When was the last time you got a do-over? Maybe you took a mulligan in your last game of golf, or you had the chance to revamp a project at work for better results. Unfortunately, financial mulligans are few and far between, and are almost nonexistent when it comes to retirement. When the topic of life after a 9-to-5 comes up, most people immediately think of their slim savings for retirement. While we should probably all be saving more for our golden years, money isn’t the only thing to plan for to have an enjoyable retirement.
The average American is feeling more confident about their ability to afford a comfortable retirement, according to the Employee Benefit Research Institute’s 2016 Retirement Confidence Survey. However, only 21% of respondents were “very confident” their savings would be enough to cover their expenses after they left the workforce for the golf course. Growing confidence is great, especially after record lows during the Great Recession. But that doesn’t change the fact that the luster of the so-called golden years fades quickly when retirement isn’t quite as rosy as it was portrayed to be.
While retirement is supposed to be a relaxing reward after decades of work, it can only become that if you put in some planning ahead of time. No matter how far away that retirement date seems, it pays to be thinking about these 5 things now.
1. Not saving enough money
It’s likely the most obvious factor, but also the most vital. If you haven’t saved enough money for retirement, everything else becomes much more difficult. It used to be that saving $1 million was a benchmark for a comfortable post-work life, but most experts will say that might not be enough anymore. However, it’s also true that many people enjoy their lives while saving less than that figure. The truth is, only you can determine how much you’ll need to save for your own retirement.
To do that, however, you do need to know the facts and have a plan to face them. For instance, you’ll need to save much more than you have in the past for health care costs, which are only likely to increase in future years. By some estimates, most retirees will need at least $220,000 to cover medical expenses if they retire at age 65. You might lead a relatively healthy lifestyle, but that can change much faster as you get older.
Saving for the unexpected takes many forms, and isn’t just related to medical care. As in all of life, retirement savings should also include a healthy emergency savings fund to cover any type of financial pitfall. “A well-constructed plan, whether with advice of a professional or not, needs to account for success, as well as challenges and failures,” Tash Elwyn, president of Raymond James & Associates, told USA Today.
2. Leaving the workforce too early
Once you pull the trigger on leaving your job, it’s hard to make a comeback. Retirement might seem like a rite of passage once you hit a certain age, but there’s nothing guaranteed about your income if you haven’t made a plan for it. “Of those who retire voluntarily, many do so with no real understanding of how much it will cost to live in retirement or when or how the retirement money will come,” Thomas Murphy, a certified financial planner at Murphy & Sylvest in Dallas, told CNBC.
Of those who left the workforce and tried to return after realizing they needed to continue working, many encountered a problem finding a job that offered an adequate salary or benefits, CNBC reports, and many dealt with hiring managers who were concerned about their age.
Unfortunately, even those who do stay in the workforce are at a disadvantage. According to Teresa Ghilarducci of the Schwartz Center for Economic Policy Analysis, older workers are often overlooked for promotions and on-the-job training, and begin to experience a decline in pay between the ages of 55 and 59 regardless of their education level. “Working longer is a retirement plan like winning the lottery or dying earlier is a retirement plan. Being able to work longer is not a plan. It’s a hope,” she told Slate.
Continuing to work isn’t just a financial decision, however. Many retirees say they keep a job in some capacity to keep their minds sharp, remain physically active, and maintain a sense of purpose.
3. Not having a plan for your free time
In a short e-book for Amazon, author Alex Potrero writes that he lost his identity when he retired from a fast-based career as an executive in the federal government. “The biggest mistake I made when I retired was that I did not really know what I would do with all my time after I was, in fact, retired,” he wrote. “I had grown accustomed to routine of a full-time job and when I retired I did not have a routine in place to adequately replace it.”
Many people still at work dream of a retirement that includes sleeping in, reading a book, and spending more time at the beach. However, those activities will quickly become unfulfilling if they’re not supplemented with a social life and a sense of purpose. “You need a reason to get out of bed every morning, get dressed and go do something,” Murphy told CNBC.
Murphy notes that many people, men in particular, lose many of their social connections after retirement, because many of their friends are at work. Before you retire, take steps to solidify those relationships outside of work, or make the time to forge new relationships before you pull the plug on your career. It can also be beneficial to start a new hobby or two before you retire, or begin a volunteer opportunity.
4. Not planning for your retirement goals
Travel is often a key factor in many people’s retirement plans. However, getting the timing right is essential. All too often, people put off travel plans for later, only to realize health or other factors prevent them from enjoying it.
“I’ve had dozens of clients that put off traveling, waiting until ‘the time was right’ only to let illness and other life issues prevent them from embarking on all the trips they put off for years,” said Jeff Rose, a certified financial planer at Alliance Wealth Management in Carbondale, Illinois.
As long as you’ve budgeted for that travel in the first place, and have a plan for responsibly spending your money, there’s no need to delay your retirement goals. “There are two times in retirement: when you are healthy and when you are not,” Murphy said. “Plan accordingly. Travel and see whatever your heart desires. Plan to do so in the first five years of retirement. If you are healthy enough to travel after that, consider yourself lucky.”
5. Not adjusting to the required lifestyle
While taking that long-desired trip to Alaska is great, purchasing a yacht and staying in five-star hotels for the rest of your days isn’t always advised — even if your previous career afforded you those luxuries in the past. When the paychecks stop, you automatically begin to live a life on a fixed income. Period.
While retirement affords you many luxuries like extra free time, it sometimes also requires scaling back — whether it’s in terms of possessions or spending. This can be especially difficult for people who enjoyed incredibly successful careers, and aren’t used to adjusting their lifestyles for a smaller income.
“Naturally, they envision a life in retirement that is just as lavish as when they were employed — business trips that include five-star hotels — whereas, in the real life of retirement, to fit their financial resources, retirement may require that they change their standards and change expectations,” Elywn told CNBC. “That adjustment can oftentimes be challenging for successful business people.”
By David Lasman – “Ask Medicare Dave” | President – Senior Healthcare Team
wwww.SeniorHealthcareTeam.com | 866-333-7340
Selecting the right healthcare plan through Medicare can be overwhelming and downright stressful. Senior Healthcare Team is a nationwide resource that provides guidance and support about Medicare to seniors at no cost to them and helps them to choose the most suitable insurance plan tailored to their specific needs and budget. Our goal is to educate and empower our clients to make the best decisions regarding their healthcare and clear up the confusion of Medicare. At Senior Healthcare Team, we aren’t partial to any one insurance company. Our loyalty is to our clients and our mission is to provide them with the best healthcare options at the very lowest cost.