Nobody wants to be broke in retirement. Unless you prepare very well, you might discover at some point that your retirement is going to cost more than you originally planned. First of all, try to comprehend if the budget that you have in mind could be smaller than it needs to be.
Today’s retirees are expected to live 40% longer than those who retired 80 years ago, and recent research has shown how Americans are likely to live longer. Why is this important to know?
As the retirement period lengthen, you are required to find more financial resources to support not only your daily expenses but also all the health care expenses that can appear due to aging. If you’re worried that this might be the case for you, check out some signs that you might not be saving enough for retirement.
You haven’t planned anything long-term – More than half of adults turning 65 this year will need some kind of long-term care, and 1 in 7 will need care for more than five years, as the Department of Health and Human Services has stated. If you are receiving care in a nursing home or an assisted living facility, you’ll have to pay a lot of money. The average annual cost of care in these situations was $48,612 in 2019, and the annual cost of a private room in a nursing home is over $102,000.
You underestimated your life expectancy – This is one of the situations where it’s best to be as optimistic as possible. About 1 in 4 retirees that are 65 years old will live to be 90, so it’s important to make sure you’ll have enough money until then.
You never thought you’d have high healthcare costs – Everybody knows they’ll need to pay for healthcare in retirement, but only a few understand how much it will cost. When you calculate how much do you need for retirement, make sure you cover the healthcare costs, which could be higher than what you’re aware of right now. Also, try comparing Medicare options to make sure you get the right plan for what you need.
You didn’t consider inflation – When you’re a worker, you’re not completely aware of the impact of inflation, because your wage is rising along with the prices. So you might not consider inflation as a factor in your retirement savings calculations. What you can do is to start saving even more than you previously planned. If you don’t know how to do it, there might be an option for you. Try delaying your Social Security benefits as much as possible. You can earn more money if you delay your Social Security benefits until the age of 70.
You didn’t factor in big-ticket items – Before you retire, it is mandatory to create a post-retirement budget, so you can estimate the expenses and how much income you’ll need. But you might end up spending more than you expected in retirement if you don’t factor big-ticket items into your budget along with regular expenses.
Your spending habits will change – If you change your spending habits, your retirement budget projections will be useless. For example, there are many retirees that end up spending more money in retirement to keep themselves entertained. It’s ok to keep going out, as long as you find a way to stay active and connected with others in a cheaper way. Plus, if you don’t know what to do with all your spare time, there are many free ways to stay busy after you retire. You can hike, you can take long walks, research your family’s history, read books, or take advantage of free community events.