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10 Retirement Issues Keeping Us Awake at Night

Author: Katie Brockman | January 27, 2021

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Retirement takes a lot of planning

Retirement can be one of the most joyous periods in your life, but it requires an extensive amount of planning and preparation. You may already be eagerly planning for all the exciting activities on your bucket list. However, there are also plenty of other factors to consider to make sure your senior years are as comfortable as possible. Here are a few issues you may face in retirement that you should be planning for now.

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Senior couple sitting apart and looking stressed

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1. Lack of savings

The median amount baby boomers have saved for retirement is just over $150,000, according to a report from the Transamerica Center for Retirement Studies. Even if you’re spending a modest $30,000 per year, $150,000 in savings will last only around five years in retirement. So before you choose to retire, make sure you’ve determined how much you need to retire comfortably so you don’t run out of money too soon.

ALSO READ: Quit Doomscrolling: 4 Tips to Save Your Retirement

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Senior man talking to doctor holding clipboard

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2. Healthcare costs

Although most retirees are eligible to enroll in Medicare coverage at age 65, Medicare won’t cover all your healthcare expenses. In fact, the average 65-year-old couple can expect to spend nearly $300,000 on out-of-pocket healthcare costs in retirement, according to research from Fidelity Investments. To combat these costs, you may choose to open a health savings account (HSA), or make sure there’s some wiggle room in your retirement budget to account for healthcare expenses.

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Senior woman in a nursing home talking to a nurse

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3. Long-term care expenses

Like healthcare, long-term care costs may not be at the forefront of your brain when you retire, but they can wreak havoc on your finances. The average semiprivate room in a nursing home costs more than $6,800 per month, according to data from the Department of Health and Human Services, which amounts to nearly $82,000 per year. While you may not know right now whether you’ll need long-term care when you’re older, it’s a good idea to have a plan in place. You might consider signing up for long-term care insurance, for example, or set aside a chunk of savings in your retirement fund specifically for long-term care.

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A Social Security card mixed in with a fan of paper bills

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4. Choosing when to claim Social Security

Social Security benefits are a significant source of income for millions of retirees, and the age you claim will affect how much you receive each month. In order to receive the full amount you’re entitled to, you’ll need to wait until your full retirement age (FRA) to claim. Depending on the year you were born, your FRA is either 66, 67, or somewhere in between. If you claim before your FRA (as early as age 62), your monthly payments will be reduced by up to 30%. Wait until after your FRA to file for benefits (up to age 70), and you’ll receive your full benefit amount plus a bonus of up to 32% each month.

ALSO READ: Thinking of Claiming Social Security? Do This Simple Math First

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5. Social Security’s cash shortage

Social Security is not going bankrupt, but it is experiencing some cash flow problems. With millions of baby boomers retiring every year and lifespans increasing, the Social Security Administration (SSA) is paying out a lot of money in benefits. The problem is that the program is funded primarily through payroll taxes, and right now the money coming in from taxes isn’t enough to cover the amount that’s being paid out in benefits. As a short-term solution, the SSA has been dipping into its trust funds to cover the deficit, but those funds are expected to run dry by 2034. At that point, the money from payroll taxes will only be enough to cover around 76% of projected benefits.

In other words, unless Congress comes up with a solution before 2034, your benefits could be reduced by nearly 25%. This means it’s especially important to have a strong retirement fund just in case you can’t rely on Social Security as much as you’d planned.

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6. Expensive debt

You don’t necessarily need to be debt-free by the time you retire, but if you’re loaded with expensive types of debt (like high-interest credit card debt), that could create some challenges. When you’re living on a fixed income in retirement, every expense matters. And if a significant portion of your monthly income is going toward debt repayments, that’s going to make it harder to enjoy the retirement you want -- not to mention the fact that it could drain your savings faster, too.

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Stock market chart

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7. Stock market downturns

Stock market downturns may be alarming, but they’re normal -- and inevitable. However, it’s still a good idea to prepare for them the best you can, especially when a market downturn could sink your retirement savings. As you get closer to retirement age, be sure to adjust your asset allocation so that your portfolio is weighted more toward bonds and other conservative investments rather than stocks. Your savings won’t grow as much when you’re investing conservatively, but your money will be more protected when the market takes a turn for the worse.

ALSO READ: Worried About a Stock Market Crash? 6 Ways to Be Ready

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8. Inflation

Inflation is tough to prepare for because it’s essentially invisible. You can’t add “inflation” as a line item in your budget, but it will eat away at your savings if you’re not prepared for it. If inflation increases at a modest 2.5% per year, for example, your money will lose half its value over 20 years. While you may not be able to avoid inflation, you can account for it by using a retirement calculator to estimate your savings needs. It may feel like you need to save a huge sum of money, but remember that as inflation increases, your money won’t be worth as much as it is now.

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9. Unexpected expenses

Unexpected costs don’t stop once you retire, so it’s critical to have at least three to six months’ worth of savings stashed in an emergency fund. Another reason for retirees to have an emergency fund is that it can help your savings last longer during stock market downturns. When the market falls, you’ll want to avoid withdrawing your savings as much as possible so that you’re not selling when stock prices are lower. If you have a robust emergency fund, you may be able to survive on that money until the market -- and your retirement fund -- recovers.

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Elderly man sitting alone at large table and eating from a bowl

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10. Divorce and other family issues

Nobody plans to get divorced, but if you and your spouse end up divorcing during your senior years, it could complicate your retirement. Your retirement assets may be divided between the two of you, and you could need to pay alimony as well. Besides divorce, other family issues could also pose financial problems. You may need to care for older parents or relatives, for example, or provide financial assistance to adult children. It can be tough to plan for these costs, but it’s a good idea to be aware of them as you head into retirement.

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Older couple standing in front of a building

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Preparing for retirement is a tough job

There are seemingly endless factors to consider as you plan for retirement, and no matter how much planning you do, you can’t prepare for everything. However, by doing your best to build a strong retirement fund and account for all the challenges you may face, you can head into your senior years as prepared as possible.

The Motley Fool has a disclosure policy.

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