In retirement, many older Americans have to adjust to a new lifestyle with little or no income. Unforeseen expenses, such as unexpected medical bills and long-term care costs, can quickly deplete savings. Conventional wisdom says you need about 70-80% of your working income to cover expenses in retirement.
Fortunately, there are ways to avoid the need for a drastic downgrade in your lifestyle. Planning ahead can help you budget for unexpected events and avoid the risk of spending more than you can afford.
In addition to saving for unforeseen expenses, you can also consider ways to reduce your out-of-pocket medical costs. One option is to sign up for Medicare Part B when you first become eligible at age 65. If you don’t enroll in Medicare during this window, you may have to pay a penalty later. Another option is to join a Medicare Advantage Plan that includes retiree health coverage. These plans are offered by some employers and combine Medicare and your retiree health insurance into one monthly premium. These types of plans are designed to save you money by providing discounted fees for doctors and hospitals that accept your Medicare Part B benefits.
As the Baby Boomers reach retirement, employers have started to focus more on cost-containment. Some firms have even stopped offering retiree health benefits altogether, while others have reduced benefit packages in recent years. For example, fewer companies are offering health and dental coverage for their retirees, while more are sponsoring Medicare Advantage Plans or group Medigap Read the full article policies to help their employees save on their health insurance costs.
The biggest concern for most people entering retirement is the question of how they will pay for their healthcare in retirement. For most, this is the main reason they stay in their jobs longer than they might otherwise, and it can impact their quality of life once they retire.
If you are thinking of retiring in the near future, it is important to track your savings and work out how much you will need to live on in retirement. You should also look into claiming any old pensions and other income you may have from previous employment. If you are worried about adjusting to your newfound freedom, start slowing down your work hours over the course of several years before retirement and try to find ways to fill your time with meaning and purpose.
We have helped our clients transition to retirement, and we see a wide range of experiences, from those who feel very fulfilled in their post-career lives to those who are struggling with the adjustment. We have found that our most fulfilled clients have carefully planned for their abundance of free time and have designed a life they truly desire. They are not just retiring to escape from a job or due to pressure from family and friends, but are designing a life they genuinely want to lead. Those who struggle have not put enough thought into their post-career life and haven’t prepared adequately for the financial, social and emotional challenges of retirement.