For many retirees, or those getting close to retirement, the scariest thing about retirement is that they don’t know exactly what’s going to happen as they get older. The fact is, many retirees face financial surprises in retirement that they aren’t prepared for and can ruin their well-laid plans. But, after you read today’s blog, you won’t be one of them. Enjoy.
Surprise Expense 1: Home expenses. Even retirees who are on a budget, and know what they need to pay for their mortgage, groceries, utility bills and so forth, can see their budget blown out of the water if they suddenly need a new roof on the house, or new siding, a new HVAC system or any one of a number of large expenses that owning a home sometimes brings. As a retiree your best bet is to have a supplemental budget so that, if surprise home expenses like these arise, you can take care of them without blowing your regular budget.
Surprise Expense 2: Health costs. It’s actually surprising how many people don’t budget for major health costs like surgery, accidents and so forth. The fact is however that, even if you have insurance, and Medicaid is helping out, there’s almost always a portion of those doctor bills that you will have to pay yourself. Having excellent insurance is a must in retirement, no doubt.
Surprise Expense 3: Delayed decisions about investments. Many people, in the heat of activity during the last few years before retirement, forget to reformulate their investments like IRAs, 401(k)s and so forth. The fact is however that after retirement your financial and investment objectives change from accumulating wealth to preserving wealth and producing several streams of income. Sitting down with your financial advisor to reformulate your investments is vital to having enough money during retirement.
Surprise Expense 4: Badly timing the start of your Social Security benefits. Many consumers make the mistake of starting to collect their Social Security benefits too early, which reduces their payments significantly. We’ve talked about this in many other blogs but, suffice to say that waiting as long as possible to start collecting Social Security will increase those payments substantially and, if you can wait, you really should.
Surprise Expense 5: Forgetting to calculate inflation into the equation. Let’s say that today you can handle a budget of $2700 a month, but you’re in your 60s. Consider this; you might live approximately 20 more years and, with the rate of inflation, that same $2700 will only be worth about $1700 at that time. Many experts will say that, because of inflation, consumers need to consider carefully whether or not to retire early.
Surprise Expense 6: Becoming a victim of fraud. Unfortunately, as most people get older their cognitive abilities begin to wane and, as they do, it seems that sleazy salesman and con-man become aware of it much more easily. Sure, most of us believe that we’re “too smart” to fall for their scams but, inevitably, many do. As you get older it’s vital that you become a little more skeptical and, if something seems too good to be true, it probably is.
Surprise Expense 7: Believing that you won’t live as long as you actually do. Did you know that one out of five men and one out of three women will actually live to be 90 years old or older? It’s true and, if you’re only in your 60s now, that means it’s possible you will live another 30 years. That being said, managing your money so that you have enough to support yourself for the rest of your life becomes even more important than it already was.
There you are, dear readers, 7 Surprise Expenses that, if you don’t prepare for them, can seriously damage your finances in retirement. Now that you know them, you can prepare yourself better so that, as you head into your “golden years”, you’ll have fewer surprises than most.