8 Hard Truths About Retirement
What to expect, and help prepare for in your golden years.
Most of us will 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 a world of surprises. While some of these revelations can be pleasant, others can be challenging. Knowing what to expect in advance of retirement, can help you prepare for it today. Here are some hard truths you should know:
#1) Medicare won’t be free. After many years of paying Medicare FICA taxes, you may dream of the day when Uncle Sam will pick up the tab for your medical care. However, if you are 65 or older, you will still pay part of your healthcare costs. Medicare Part A, which primarily covers hospital costs, is indeed free for most folks. However, you will pay a premium for Medicare Part B outpatient services, any supplemental plans you opt to buy, deductibles, copays, and coinsurance.
#2) Social Security payments might not cover it all. Millions of Americans rely on Social Security as the cornerstone of their retirement. The average retiree’s Social Security monthly benefit is $1,555 — just $18,660 a year. You can get by on this modest amount. Millions of retirees do. However, you may want to consider additional saving programs to supplement financial stability.
#3) It’s important to save for retirement sooner, than later. When you are in your 20s and 30s, retirement feels like a million years away. Even in your 40s and 50s you might imagine you still have plenty of time to catch up. While it’s never too late to save for your golden years, there’s a good chance that when you do retire, you may have wished you saved early on, and more often.
#4) Housing may be your biggest expense. Many retirees dream of paying off their mortgage so they’ll be free to spend money on travel and other activities. The reality is though, that housing will likely remain the biggest expense in your budget for as long as you live. If you were to look back at 2020, U.S. households led by someone age 65 or older, spent an average of $17,435 on housing.
#5) Spending may be more than you expected. A recent survey found that 39% of retirees spent more money in retirement, than then they had anticipated. That reality means your retirement spending may need some tweaking once you enter post-work life. While the typical non-retired consumer over the age of 40 spends $2,993 a month on average, the typical retiree spends just 32% less ($2,008).
#6) Planning to work? That might not happen. Your expectations of working while retired might not align with reality. In a recent poll among pre-retirees who are 50 or older, 65% say they definitely plan on working during retirement. However, far fewer of today’s retirees actually follow through with that plan with just 7% of retirees working, even in part-time positions.
#7) If you’ve never volunteered, you may not start. About 90% of Americans say they would like to do volunteer service for a cause that needs their help, but just 25% actually do so, according to the Stanford Center on Longevity. The study found that retirees do not volunteer at higher rates than those of non-retirees.
#8) Healthcare spending may increase. You may face a bevy of health care expenses during retirement—medical procedures, hospital bills, prescription drugs, maybe even home health care—and you may not know when these expenses will hit, or how much you may have to pay. Opening a health savings account (HAS) today, could help protect against unforeseen expenses.
To align your retirement with your financial goals, give NIH Federal Credit Union’s Wealth Advisors a call. They can help you make these important decisions.
Resources:
MoneyTalksNews.com
