Most people probably envision retirement as one of the happiest times of their lives. After working for decades on end, you finally get the opportunity to sleep in, travel the world, spend additional time with the grandkids, or whatever else you would like to do.
For many seniors, however, retirement isn’t all it’s cracked up to be. In fact, about 28 percent of them state their lives are in reality worse during retirement than before they left the workforce, according to a Nationwide survey.
Is that a depressing thought, or what?
The fantastic news is that the reasons people gave to be miserable with retirement were largely financial — and therefore preventable. Of the 28% percent of retirees that are unhappy, 78% cited income for a motive, and 76% blamed an increased cost of living.
The study also pointed out that there is a disconnect between reality and expectations for many unhappy retirees, especially since they overestimate how much they’ll get in Social Security benefits and underestimate how much they will pay in healthcare costs.
Insufficient income and rising healthcare costs can easily ruin retirement for anybody, but with a little planning, it’s possible to prevent these problems so that you can truly enjoy your golden years.
More than half of people aged 50 or older anticipate to see reductions in Social Security benefits from the coming years, according to the survey — and some form of benefit cuts seems more likely by the day.
From 2034, the Social Security Administration is expected to have depleted its strength reservations, barring intervention from national lawmakers. While that doesn’t mean that the program will come crashing down in the next 15 to 20 decades, it does imply the program won’t be able to sustain gains at the levels it’s promised. As per a current report from the Social Security Board of Trustees, in order for the app to stay stable over the next 75 years, gains will likely need to be cut by roughly 23%.
So what can you do about this? For 61 percent of retired Americans, Social Security makes up at least half of their earnings — and for unmarried Americans, that number jumps to 71 percent. These are the individuals that are hit the hardest if (or if) benefits are slashed.
Among the best ways to prevent getting burned by Social Security cuts would be to keep on working as long as you can. While it’s probably not the advice that you wanted to hear, if you wait until age 70 to claim benefits, you are going to get a 24 percent to 32% bonus tacked on to your monthly checks as a result of the program’s delayed-retirement credits. So even if benefits are cut from 23%, you will still be earning close to your full benefit amount, or more.
In addition to this, working a couple of extra decades will allow you to keep padding your retirement account, rather than drawing it down to cover your own expenses. Then you’ll be less reliant on Social Security in the first location.
Medicare: What it does (and doesn’t) cover
Aside from a lack of income, many retirees are also mad about their high cost of living — particularly in regards to healthcare costs. Much of this boils down to the confusion surrounding Medicare.
Medicare will cover a great deal of your healthcare bills, but it will not cover everything. You will still cause the copayments, coinsurance, and deductibles, and Medicare won’t cover most dental care, routine eye care, hearing aids or examinations, regular foot care, or long-term custodial care (for example, a nursing home).
This can come as a shock to anyone who was expecting health care to be free once they became eligible for Medicare. These costs accumulate quickly, and they can wipe out a retirement fund if you’re not prepared.
To be sure you have been prepared, you have a couple choices. You are able to start a health savings accounts (HSA), which allows you to invest pre-tax dollars and then withdraw them tax-free to spend toward qualifying medical expenses, like deductibles and other out-of-pocket costs. And once you turn 65, you’ll no longer confront the 20% penalty for making non-refundable withdrawals — so your HSA essentially becomes a different retirement fund.
There are also government-sponsored tactics to get help paying your healthcare debts, including Medicaid and say Medicare Savings Programs. If you are eligible for both of these programs, you may get financial aid to help pay for medical costs, deductibles, premiums, coinsurance, copayments, and prescription medication expenses. While the best option, obviously, is to try and save enough so that you don’t need to rely on assistance programs if you know you’re going to fall short financially in regards to health care, understand that you’ve got choices.
Retirement should be a joyous time in your own life, and nobody wants financial issues to stand between them and a happy retirement. Luckily, they don’t need to. With a modest pre-retirement preparation, you can make sure your golden years are what you had hoped for.