10 Sad Truths About Retirement
Whether it’s dealing with unexpected medical expenses or providing for their adult children, Americans often find themselves facing expenses they didn’t anticipate in their golden years. In addition, saving for retirement is more difficult today than it was 50 years ago.
More than 30 percent of Americans plan to continue working after retirement, according to a 2019 survey by TD Ameritrade. If you don’t know how long you’ll need to work or what to expect in retirement, find out the hard truths so you can determine when you should retire.
Some of your investment success will be left to chance

What happens in the market in the 10 years before and after your retirement date can play a significant role in how well your portfolio is funded.
“It’s hard to replace money lost during that time, whether it’s due to time constraints or loss of income from work,” says Patrick Daniels, a financial planner with Precedent Asset Management in Indianapolis.
To protect your retirement savings during what Daniels calls the high-risk period, he suggests individuals “take a conservative approach to investing.”
But you can still invest too conservatively

If you avoid high-potential investments like stocks, you could make a mistake in retirement and outgrow your lifestyle, said Joseph Carbone, a certified financial planner and founder of Focus Planning Group in Bayport, N.Y.
“Retirees should look to invest in total return-type strategies that focus on stock appreciation – specifically dividend-paying stocks – and investment-grade bonds that don’t have long maturities,” Carbone said. “Many of my clients who are at or near retirement have an allocation of 60% stocks and 40% bonds, with an emphasis on dividend-producing stocks and bonds that have a duration of less than six years.”
You may not be saving enough

According to a recent GOBankingRates survey, about 64% of Americans have saved less than $10,000 for retirement. Even if you plan to live modestly during your golden years, that amount isn’t nearly enough. Matt Ritt, a certified financial planner and investment advisor at Questis, suggests investors “start saving as early as possible.”
He advised investors to take advantage of 401(k), 403b and IRA accounts and maximize contributions whenever possible. To find the funds, “limit your spending and stick to a reasonable spending plan,” Ritt said.
Whether you’re young…

More than half of millennials have nothing saved in the bank for retirement, according to the GOBankingRates survey.
That’s a shame, because the younger you are, the more opportunity you have to grow your nest egg through the power of compound interest. Start saving just $200 a month at age 25, and you could have accumulated $621,735 by age 65, assuming an 8% rate of return.
…or if you’re older

Unfortunately, baby boomers – the group closest to retirement age – aren’t doing much better.
According to the GOBankingRates Retirement Survey, 30.7 percent of those over 55 have retirement savings of less than $50,000, which is considered inadequate for those approaching their golden years. Late savers are at risk of having to catch up on their retirement contributions or even delay their retirement by a few years.
You’ll likely live longer than your loved ones, which costs more

The average life expectancy in the United States today is 78.6 years, according to the Centers for Disease Control and Prevention. And the sad truth about retirement is that the longer we live, the more we have to pay to fund our extended golden years.
“With Americans living longer than ever, it’s no surprise that their biggest concern is outliving their income,” said Jim Poolman, executive director of the Indexed Annuity Leadership Council. “But the good news is that there are solutions to not running out of income, including turning to products that offer guaranteed income for life – like fixed indexed annuities.”
You could lose out by choosing your Social Security benefits poorly.

Start taking Social Security benefits before your full retirement age and you’ll permanently lower your monthly payment. Wait until age 70 and you’ll receive more money with each check.
However, that doesn’t mean one strategy is always the best, especially when you consider spousal and survivor benefits. Fortunately, there are several Social Security optimizers that can help you determine the best time to start collecting Social Security benefits, like the Quicken Social Security Optimizer.
You may regret missing out on your Roth contribution

The younger you are, the more you can benefit from Roth accountsbecause they are funded with after-tax dollars, which accumulate investment income tax-free for the life of the investment, Ritt said. That makes them a great option if you expect your tax rate in retirement to be higher than it is now. By drawing from your Roth account before your taxable account, you reduce the amount of distributed funds you’ll pay taxes on for that year
You will have many financial issues to consider

“People approaching retirement and those just entering retirement face the challenge of planning cash flow for their new lifestyle,” said Scott Smith, a certified financial planner with Olympia Ridge Personal Financial Advisers in Rochester Hills, Mich.
Before dipping into your IRA or brokerage account, Scott Smith suggests creating a five-year cash flow plan, which should consider the tax implications of distributing your pension, annuity, Social Security, retirement savings and even part-time disposable income.
“Often these choices are made without considering tax efficiency, and the retiree ends up paying more taxes than they really need to,” Smith said.
You’ll likely need to supplement your health insurance

Many procedures are not covered by Medicare, including dental, hearing and vision care, as well as long-term care in an assisted living or nursing facility. Many retirees also face unexpectedly high deductibles and co-payments.
“The best solution is to include unexpected medical expenses in your budget when building your retirement savings,” said Joshua Zimmelman, founder of Westwood Tax & Consulting. You can also enroll “in a Medicare supplemental insurance plan, which will help you pay for co-pays, deductibles, co-insurance, prescription drugs and medical care when you travel abroad,” he added.