Retirement can be full of surprises. There are the good surprises, like discovering a passion for an unexpected new hobby or a new favorite vacation spot. Then there are the not-so-good surprises, such as not having enough income to support your lifestyle.
When you’re retired, the unpredictable has the ability to create a far greater impact than it would during your working years. After all, you don’t have that regular income to help soften the blow. Identifying potential risks and seeking to minimize the possible negative consequences are key aspects of any sound retirement plan.
Still, you can’t plan for everything that may happen. That’s why it’s important to anticipate the unexpected in retirement and take steps to help ensure you’re as prepared as possible when it does happen.
Below are a few of the surprises that might await you in retirement and what you can do about them:
Emergency expenses drain your savings.
When emergencies arise, they can come with significant costs that are unexpected and unavoidable. Major home repairs, medical bills and other emergency expenses can wreak havoc on the health of your finances even with the most careful of plans.
Medical-related costs are a main source of such unexpected expenses in retirement. Fidelity estimates that on average, a retired couple today will face $260,000 in out-of-pocket health care costs.1 Don’t make the mistake of assuming Medicare will cover all your health care costs; it won’t.
Long-term care is one of the major areas not covered by Medicare. It’s not only one of the most costly health-related expenses but also one of the most likely to be necessary. In fact, there’s a 70 percent chance the average 65-year-old will need long-term care at some point in his or her life.2
You can help reduce the potential that emergency expenses will drain your savings by building a reserve fund to cover such costs. You may also want to consider purchasing long-term care insurance to provide yourself with further protection.
Your spending increases.
You may be surprised to learn it’s quite common to see one’s spending increase in retirement. Many people assume they’ll spend less money after they retire, but this isn’t always the case.
Having more free time and money in retirement than you may have ever had before may make for a dangerous combination. Retirees often fill their newfound free time with traveling, shopping, dining out and expensive hobbies. All that spending, though, can quickly add up to bad news for your retirement funds.
It can be vital to avoid spending indiscriminately in retirement. Using a budget to guide your spending can be a good strategy to help prevent yourself from falling into this common spending trap.
You may also want to consider ways to use your time that don’t involve spending money. Think about what’s most important to you and identify the activities you find most meaningful and fulfilling. With a little creativity, you can likely find ways to pursue your interests without draining your savings.
You find retirement boring.
Maybe you’ve been counting down the days until your retirement for years, but many people find retirement doesn’t suit them. You may feel the need for some kind of challenge or purpose in your daily life. Consider whether you’ll enjoy having a free calendar with no obligations or if, in reality, you’ll get bored.
If this sounds like you, you may want to think about gradually transitioning into retirement on a phased schedule. You might also consider transitioning into a part-time position. Other good options can be to use your talents and skills to find a part-time job in a field you enjoy or a volunteer position helping out a charity.
Are you prepared for these and other retirement surprises? Find out more by contacting Bridgeriver Advisors. Our financial professionals can help you create a strategic plan for your retirement today.
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