Don’t Let This Happen to You in Retirement

If you have already created a confidence-boosting retirement plan, congratulations! You are on track to achieving the rewarding retirement of your dreams.

But what happens if you put this necessary task off? If you take a “someday” approach to stopping to assess your needs in retirement and exploring strategies and solutions that can help you achieve them?

It’s not hard to find out. You may even have watched people you know and care about struggle financially in their golden years. A time in their lives that was supposed to be free of financial pressures — or at least relatively, so we think — instead forces them to make unpleasant choices just to stay afloat.

Most often, poor financial decisions (or a lack of planning) — fueled by the emotional pressures of life changes or financial stressors — tip that first domino that can begin to topple a care-free retirement.

It takes discipline in matters of money and financial planning to ensure your money works for you, instead of the other way around.

Because you don’t want to find yourself going down the wrong path to retirement, consider these consequences of not taking action to create a plan that can provide you benefits such as reliable income for life.

Having to Sell Your Home

Many of us, at a certain age, feel we have found our final nest. We envision enjoying our retirement in our homes that give us comfort and a sense of place.

In fact, most baby boomers plan on staying in their current homes. According to a 2017 homeowner survey from Realtor.com, 85% of boomers say they didn’t plan on selling their homes. That number is remarkable because, by contrast, only 59% of millennials responded the same way.

But what if you don’t have a pool of money that is large enough to sustain your lifestyle? Or maybe too much of your income is going toward non-essential expenses… like costly bill payments, credit card debt, or debt loads in general. You could be forced to sell your home to pay for expenses in retirement.

Having worked hard for many years of your adult life, you have established your own independence and have been self-sufficient for decades. While seniors may choose to live with their adult children for cultural reasons, it can be embarrassing to have to move back in with your kids due to financial pressures.

Having to Return to Work

While many people will work some in retirement, not everyone wants to. Yet, many Americans will be heading back to the workplace in some form in retirement— at times due in large part to poor money choices.

A Rand Corporation survey found that 39% of workers 65 and older had previously been retired, proving that a growing number of boomers are working during their golden years. And according to Bloomberg, 32% of Americans age 65 to 69 and 19% of people 70-74 still work.

But the fear of outliving their savings is motivating many seniors to return to the workforce. According to the Insured Retirement Institute’s Boomer Expectations for Retirement 2017 study, only 54% of boomers have retirement savings, the lowest percentage recorded in the seven years of the Boomer report.

The report had another revealing finding as well. Just 23% of the baby boomers surveyed believe that their savings will last throughout their retirement or that they are financially prepared for retirement.

And of the boomers surveyed, only 40% had taken the time to calculate how much money they would need to retire.

Depending on Loved Ones for Financial Support

Many headlines talk about people from younger generations moving back in with their parents, but there is also an ‘opposite’ trend.

Many retirees are moving back in with their loved ones. According to cited Pew Research data by AARP, 14% of adults living in someone else’s household are a “parent head of household.” Or in other words, parents who have moved in with their children. It’s a trend that has grown from 7% of such households in 1995.

And it’s not always out of choice. For one, many retirees value their self-reliance and independence. They don’t want to be dependent on their children, as a recent GoBankingRates survey found. 92% of parents surveyed said they don’t expect any financial support from their kids in retirement

Meanwhile, only 1% said they expected “full” financial support, and 5% said they expect to receive “support as needed.” Although the vast majority of parents didn’t count on their kids’ help, 63% of children said they planned to give their parents some form of financial support.

These findings and possibilities are in line with other studies on how different generations of people deal with retirement and money matters.

Having to Suddenly Liquidate Retirement Accounts

Unfortunately, sudden life changes, such as medical needs, can come with high price tags. According to an annual estimate by Fidelity, the average couple retiring today at age 65 will need $280,000 to cover medical and healthcare costs in retirement.

Especially draining are long-term-care (LTC) costs. According to a Morningstar report, 52% of people turning age 65 who will need some type of long-term care services in their lifetimes. Should they be unaccounted for, long-term care needs can quickly reduce retirement financial resources due to their high expense.

When financial times are tough, some families may look to Medicaid as a potential source of LTC cost relief. 

Spending down assets to qualify for LTC benefits provided by Medicaid could mean that a healthy spouse can retain just $123,600 in assets for the other spouse to be eligible for LTC benefits. Actual amounts vary by state, but this could have a catastrophic impact on someone’s quality of life in retirement.

If, as a retiree, you are forced to liquidate assets from your retirement accounts quickly, you could face a huge tax bill on top of your spent funds. For most retirees, a retirement account, especially a traditional IRA, may be the biggest asset they own.

Steering Clear of Retirement Pitfalls

To retire well and avoid the unfortunate outcomes mentioned above, retirement planning experts suggest you evaluate your options, then create a retirement plan. Afterward, it’s a matter of sticking to your strategy and making adjustments along the way as your circumstances evolve.

While everyone has different financial concerns, a common one, as we discussed, is the dreadful situation of running out of money. With life expectancies on the rise, people are living longer and spending more. Part of the challenge is deciding how to pay for all those years someone may live while keeping up their lifestyle.

Taking Steps to More Retirement Security

With longevity as a risk, what are some options that might be part of a financial plan? You may consider retirement options that offer financial and income guarantees, such as annuities. To find out if this strategy, or other options, could help you enjoy more peace of mind, consult with a financial advisor or insurance professional skilled in retirement strategies.

If you are looking for help now, financial professionals at SafeMoney.com may assist you. Use our “Find a Financial Professional” section to connect with someone directly. Should you need a personal referral, call us at 877.476.9723.