard to save for retirement. There are a few who start saving and investing early, plan things out with financial advisors, and essentially do everything right. But most of us get busy with “life,” settling ourselves into a career, raising a family, buying a home, sending our kids off to college, and then carrying on as empty nesters—all part of life’s big changes and surprises, the joys, the hardships, and the heartaches.
It’s not a big surprise that retirement planning often takes a back seat.
There are also many amongst us who do not even start thinking about retirement until they are in their 50s, which is quite late. But still, you should never throw your hands up and give up on retirement planning. And even though I say it’s never too late to start, those who do start late have to deal with some unfortunate realities.
Whatever the case, the fact is that retirement can be overwhelming. There’s a lot to think about, a lot to plan, and a lot to do, which is why even people who think they are well prepared for retirement might find that there are things for which they simply forgot to plan or didn’t know they needed to plan.
As a heads-up, here are some of those “unplanned things” that might surprise you in retirement:
The Emotional Side
I’ve actually addressed this on my show a few times: The fact that people often aren’t emotionally prepared to retire because too much of their self-worth and self-esteem is tied into what they do for a living. Their careers, their job responsibilities, their job titles, the daily routine that gives meaning to their lives, shapes their feelings about themselves.
But once you stop working, how do you cope with the loss of so much of your sense of self? And what do you do with all the free time? Many of us cannot deal with the idea of retirement and a lot of people go back to work because they just aren’t ready—mentally or emotionally— for retirement. So prepare for this major life transition, perhaps by adding fulfilling activities to your life as you get ready for retirement, such as volunteering at your local library, school, church, or any other organization where you can contribute something to society and keep a social life intact.
Enrolling In Medicare
This is one you must simply add to your digital calendar, perhaps as a Reminder to Self on your 65th birthday: “Enroll in Medicare at 65.” You do not automatically qualify for Medicare unless you enroll and will pay permanent financial penalties if you are late, so you pay a 10 percent penalty for every 12 months that you are late. If someone waits 24 months, they pay a 20 percent penalty that is built in. Please do not neglect this! Medicare enrollment starts three months before your 65th birthday to three months after your 65th birthday, so you have a nice, wide six-month window to do so—and really have no excuse not to enroll on time.
Some people believe Medicare and Social Security are in the same bucket, but they are not. While you can delay taking your Social Security, you still have to actively enroll in Medicare on your own.
Continuing on these “unplanned things” that you might not be preparing for in retirement:
Here’s one that might shock many of you. Health-care costs—yeah, I know, we are all well aware of rising health care costs, but did you know studies project that health care will cost $250,000 for a couple in retirement? That’s about $5,000 per person per year or $10,000 per couple and assumes an average retired life of 25 years. That’s a lot of money, so make sure you do not underestimate health-care costs in retirement— for routine care, prescription drugs, procedures and long-term care—and plan for this substantial amount.
And while we are talking health, let’s not forget that we tend to lose our teeth as we age. Dental expenses, too, can add up and Medicare does not cover dental expenses. So factor in dental surgeries and procedures and set aside somewhere between $10,000 and $30,000 for these expenses.
Major Purchases And Repairs
Also, while retirees tend to do a good job of covering monthly bills, they often do not plan for those occasional large non-discretionary expenses, such as a leaky roof, new appliances, or major car repairs. So it’s important that you plan for these one-time expenses; take a look at your budget on an annual basis and make sure you take into account things that come up quarterly or semiannually.
Planning For A Long Life
Another thing you must financially plan for is living beyond that calculation of 25 years in retirement. That’s because, for a 55-year-old couple, there is a 50 percent chance that one of them will live into their 90s. If you do live to 90, will your money last? And with that longevity come other needs, such as long-term care expenses, perhaps living in a senior’s facility, re-jigging your home so you don’t have to climb stairs, etc. So think about and talk to your advisor about living beyond 25 years in retirement.
Needs Of A Surviving Spouse
You must also account for the financial needs of a surviving spouse, and how he or she might be impacted by the loss of the dying spouse’s pension and benefits, annuities, and Social Security. Do a “what if” analysis to see which income streams might stop? Also, think beyond finances to issues such as long-term care and who will take care of the surviving spouse’s old-age needs.
Legal Affairs, Estate Planning
Finally, make sure you put your legal affairs in order. In fact, on this, the reality is any of us could die (or get severely incapacitated anytime) of sickness, accident, or who knows what. For all ages, it’s important that you have an estate plan that clearly lays out how your assets will be distributed, who will act as your fiduciary, who might have control over your health-care decisions, and other critical essential needs. Having a will and a living trust can save your survivors a lot of time, headache, and cost—without these documents, all those decisions will be he handled by the state and you don’t want to leave these important matters in the hands of the state and the court. So make sure all your beneficiaries are correctly listed and up to date. Also, make sure you have a financial power of attorney and health-care directive. I recommend having a family meeting and let them know your wishes and your desires.
If you plan for all of the above, there should be few financial surprises in retirement. Then, hopefully, all the surprises you do get in your golden years will be ones that bring a smile to your face.
Disclosure: The opinions expressed are those of the author’s and not necessarily United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.