We live with our parents for approximately 25% of our life, then we are working for about 40% of our lives and the remaining time we are on this earth is spent in retirement. This is the time when our pensions and our savings are most important to ensure that we have the quality of life that we have always wanted. There are many things that can get in the way of attaining and keeping the quality of life that we want to have in our retirement.
Six Retirement Surprises
Here are 6 retirement surprises that we all need to pay attention to during retirement and also when we are planning for our retirement.
Live within your means
We have all of this extra time to spend and sometimes people plan trips etc that they have been waiting for until retirement. They may buy a new car and they may spend a lot of money upgrading their homes all of which eats into their savings and as their savings decline, there is less income from the savings to help them with daily expenses. Plan your major expenses and make sure that you are living within your means to enable a quality of life that you desire as you get older.
If you do not have a budget, you should. Once you have a budget, living within that budget is important as mentioned above. But sometimes there are changes to your budget that are needed to reflect additional income as well as additional expenses. We suggest updating your budget at least once per year to assess your ability to live within your means and make sure you have sufficient income to live on.
Health issues can creep in any time. From heart attacks to strokes, diabetes and on and on. Most people will have some form of health insurance to cover them. However there is the deductible and most only cover up to 80% of the health bill for hospital stays etc.. Even 20% of a $200,000 is $40,000 which is a substantial amount to cover. If you or your spouse needs to go into a home to be cared for the bill for this can be high as well. Even at $3000 a month or $36,000 a year, this is a substantial amount that needs to be covered.
For the past 20 years our governments have been able to control inflation and keep it in the manageable range of 1 to 3%. Some countries have experienced far higher levels of inflation. We can only hope that were we live will remain in the 2% range for the foreseeable future. Even 2% over 20 years adds a hefty increase to your daily bills. This is something that should also be planned for. A 40% increase over 40 years is substantial.
Not working forever
While some of us may plan to work well into our 60’s and beyond the reality is that many of us will not be able to work due to health issues. Availability of work is another factor. We have seen some 80 year olds still working. They are probably for the money and also for the social part of the job. However as soon as your health goes or as soon as they downsize it is much more difficult to find a job unless it is a minimum wage job.
The last 30 years have seen really volatile markets. In 2008 the market dropped by 50% and has since come back and exceeded the levels pre 2008. If you need to withdraw money from your savings plan or your retirement when the market is down. You are actually eating into more of your capital than may have been planned or budgeted. Accounting for these changes is necessary to ensure that you will have a retirement plan that lasts.