Knowing what
to expect can help you prepare for — and adjust to — life in your golden years.
Chris Kissell • December
3, 2021
Most of us spend decades
working and dreaming of a day when we can retire. But when we finally arrive at
our post-work destination, it’s not unusual to find ourselves in a world of
surprises.
While some of these
revelations can be pleasant, others are more sobering. Knowing what to expect
in advance can help you prepare for — and adjust to — life in your golden
years.
Following are some hard
truths you should know before you retire.
1.
Medicare won’t be free
fter all those years of
paying Medicare FICA taxes, you may dream of the
day when Uncle Sam picks up the tab for your medical care. But that is no dream
— it’s a fantasy.
Alas, you will pay for
the federal health insurance program for folks age 65 and older. Medicare Part
A (which primarily covers hospital costs) is indeed free for most folks. But
you will pay a premium for Medicare Part B (outpatient services) and any
supplemental plans you opt to buy.
And don’t think
deductibles, copays and coinsurance will be a thing of the past, because they
will continue.
For more on the program’s
shortcomings, check out “Medicare Will Not Cover These 6 Medical Costs.”
2.
Social Security won’t go very far
Millions of Americans
rely on Social Security as the cornerstone of their retirement. Among “elderly”
Social Security beneficiaries, 37% of men and 42% of women receive 50% or more
of their income from Social Security, according to the Social Security Administration.
That is pretty startling
when you consider that the average retiree’s Social Security monthly benefit is
a paltry $1,555 — just $18,660 a year. You can get by on such a modest amount.
Millions of American retirees do just that. But do you really want to?
3. You
will wish you had saved more
When you are in your 20s
and 30s, retirement feels a million years away. Even in your 40s and 50s, you
might imagine you still have plenty of time to catch up.
While it is never too
late to save for your golden years, there is a pretty good chance that once you
finally retire, you will regret not saving early and more often.
In fact, a survey
by Global Atlantic Financial Group found
that 36% of retirees wish they had put away more for retirement.
As Matt Stephens, an adviser
with AdvicePoint in Wilmington, N.C., told Reuters about the retirees
he counsels:
“The biggest regret I
hear over and over is that they didn’t start investing sooner.”
4.
Housing will remain your biggest expenseMany retirees dream of
paying off their mortgage so they will be free to spend money on travel and
other activities. But the reality is that housing likely will remain the
biggest expense in your budget for as long as you live.
U.S. households led by
someone age 65 or older spent an average of $17,435 on housing in 2020, as we
detail in “Here’s How Much Retiree Households Spend in a Year.” That
is easily more than these households spent in any other expense category.
5. Your
dreams may not match reality
It’s fun to imagine
retirement as an endless loop of trips to Europe and leisure outings with new
friends. But once you get to your golden years, things likely will be
different, according to findings from
the Society of Actuaries.
When pre-retirees think
about retirement, they imagine they will:
·
Exercise: 88%
·
Visit children and grandchildren: 79%
·
Engage in hobbies: 76%
·
Travel: 74%
·
Participate in social activities: 69%
However, the reality of
retirement is different. Here are the percentages of retirees who actually
engage in those activities:
·
Exercise: 68%
·
Visit children and grandchildren: 65%
·
Engage in hobbies: 54%
·
Travel: 58%
·
Participate in social activities: 49%
6. You
may spend more than you expect
The Global Atlantic
Financial Group survey found that 39% of retirees spend more in retirement than
they had anticipated before leaving work.
That reality means your
retirement dreams may need some tweaking once you enter post-work life, says
Paula Nelson, president of retirement at Global Atlantic, in a press release:
“Many Americans adjust
their lifestyles and cut spending once they see how quickly costs can add up in
retirement.”
7.
Divorce will be a serious threat
In the past, retirees
were expected to stay married until death parted them. But that is no longer
the case. The rate of divorce among those over 50 has roughly doubled since
the 1990s.
The phenomenon — known as
“grey divorce” — is largely a result of aging baby boomers, who were far more
likely to have been divorced already than couples in earlier generations,
according to Pew Research Center. The organization concludes:
“Their marital
instability earlier in life is contributing to the rising divorce rate among
adults ages 50 and older today, since remarriages tend to be less stable than
first marriages.”
8. You
might not work — even if you planned to
Among pre-retirees, 72%
say they want to work during retirement, according to the findings of “Work in Retirement: Myths and Motivations,” a
joint study by Merrill Lynch and Age Wave.
However, far fewer
actually follow through. Just 7% of retirees actually work even part time in
retirement, according to an Allianz Life study.
9. If
you’ve never volunteered before, you won’t start in retirement
About 90% of Americans
say they would like to do volunteer service for someone or some cause that
needs their help, but just 25% actually do so, according to the Stanford Center on Longevity.
When asked why they don’t
follow through on the wish to help, Americans most commonly cite a lack of free
time. Yet, retirees — with plenty of time on their hands — do not volunteer at
rates that are any higher than those of workers.
And among people who did
not volunteer during their working years, just one-third finally begin
volunteering during retirement.
10.
Retirement can be especially lonely for single men
In some ways, retirement
is more challenging for women. Because they live longer than men, they will
have to stretch the funds from their nest eggs over a longer period. To make
matters worse, women generally start with less in retirement savings than men
do.
But women who are single
have one big advantage over their male counterparts: They are less likely to be
lonely.
Just 48% of retired men
who live alone say they are very satisfied with the number of friends they
have, according to an analysis of Pew Research Center survey findings.
However, a robust 71% of
women who live alone are satisfied with the number of friends they have.
11.
Health issues likely will catch up with you
Retirement is supposed to
be a time of relaxation. But the truth is that quitting work is more closely
linked with increased illness.
Research from the Institute of Economic Affairs finds
that retirement increases the chances of clinical depression by about 40%, and
of having at least one diagnosed physical illness by 60%.
Such sobering numbers
underscore why many people planning for retirement would benefit from opening a health savings account and
stashing as much cash as possible into that HSA, assuming they are eligible for
one.
12. You
may be disappointed — at first
Nearly one-third of
recent retirees — 28% — say life is worse in retirement than it was during
their working years, according to a Nationwide Retirement Institute survey.
However, hang in there.
As your retirement rolls on, you are likely to feel happier. The Pew Research Center found
that 45% of adults 75 and older believe life has turned out better than they
expected.
Just 5% say it has turned
out worse.
Reach
your financial goals with an adviser
Whether it’s making smart
investments or securing a comfortable retirement, the right financial adviser can
assist you in creating a financial strategy. A great place to start is with
SmartAsset’s free tool, which connects you with up to three fiduciary financial advisers in
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If you’d like to be
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