Some people really look forward to retirement. Others dread the prospect of not having enough to do. However active you plan to be in retirement, most of us hope to hang up the gloves before paid work becomes too much for us to cope with. Unfortunately, the golden years come with significant costs that you might not have taken into account, and more people these days are remaining in work because of financial necessity.
Less than a third of workers aged 50-80 are on track to saving enough money to retire at an age when they would like to. This is especially troubling when you consider that 40% of the baby boomer generation are forced to retire ahead of schedule due to illness or redundancy. However well you plan for retirement, it’s important to remember that the economy will change over time, and you may be retiring into a world that is quite different from the one in which you started saving. The way to pre-empt this is to expect the unexpected. Preparing for these eventualities will help you plan more effectively.
Provide for your Spouse
Life insurance as a top priority. In addition to funeral costs, Life insurance can take the pressure off your spouse by covering living costs and everyday expenses. Being forced to adapt to a new budget can be extremely difficult later in life, so it’s ideal if you can provide your spouse with an adequate safety-net to allow them to maintain their standard of living once you’re gone.
The Price of Health
Human beings are living longer than at any time in history. Advances in medicine and other global factors have resulted in an average lifespan that is about a quarter of a century longer than we enjoyed a hundred or so years ago. But there is good news and bad news when it comes to longevity. On the one hand, boomers are blessed with more time to enjoy retirement. On the other hand, those extended retirement years are often tempered with illness, as chronic diseases become increasingly common. Chronic diseases such as diabetes, cancer and cardiovascular conditions are the top causes of illness, disability and death among baby boomers. The likelihood of avoiding this bleak prospect can be reduced somewhat by eating more vegetables and losing weight (baby boomers have not historically been the healthiest generation) but by and large, you can’t prevent most of the chronic diseases you might suffer one day. Thankfully, loads of research is being done into the diseases affecting older people, and there are plenty of options out there for treatment. Whether you need Dementia Services or in-home care, you’ll be able to find a reliable source of support. But the truth is, healthcare is expensive. From hospital stays to doctor’s visits and prescription costs, those bills stack up. Expecting significant medical costs is a no brainer when you’re considering when to stop working, and how much cash you’ll need to make your retirement secure and comfortable.
Kill Your Debt
Debt can be a massive drain on retirement savings. Unless you have invested your savings in a magic bank account, your debt is going to be costing way more interest than your savings can earn you. Finding your way out of debt should be at the top of your to-do list as you inch nearer to retirement. Prioritise debts with the highest interest rates. Zap that credit card debt at the first opportunity, then progress through your loans for cars and home equity. Paying off your mortgage can be beneficial, but don’t aim to do that at all costs. Depending on certain factors, it might make financial sense for you to sell and downsize or diversify your property portfolio. You can’t predict all the challenges you’ll face in the future, so starting your retirement with a clean slate where debt is concerned will provide extra peace of mind.
Whether you’re excited for your retirement or you’re just starting to get your head around the fact that you’re getting older, give prior thought to these factors to make sure your financial planning pays off.