Financial Planners: 4 Unrealistic Plans Retirees Always Make
Written by
Jordan Rosenfeld
Edited by
Levi Leidy
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It can be difficult to predict what actual retirement will look like for many retirees, making it all too easy to make unrealistic plans.
Whether that’s not accounting for inflation, planning expensive travel you haven’t really thought out or many other variations on a theme, retirees often learn the hard way that they have to pivot at this late stage of the game.
Financial experts explain some of the most common unrealistic plans retirees make and how to get around them.
Planning To Work a Part-Time Job During Retirement
Many folks about to enter retirement or those that have finally entered those golden years assume that they will continue to work a part-time job to help offset expenses or help fill their time, according to Christopher L. Stroup, CFP, founder and owner of Silicon Beach Financial.
“The reality is that your health can play a big role in your ability to work at an advanced age. Even with quality health, many retirees end up filling their days with family, travel or volunteering rather than taking on work to help pay the bills.”
Underestimating What You’ll Pay on Future Expenses
Another challenge of looking ahead to retirement, Stroup said, is that most people have a hard time predicting what their life will look like in the next 12 to 24 months, let alone during a 10- to 30-year retirement. This translates to vastly underestimating future expenses and how expenses will evolve during this period of life.
“We tend to see elevated expenses during the immediate aftermath of retirement as retirees enjoy this new era of life, only to have expenses slowly lower over the course of a few years. Eventually, as you age, expenses tend to rise as healthcare costs dominate larger shares of your budget.”
Not Planning For Health Costs
One plan is really a lack of a plan, Stroup said. “Many retirees falsely assume that Medicare will pay for all of their healthcare costs in retirement.”
The reality is that many retirees will need supplemental insurance coverage or plan to pay the difference out of pocket, Stroup explained.
“Healthcare costs tend to be some of the largest during this phase of life, so it’s best to begin discussions around healthcare planning well before retirement comes into focus.”
Projecting That Your Spending Will Remain the Same
Many retirees assume that their expenses will remain consistent during their retirement, but this often isn’t the case. “Your life will evolve, so you’d be wise to expect that your planning needs and desires will change over the course of your retirement,” Stroup advised.
What Retirees Can Do
To combat these issues, Nischay Rawal, managing partner and CPA with NR Tax & Consulting, suggested reviewing income, expenses, savings and goals.
“I help [clients] maximize Social Security, balance it with other income streams and suggest delaying benefits. For foreign retirement, I connect clients with experts on tax, legal and healthcare matters,” he said.
For example, he shared about a couple who wanted to retire in Costa Rica. After analyzing costs, he recommended delaying Social Security, using some savings to purchase an annuity and buying expatriate health insurance. “They’re now retiring abroad confident their income will sustain them,” Rawal said.
The best way to plan for retirement is to assume that there will be surprises, unexpected costs, inflation and health expenses you don’t currently have. The more savings strategies you have, the better.
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