7 Signs You’re out Of Retirement Money!
No one wants to be a broke retiree, and if that’s one of your biggest concerns, then we made a list of signs you’re out of retirement money you could look into.
Because here’s a sad truth: no matter how much we prepare, we might later discover that our retirement will cost more than we initially planned.
First and foremost, it’s all about becoming aware of the fact that your initial budget might be smaller than you’d actually need. And if so, then you shouldn’t be worried about having too much money, but you should save even more for your golden years.
You don’t have a long-term care plan.
One of the signs you’re out of retirement money is that you didn’t take into account that you need a long-term care plan. And by taking this into account, I mean literally saving money for one.
You might be surprised to find out that more than half of adults who are 65 years old today need a long-term care plan, and around 1 in 7 will definitely need care for over five years, as the Department of Health and Human Services confirmed.
What you can do
There are many strategies you can try to be financially prepared for long-term care. Some options even include getting a long-term insurance policy or even a hybrid life insurance policy that might pay out if you suffer from a long-term care event.
Another great option is getting a longevity annuity. If you’ve never heard of it, it’s an insurance product that would require a lump-sum investment. In fact, it provides a steady stream of retirement income.
However, you’ll have to wait many years until you receive the payout, and that’s why you can’t really time it with a long-term care need. You could meet with a financial planner who specializes in long-term care planning.
You underestimated your life expectancy.
Another relevant sign that you’re out of retirement money is that you underestimated your life expectancy. This is by far the most difficult subject when it comes to retirement, because the whole ordeal of actually thinking about how many years you might have left is inhumane, to a certain degree.
But it’s still relevant for calculating retirement funds. To avoid such difficult thinking, it’s much better to overestimate than underestimate, that’s for sure.
Also, it might help to check the current statistics, but then again, who wants to think of themselves as just numbers in a statistic chart?
What you can do
You could use a life expectancy calculator to get an estimate of how long you might live, depending on your health and family history. To reduce the risk of outliving your own savings, you definitely shouldn’t rely on only one source of income.
You could also have a portfolio of diversified investments in a retirement account from which you could withdraw money over time.
You didn’t plan for high healthcare costs.
We all need healthcare, and not only in retirement. However, another important sign you’re out of retirement money is that you didn’t look into how high healthcare costs are in retirement.
Some people find out in their 40s that basic healthcare costs are over $250,000, and to be honest, most of them fail out of their chairs. More than that, retirees could expect to spend even more than that.
Fidelity Investments estimates even say that a 65-year-old couple retiring in 2023 would need to pay $315,000 to cover medical expenses in retirement.
What you can do
When you’re calculating how much you might have to save for retirement, make sure you also take healthcare costs into account, because they can be drastically higher than what you’re currently paying.
Also, you don’t want to overlook small items, such as prescription co-pays for diabetes patients and other health issues that would require years of medication.
When you’re in retirement, you could compare Medicare options to make sure you’re 100% getting the right plan for your own needs.
You didn’t take inflation into consideration.
When you’re working, you might not really feel the impact of inflation if your wages are rising along with the prices. More than that, you might not even factor inflation into your retirement savings calculations.
Generally, in the United States, prices of goods and services rise by 3% on a yearly basis. This also means that over the next 20 years, your $100,000 of retirement savings will probably be worth 60% less.
What you can do
If you didn’t take inflation into account when you calculated your retirement funds, you might have to save a bit more than you previously thought. In fact, most people fail to take into account this kind of change, and it usually ends up costing them a lot over the years.
Besides saving more to prepare for inflation, you should also consider delaying your Social Security benefits. You could maximize your Social Security benefit by waiting to claim it until you reach 70 years old.
This way, your monthly check will be bigger, but the Social Security Administration’s COLA will apply to the biggest payout.
You didn’t factor in big-ticket items.
Another thing you need to do before you retire is create a post-retirement budget to estimate your expenses and determine how much income you need in order to cover them.
But you could still end up spending more than initially planned, especially if you don’t factor in big-ticket items along with other regular expenses.
What you can do
It’s extremely easy to overlook expenses like a new car or home repairs, especially when you’re creating a proper retirement budget. That’s the number-one mistake you could make.
When you’re building your retirement budget, you want to make sure you pay attention to all of those things, too. You could make a list of big-ticket items you might need to pay for in retirement, but also an estimate of how much they might cost.
Then, you can build an emergency fund in a particular savings account that’s big enough to cover those expenses.
You changed your spending habits.
On the same list of signs you’re out of retirement money is changing your spending habits. For instance, you could be a penny-pincher now, but when you retire, that might change.
For instance, plenty of retirees end up spending way more in retirement just to keep themselves entertained. Also, shopping and eating out remain two of their ways of staying socially active.
What you can do
No one says you should give up on your social activities, but you could still do it in a free and low-cost way. This is a great way to join book clubs and volunteer in the community.
They won’t cost you anything, but they will provide great interaction. There are many ways to stay busy after you retire. You could either take walks, hike, research your family’s history, or take advantage of free community events.
You loaned money to your kids.
You might end up spending way more in retirement than you initially expected, and this might be a sign you’re out of retirement money. Truth be told, it’s not easy to say no to your kids.
However, if you are going to help them out, you have to do it judiciously. Otherwise, you could run out of money.
What you can do
By having a solid financial plan, it will be easier to understand the risks of raising your retirement savings. Your retirement security mainly depends on the balance you decide when you’re planning your retirement income, assets, and spending.
For instance, if you spend enough assets, you can make the income you need to stay retired.
You might be having a hard time adjusting to all this planning, and rightfully so. Here’s a great book that might give you more insights into the matter: Retirement Money Secrets: A Financial Insider’s Guide to Income Independence.
If you found this article useful, we’re glad, because we have many others you need to try: Stop Believing These Weird 10 Retirement Myths – Here’s Why
