We all have a view of what retirement will look like: long days of fishing or golfing, relaxing on the front porch, enjoying grandchildren, spending time with friends.
Unfortunately, simply being retired does not mean that problems suddenly disappear — least of all money problems. No matter how well you have planned and saved, you could get blind-sided by an unexpected retirement cost. The solution? Leave room in your portfolio for one of these five common retirement pitfalls:
• A Not-So-Empty Nest. While the economy is certainly recovering, the downturn and resulting high unemployment did make it clear that adult children sometimes have to come home for a while to get back on their feet. For retired parents who are opening their doors to laid-off, unemployed, or otherwise down-and-out grown children, it’s important to make sure that you set clear boundaries regarding the amount of help you can offer. Otherwise, you might find that you’ve got too much retirement left when your money runs out.
•Health Care Costs. Even if you have a plan in place for your post-retirement healthcare expenses, it’s imperative that you factor in the number of costs that will not be reimbursable. Some drug plans and some prescription drugs are not covered by Medicare, and many (if not most) dental and optical visits will entirely be paid out of your pocket.
It is important to plan for a financial cushion in your retirement portfolio in order to pay for potential health care costs, but it’s also a good idea to take great care of your health. You’ll feel better and have fewer costs to worry about.
•Home Maintenance and Repair. If you decide to stay in the home you’ve always lived in, don’t forget that it, too, is getting older. Homes eventually need roofs and boilers replaced, plumbing updated, HVAC systems repaired, and so on. Even if you have always taken care of your home maintenance yourself, it’s a smart idea to set aside money specifically for any repairs that might need to be done.
Alternatively, consider downsizing. Moving to a low-maintenance apartment, condominium, or retirement community could not only save you maintenance costs, but it might also be a cheaper housing option for you.
•Long Term Care. According to the Congressional Budget Office, 24 percent of people turning 65 will need to spend at least a year or more in a nursing home. Unfortunately, Medicare will not cover the majority of your long term care expenses. You need to plan ahead for the possibility that you might fracture a hip or come down with an illness. Your best bet is to purchase a long-term care insurance policy before you retire.
•Travel. While you might have no plans to go any further away than the local golf course or hobby shop, travel needs can sometimes sneak up on you. For example, if your children and grandchildren end up moving out of state, the expense of visiting is something you might not have planned for. Similarly, if you end up taking care of a parent, sibling, or friend somewhere else in the country, you might find yourself facing some unexpected travel expenses.
The Bottom Line
No matter what your situation, it always pays to plan for some retirement wiggle room, just in case.
