You’ve worked your whole life to come to this party—your retirement party. You’ve saved and planned for this moment, and you’re looking forward to the upcoming years.
1) Uncovered Medical Expenses
One of the biggest surprises for retirees is medical expenses. To start with, Medicare isn’t free. You pay for it. And many find out the hard way that Medicare doesn’t cover all medical expenses.Medicare has Part A, which covers hospital stays, and Part B, which covers doctor visits. All other expenses, including the copays, are paid out of pocket.
So, that means you must pay for additional insurance plans to supplement Medicare.
You’ll need a Medigap plan to supplement Medicare. And you’ll need to pay for insurance to cover hearing, vision and dental.
Medicare doesn’t cover prescriptions, so you'll also need a policy for that.
Different insurance products are available that bundle these coverages, so you should do some research before you turn 65.
2) Outliving Savings and Investments
Most people retire in their mid-sixties, and the average length of their retirement is 20 years. Do you have enough investments, savings, and Social Security benefits to sustain you for the next 20 years or longer?You may live for a long time but cannot care for yourself. Having the funds for home health care or assisted living should be part of your plan.
3) Losing a Spouse
Losing a spouse is an emotional hit, but it can also hurt financially. First, you must pay for the funeral. The median cost of a funeral is $7,848. Will this expense hurt you financially?Think about this when you’re making plans to retire. The longer you work, the larger the benefit, and possibly a larger survivor benefit for your spouse.
Because income disappears when a spouse dies, purchasing life insurance before retiring is prudent.
When purchasing life insurance, review your net worth and future income goals. Consider what would be lost if a spouse dies, and plan your insurance benefits accordingly.
4) Adult Children or Aging Parents
You might be part of the sandwich generation if you’re Generation X. That’s where you have adult children living at home and aged parents who need care. This can drain a savings account.Even if the adult children aren’t living at home, many retirees still give some support to their grown children. If you want to do that, ensure you budget with this in mind so you don’t drain your savings.
5) Unexpected Housing Costs
How old is your home? Almost 80 percent of people 65 and over own their house. Most of them bought it years before retiring. Is the roof new? Are there any problems with the furnace? How about those leaky windows?All of these are major expenses.Have your home inspected before you retire to uncover any surprises while you still have a higher income. One percent of your home’s total value should be the yearly budget for maintaining your home.
Does your house have stairs? If you plan to live in the house for a long time, you may need to make upgrades and disability-related accommodations. If you become wheelchair-bound, can you go through the door?
6) Underestimating Monthly Expenses
Sit down and go over monthly expenses. Take into account:- home
- utilities
- insurance
- food
- gas
- taxes
- etc.
7) Inflation Eats Away at Savings
Inflation has caught a lot of retirees off guard in the past few years. It ate away at retirement savings accounts.It’s important to have savings in high-yield accounts and diversify investments to stave off inflation.
Be Prepared Before Retiring
Numerous surprises happen after your retirement, and many of them are financial. So, protect your nest egg and plan out your retirement. Don’t just think about that boat or trip you’ve been meaning to take—think worst-case scenario.It’s not the fun part of retirement, but it’s necessary to ultimately enjoy your retirement.