7 Eye-Opening Realities About Retirement

Retirement is often seen as a well-earned opportunity to enjoy life and pursue passions. While it can be a time of great satisfaction, clearly understanding what to expect can help you navigate potential challenges and confidently embrace the journey. Here are some truths to be aware of as you think about transitioning into this new chapter.

1.Your House Is Still Your Largest Expense

Paying off your mortgage might be a long-term goal, but even without mortgage payments, housing can remain your biggest cost. BLS data shows that U.S. households led by someone 65 or older spent an average of $20,362 on housing in 2022. These costs include property taxes, home insurance, maintenance, and utilities. If you’re looking to save on home insurance, there’s some great opportunities right now to lower your monthly bill. Simply, answer a few quick questions to see which company fits your needs the best.

2. Medicare Isn’t Totally Free

As you work, you may think about how nice it will be once Medicare covers your healthcare costs. Unfortunately, even when Medicare covers you, you still have medical expenses to pay on your own. While Medicare Part A, which covers hospital care, is free for most, you’ll need to pay premiums for Medicare Part B (outpatient services) and any supplemental plans you choose. Additionally, deductibles, copays, and uncovered services can add up. For more on costs associated with Medicare, visit Medicare.gov’s cost overview.

3. Social Security Isn’t a Magic Solution

Social Security plays a role in most retirement plans, but it’s a mistake to expect it to cover the bulk of your expenses. The average monthly benefit in 2024 is $1,837, equating to around $22,044 per year. This amount can help you get by, but it’s unlikely to fund the retirement lifestyle you envisioned. However, there’s plenty of ways you can reduce expenses. For example, you could switch your car insurance and potentially save up to $600 per year with this company. For a deeper look at Social Security’s impact, refer to the Social Security Administration’s benefits data.

4. Your Lifestyle May Need Adjustments

A report from the Global Atlantic Financial Group highlighted that 39% of retirees end up spending more than anticipated during the early years of retirement. This trend often results in the need for retirees to reduce their spending as they grow older to ensure their savings last. Two ways to reduce expenses up front are to sign up for home and car warranties, so you don’t have to shell out full price for repairs. Many retirees find themselves re-evaluating their budgets as they become more aware of how rapidly expenses can accumulate. To better understand how retirees adapt their spending habits, visit the Global Atlantic Financial Group’s retirement planning insights report.

5. Financial Independence Isn’t Guaranteed

Retirement might seem like the perfect opportunity to enjoy financial freedom, but many retirees find themselves facing unexpected challenges. In fact, nearly half of retirees report that their expenses are higher than expected, which can impact their sense of financial security. According to findings from the Employee Benefit Research Institute, this can lead to adjustments like scaling back on non-essential spending, moving to a smaller home, or even taking on part-time work to make ends meet.

6. Health Issues Should be Expected

Research from the Institute of Economic Affairs shows that retirement is associated with a significant increase in depression and physical ailments, underscoring the importance of planning for healthcare expenses in retirement. If eligible before retirement, consider contributing to a health savings account (HSA) and consulting a financial advisor about setting aside funds for healthcare costs after retirement.

7. You May Initially Feel Unsatisfied

According to the Nationwide Retirement Institute, nearly 28% of recent retirees report that life is worse than during their working years. However, retirees tend to adapt and find happiness over time. In fact, 45% of adults aged 75 and older say life has turned out better than they expected. To learn more about older adults’ satisfaction and expectations, visit the Pew Research Center’s analysis on aging and retirement.

Embrace Retirement with Realism and Resilience

Retirement brings a mix of anticipated joys and unforeseen challenges. By acknowledging potential hurdles and planning for them, you can navigate this stage with confidence and adaptability. Stay informed, maintain flexibility, and be prepared to adjust as needed to enjoy a fulfilling retirement.