The ‘golden’ years. Those fifteen or twenty years after age 65, when retirement comes calling, you’re supposed to spend time doing all those things you genuinely enjoy.
By 2025 the estimated number of people in the United States who’ve reached retirement age will be 65.23 million. If everyone age 65 and over collects the average Social Security, it will run into trillions of dollars.
Still, Social Security benefits can be an essential player in creating a well-rounded retirement plan. But, unfortunately, it’s also one area that gets overlooked during what passes for planning to most retirees. To help you navigate this fun but financially significant time, we’ve found ten areas most people neglect when planning to retire.
10. Long-Term Care
When retirement comes, everyone’s thrilled about sleeping in, enjoying a cup or pot of coffee, and finally enjoying activities they neglected in their working years. But there’s work to be done to prepare for retirement to ensure you and your loved ones prepare well for long-term care.
- Budgeting for long-term care: Creating a financial plan to make sure any long-term care needs and expenses are covered and planned for when they arise.
- Living Arrangements: Knowing where you plan to live, who will provide medical care – including insurance coverage and existing health conditions – and if you need assistance from family or friends.
- Relative Care: This refers to planning for long-term care for relatives, such as parents or siblings, who may need specialized care during your retirement years.
No matter your long-term care needs, planning for them is essential to retiring well.
9. Longevity
One area that can easily escape a retiree is an increased life expectancy. But, unfortunately, living longer means you’ll need to plan for more years and, therefore, more expenditures.
Since the life expectancy in the US is due to reach 85.6 years by 2060, planning wisely for an extended stay on earth can provide you with years of comfort and financial peace.
8. Inflation
This one has been everywhere this year and has likely pinched more than a few retirees when it comes to money. The definition of inflation is a substantial rise in the prices of goods and services that reduce the purchasing power of money over a given period of time.
And while average inflation consists of a minimal 2% annual rise in prices, substantial inflation causes prices to continue to rise, squeezing everyone’s budget tighter and tighter over months or years. Failing to account for this situation can wreak havoc on your financials, primarily if you rely solely on Social Security to see you through the end-of-life period.
7. Social Security
Danielle Miura, a certified financial planner with Wealthtender and Founder of Spark Financials, wants retirees to understand how Social Security can impact their financial portfolio.
“Chances are that you are overlooking your most significant retirement benefit-Social Security. For most people, including the wealthy, Social Security benefits rank as one of their most considerable retirement benefits. Social Security benefits are guaranteed, and inflation-adjusted payments can relieve stress to the rest of your retirement portfolio, allowing your investments to remain untouched for a longer time frame.”
By securing your Social Security benefits and allocating them to your annual budget, your investment portfolio can stay primarily untouched, allowing you to reap the benefits from it for a much more extended time. In addition, this investment buffer creates financial longevity that can serve you well as you get older, ensuring that you’ll be financially sound if a sudden financial or health crisis should arise.
6. Medical Expenses
Everything’s going wonderful in those first years after retirement. You feel great, sleep better, and enjoy your friends and favorite activities. Then you start to feel poorly. Maybe you spend a few days in the hospital or have to have surgery after a fall.
The adage goes, ‘A failure to plan is planning to fail.’ Forgetting or overlooking possible medical expenses can lead to a steep hit to your financial security. Even with insurance, your medical bills can add up quickly if you don’t have a plan to manage them for yourself. If your significant other is also retired, this amount gets doubled. According to the Fidelity Retiree Healthcare Cost Estimate, anyone who retired in 2022 will need a considerable $315,000 to cover medical costs. And while Medicare is free for anyone 65 and older, there can be plenty of medical-related expenses, like deductibles and co-pays the plan doesn’t cover.
5. Early Retirement
Retiring before age 65 can have some extra out-of-pocket expenses associated with this decision. Covering medical costs, for instance, can cut deeply into your finances, especially considering you won’t be eligible for Medicare until age 65. Some programs can help. Medicaid, COBRA insurance, and a short-term medical insurance plan can take some weight. Also, if you want to work a little, a part-time job can help cover the cost of out-of-pocket insurance.
At any rate, deciding to retire early comes with its own set of concerns you’ll need to address before you make any concrete choices on whether to quit working entirely, work part-time, pick up a side gig, etc.
4. Pension Payments
As you retire, it’s good to sit down and review the jobs you’ve had in your life. Discovering an old pension payment can be a pleasant surprise and boost your nest egg. In addition, these income sources can benefit any retiree’s plan after they retire, providing much-needed financial assistance.
If you’re unsure whether an old employer had a pension fund, the government has a free-to-use Pension Tracking System that will allow you to track down information for any old employer. And if you know your old employer’s information or pensioner, it’s as simple as filling out a form.
Either way, these funds can be a valuable asset to use during your retirement years to give you some liquidity and shore up your investment portfolio in the interim.
3. Estate Planning
An AARP report on death showed that 60% of people in the US die without securing a last will and testament. This report means their assets automatically go to a probate court when they die.
While a spouse might be able to secure any community property, the separated property would be hard to get ahold of if there isn’t a will to say who should get it.
Ensuring your estate planning documents are up-to-date is the easiest way to ensure your property goes where you want it.
2. Debt Doctor
One area that may be super easy to overlook when planning to retire is debt. Whether it’s a mortgage, car loan, or credit card debt, carrying that into retirement is a surefire way to dent your financial assets.
If you have the money to spare before you retire, pay down your debt and save like crazy afterward. This financial decision will help you rebuild your nest egg quickly without worrying about your home and other important property while you enjoy your later years.
1. Communicating Your Last Wishes
It’s easy to think that a last will and testament clarifies what you want to happen when you die. It wouldn’t be the first time an estate tore a family apart. While a will can undoubtedly describe your desires for your property, it won’t help your loved ones understand why you chose to split your assets in such a way or anything you didn’t put in your will.
Communicating your last wishes to your loved ones is vital in securing your retirement planning, especially if your health suffers.
This article was produced and syndicated by Wealth of Geeks.