15 Hard Truths About Retirement That You're Not Expecting

Ask any retiree if their retirement has gone exactly as they expected it to and you'll probably hear at least a few stories about unplanned events and the expenses that came with them. That's not surprising. It's not easy planning for life after the workforce. Even if you envision a fairly quiet retirement at home, you'll likely run into at least a few tough situations you weren't anticipating.

But you can take steps to insulate yourself against retirement shocks by accepting and preparing for these 15 hard truths about retirement.

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It's easy to put off retirement savings when we're young, but retirement sneaks up on us faster than we think. And with most people needing somewhere between $1 and $2 million for retirement these days, it's crucial to start saving as early as possible.

If you haven't thought about how much you need to save, now is the time to do so. Set up automatic contributions to your retirement accounts also, so you don't forget to make them.

ALSO READ: How Much Do I Need to Retire Comfortably?

When planning for retirement, it's important not to be too optimistic about your portfolio's performance. It would be great if you could set aside a few hundred dollars per month and count on a 20% average annual return to grow your money at warp speed. But that's not realistic for most people.

You might have years when your money grows 20% or more, but you'll also have some years when you lose money. If you don't want your retirement plans getting derailed, it's usually best to plan for a 5% or 6% average annual rate of return on your investments. If your money grows more quickly than that, you can always retire a little earlier or use the extra spending money on things you want.

Some people think they can avoid the losses that come with investing by sticking to conservative assets like bonds. While there's definitely a place for these in your portfolio, you don't want to invest too heavily in these assets. They don't grow as quickly as stocks do, so it'll take you even longer to reach your savings goals if you're only investing in these.

The general rule of thumb is to invest 110 minus your age in stocks with the remainder in bonds. So if you're 50, you'd keep 60% in stocks and 40% in bonds. You shift your money to safer assets over time, but you do so gradually so you can still capitalize on the high earning potential of stocks.

A $1 million nest egg still sounds like quite a bit of money, but it's not going to have the same kind of buying power in a few decades. Inflation will continue to drive up the cost of everything, and you need to anticipate that in your retirement plan.

The typical rule of thumb is to plan for a 3% annual inflation rate. It might be higher in some years and lower in others, but over time, it should even out. If you want to be conservative, you might plan for a 3.5% or 4% annual inflation rate instead.

ALSO READ: How to Profit From Inflation Surges

You've probably heard that you'll be able to get by on less money in retirement than you need while you're still working. But this isn't true for everyone. You'll get rid of some expenses in retirement, like childcare and contributions to your retirement account. But you'll also have other expenses that will likely increase.

Rather than going with an arbitrary estimate of what you'll need, like 70% or 80% of your current income, craft a custom retirement plan based on your goals. Think about where you plan to live and how you want to spend your time in retirement and let that be your guide.

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Social Security was only designed to cover about 40% of the average worker's pre-retirement income, and for some people, it covers even less. The average monthly benefit right now is $1,663 per month. That amounts to about $20,000 per year, but it's not enough to cover the average retiree's expenses on its own.

There are things you can do to boost your Social Security benefit, like raising your income today, working at least 35 years, and choosing the right time to apply for benefits. But it's also important to keep Social Security in perspective. It's a key part of your retirement plan, but it was never intended to be the whole thing.

Paying your mortgage off before you enter retirement can help ease your financial burden, but don't assume that you'll never have to pay anything for your home once you retire. You'll still owe property taxes and you'll probably need to replace the roof or upgrade a broken appliance once in a while.

It's difficult to anticipate these expenses, but do your best to budget for them when estimating your retirement costs. You can use current prices as a baseline, but don't forget to factor in inflation as well.

Older adults typically have more health issues than younger ones, and these can lead to costly medical bills. Taking steps to protect your health right now, like eating right and establishing a regular exercise routine, can reduce your risk of certain health conditions. But it's still important to budget for medical care in your retirement plan.

ALSO READ: Healthcare Could Be Your Greatest Retirement Expense. Here's a Great Way to Save for It

Most seniors rely upon Medicare to cover their healthcare expenses, but not everyone realizes that Medicare has costs of its own. There are monthly premiums, deductibles, and copays, just like regular health insurance. These costs will also likely go up over time. There's not much you can do about this other than plan for it in your retirement budget.

Medicare covers a lot, but there's plenty it leaves out as well. Seniors who need hearing aids won't get any help from Medicare. Original Medicare also doesn't include any coverage for dental or vision care.

You can purchase a supplemental health insurance policy to cover some of what Medicare doesn't, but then you're adding additional monthly costs. Still, a lot of people prefer this over paying for their care completely out of pocket when expenses arise.

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Long-term care can easily drain a retiree's nest egg in a few years. It's not always easy to know if you might need this type of care, but if you have a personal or family health history of serious illness, you don't want to ignore the possibility.

Consider looking into long-term care insurance. This doesn't come cheap, but it can help you cover the costs of long-term care should you need it in the future.

Married couples have to prepare for the fact that one spouse is likely going to die before the other. This can have serious implications on the survivor's retirement plans. If the deceased spouse was working, their death could cause serious financial concerns for the surviving spouse. Or the surviving spouse may decide they want to move or downsize their home after the death of their partner.

It's a good idea for married couples to talk through these scenarios and make sure they have enough money set aside so the surviving spouse doesn't face any unexpected financial surprises.

ALSO READ: 3 Retirement Planning Steps No Married Couple Should Skip

Some people prefer to work, at least part-time, in retirement. Working in retirement is also a popular strategy for those who weren't able to save as much as they wanted to when they were younger. It's a great option if you're able to do it, but not everyone is.

You might be forced into early retirement by an unexpected illness or injury, either to yourself or a family member. Or you might lose your job and be unable to find a new one. That's why it's best to save as much as possible while you're young, even if you plan to continue working as you age.

Working might not be part of your ideal retirement plan, but if you're concerned about running out of money prematurely, it's an option to consider. It doesn't have to be quite as boring as the nine-to-five job you have right now.

You could start a side hustle that eventually turns into a business or look for something that's more in line with your interests. You could also see if transitioning to part-time at your current job is an option.

When younger workers envision retirement, they typically think of travel, hobbies, and spending time with family. But for a lot of seniors, retirement can bring health issues, financial insecurity, and a feeling of isolation.

It's not easy to predict exactly how you'll feel about retirement until you're there. But try to anticipate potential problems that could arise and think about ways you could combat them. For example, if you feel lonely in retirement, you could join some local groups focused around your hobby or volunteer with a local organization.

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Retirement can be a wonderful time in your life, but we don't get there without serious effort. While there's no way to anticipate every possible difficulty that could arise in retirement, we can do our best to plan for some of the common problems discussed here.

Review your retirement plan at least once per year and whenever your financial situation changes. Make changes to your plan as necessary to keep yourself heading in the direction you want to go.

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