Don’t let these 3 retirement surprises ruin your old age
Sometimes life’s surprises can be pleasant, like when a friend sends you flowers on your birthday or the forecast for a rainy day turns sunny. But other surprises aren’t as fun, including some of the financial surprises you may encounter in retirement. Here are three to keep in mind so your finances don’t get thrown off course.
1/ A lower-than-expected Social Security benefit
Many people retire assuming that Social Security will provide enough income to cover most, if not all, of their expenses. In reality, the average senior citizen this year receives only $1,543 per month.
Rather than relying too heavily on Social Security, try to increase your personal savings so that you have income to supplement those benefits. If you have access to a 401(k) plan at work, it’s worth enrolling in it, especially if you’re eligible for an employer match. And if you don’t have a 401(k) plan, fear not – you can build up a nice nest egg in an IRA instead.
It’s also helpful to get an estimate of your monthly Social Security benefit before you retire, so you know how much to expect. You can access this information on your annual tax returns, which you can get by opening a Social Security account.
2/ A property tax increase
Many seniors enter retirement owning their homes. But even if you manage to pay off your mortgage in time for retirement, your housing costs can still eat up a large portion of your income. That’s because property taxes tend to increase over time, even during periods of declining home values.
A good way to protect yourself from rising property taxes is to build up your savings. Depending on where you live and the value of your home, one year the increase in property taxes may be much higher than the increase you receive from Social Security.
3/ Services Medicare does not cover
Many seniors are shocked to discover that Medicare will not cover all of their health care needs. If you stick with the original version of Medicare, you’ll need to cover the cost of dental care, eye exams and hearing aids if you need them. And while Medicare Advantage, an alternative to the original Medicare, generally covers these costs, you may find that an Advantage plan is too restrictive for you.
The solution? If you’re eligible to put money into a health savings account, or HSA, do your best to maximize it while you can. That way, you’ll have money set aside for future health care expenses, so that when Medicare isn’t enough, you won’t be left high and dry.
It’s important to know that you can only put money into an HSA if you’re enrolled in a high-deductible health plan, the definition of which changes every year. But it’s worth checking to see if you qualify, because like 401(k)s and IRAs, HSAs offer a world of tax advantages.
Surprises can make life interesting, but the above surprises could ruin your retirement and cause you unnecessary stress at a time in your life when you deserve better. Now that you know to watch out for these traps, you can take steps to prevent them from ruining your old age.