A rose is beautiful and we all enjoy them to celebrate special occasions. But roses have thorns — sometimes we can prick ourselves if we aren’t careful. Retirement is just the same. We can enjoy retirement if we hold it just right, but if we refuse to prepare, the thorns we will experience in retirement can cause some real pain.
Here are some of those thorns to consider:
- Of all people who filed bankruptcy in 1991, 21% were older than age 65. Today that number has grown to 28%. This destroys credit and prevents ability to borrow money for needed items. If debt levels are really high before retirement age, this can be a real thorn to manage after age 65.
- Some parents try to help their children with student loans by co-signing on federally insured loans. Later, if the child doesn’t get employment that earns enough money, the parents end up paying on the loan. This can be a real thorn when it comes to retirement.
- Another potential thorn in retirement is higher taxes. No doubt you have been taught to save money in a 401(k) or other tax-deferred savings program throughout your working years. Supposedly you will be in a lower tax bracket in retirement years so paying all those deferred taxes in retirement will be cheaper than paying them during working years. But it has been my experience working with thousands of clients that this simply isn’t the case. People in retirement usually pay much higher income tax than when working because they don’t have any deductions!
- Another thorn that can cause real pain in retirement is waiting too long to start saving for it. If you started working at age 25 but did not form a habit of saving until age 55, this could potentially pain you every day of your life in retirement.
- Having to work until age 80, because you don’t have enough money to retire, can be another real problem. Maybe you like to work and you don’t mind it. But that’s different from being forced to work. And what if you don’t have the health to do so?
- What about the fear of running out of money in retirement, which oddly enough, is a much greater fear than dying? I’m sure the reason is that it’s hard to cut spending down at a time we have more free time to spend. Statistics show we spend more when we first retire than when working. Apparently it takes a few years to adjust to the new income.
- The thorn of inflation is real. It has hurt so many retirement-aged people as their fixed expenses increase while their income does not.
- The final thorn that can turn a beautiful retirement into a thorny nightmare is the need for dental, vision, hearing and for long-term or hospice care. The huge prick here is that the costs can exceed your entire savings for retirement, and this might leave a surviving spouse destitute and on welfare. A HealthView Services study in 2016 shows that the cost for all these elderly care service for a couple age 65+ will be $377,000 during their retirement.
To create a beautiful retirement with minimal thorns, get in touch with a financial coach who can teach you how to deal with each of the things I have discussed above. Contact me today: peter@moneymastery.com.
