15 Retirement Challenges and How to Overcome Them

Once you retire and your paychecks stop, managing your money becomes a lot more challenging. In fact, there are some key obstacles you could face in your later years that interfere with your financial security.

The good news is, if you prepare for the money issues you're likely to encounter, you can make sure you have the retirement you deserve. Not sure how to do that? Here are 15 common challenges older Americans face -- along with some tips for overcoming them.

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One of the biggest challenges many older Americans face is being forced out of the workforce before they are ready to leave.

Health issues or a lack of employment opportunities often mean that retirement happens sooner than planned. This can cause a number of financial problems, as it means less time to save and more time for your savings to support you.

To make sure you aren't left with a nest egg that's too small because you must retire sooner than planned, set your target retirement date for a younger age. That way, you'll be ready if you have to quit early -- and will simply end up better off if you can work longer.

If you're already nearing retirement and are forced to stop working before you're ready, you can still salvage your retirement by making big changes ASAP, such as downsizing to a cheaper home.

ALSO READ: What to Do If You're Forced to Retire Before You're Ready

Far too many Americans reach their retirement years without enough savings to cover their costs.

Avoiding this challenge involves saving diligently throughout your career. If you start investing early and put aside around 15% of income, you should have plenty of money to support yourself.

If you're already nearing the end of your working days with too little savings, working a little longer (if possible) could help you fix this issue by bulking up your nest egg. If you can't do that, then again a drastic shift in lifestyle -- such as moving to an area with a lower cost of living -- may be called for.

Many retirees end up surprised by how low their Social Security benefits are. That's especially true for those forced to retire and claim them early.

The reality is, Social Security isn't meant to be a sole support source, and these benefits are intended to replace only around 40% of pre-retirement income. And early filing can further reduce the amount you receive -- sometimes cutting benefits by as much as 30%.

Signing into your Social Security account to see what your benefits will actually provide can help you to overcome this challenge. If you have a realistic picture of how much retirement income comes from this source, you can save enough to supplement it -- or set your retirement budget accordingly.

ALSO READ: 3 Social Security Myths That Could Throw a Wrench Into Your Retirement

It's crucial not to withdraw too much from your retirement nest egg too soon -- but setting a safe withdrawal rate is one of the key challenges retirees face.

While experts traditionally suggested seniors follow the 4% rule and take out 4% of their account balance, this could lead to financial shortfalls due to the fact life expectancies have gotten longer and many new retirees are projected to earn lower returns than their older peers.

Overcoming this challenge involves carefully researching options for deciding how much to withdraw. For example, some financial experts suggest following IRS tables for required minimum distributions to decide how much to take from retirement accounts.

Inflation has hit a 40-year high, and rising prices for goods and services can hit seniors on a fixed income especially hard.

Future retirees should take the effects of inflation into account when setting savings goals. Current retirees need to rework their budgets to account for inflation, look for spending cuts, and make sure they have the right asset mix in their investment accounts to try to combat inflation's devastating impact.

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Healthcare is a huge expense for seniors, but many retirees aren't aware of how much they're likely to be forced to pay out of pocket, as they assume Medicare will cover what they need.

The reality is that the typical senior couple could expect to spend $300,000 or more out of pocket to cover their medical care during retirement. To be prepared for such a big expense, it's important to save throughout your career -- ideally in a health savings account if you're eligible for one.

If you've reached retirement age without dedicated savings earmarked for medical care, your best bet is to shop carefully for Medicare coverage that provides comprehensive protection so you can keep costs down.

ALSO READ: What Will Healthcare Cost You in Retirement? Prepare to Be Shocked

Many retirees are shocked to find out how taxes affect their retirement income.

Not only are pensions taxed in many cases, but seniors will also owe taxes on distributions from traditional retirement accounts. And Social Security benefits could even become taxable once your income reaches a certain threshold -- which isn't very high.

Both current and future retirees need to understand the tax rules that apply to their income and should work this into their budget to ensure they are setting realistic spending goals based on the income left over after the IRS takes its cut.

Around seven in 10 seniors will need long-term care sometime during their lifetime. Costs of this care can be astronomical, whether it's provided at home or in a nursing home.

Having dedicated savings set aside for long-term care could be a solution, but it's often impractical because the costs are simply too high for most people to cover.

Other alternatives to overcome this challenge include buying long-term care insurance or working with an estate planning attorney to make a Medicaid plan that shields your assets while allowing you to qualify for Medicaid to pay for nursing home care.

ALSO READ: The Shocking Cost of Long-Term Care -- and How to Tackle It

A growing number of older Americans are entering retirement with various types of debt -- including student loans and mortgages.

Paying debt as a retiree can eat into your fixed income, and the interest you have to pay leaves you with less to spend on other things.

If you're a younger worker, you can avoid subjecting yourself to this challenge by setting the goal to become debt free before quitting work. Current retirees, on the other hand, should make a debt payoff plan and consider whether refinancing could help cut interest costs.

Surprise expenses don't stop in retirement, and they can be devastating for seniors with limited money coming in.

To make sure you're prepared for them, aim to build up an emergency fund with enough money to cover three to six months of living expenses. That way, you won't have to withdraw money from retirement accounts or borrow to cover costs when disaster strikes.

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If your investments don't perform as planned, you may not earn the returns you need for your savings to support you during retirement.

Overcoming this challenge involves building a diversified portfolio with a mix of different assets. You should research investment options carefully, make sure you understand any assets you're putting money into, and maintain a balanced portfolio that exposes you to the right level of risk given your age and investing timeline.

ALSO READ: 3 Best Ways to Invest for Retirement

Having to take money out of retirement accounts at a bad time can be a major retirement challenge. If you're forced to make withdrawals during a downturn, you could end up having to sell assets and locking in losses that you could've recouped if you'd allowed time for market recovery.

Having enough money in savings to cover a year or two of expenses can help you avoid poorly timed withdrawals. Maintaining a mix of different assets -- including stocks and bonds -- in your portfolio can also enable you to be strategic about which assets you sell to cover your costs.

Many older Americans find themselves forced to support adult children or to contribute to family in other ways. This could lead to dwindling retirement savings and cause financial problems.

Avoiding this issue involves setting limits on the types of financial help you offer. It does you no good to drain your account to help loved ones only to find yourself broke and becoming a burden on the very people you tried to help.

ALSO READ: Parents: Don't Make This Common Retirement Savings Mistake

Living longer than planned is a good thing -- but it can put a strain on your savings account.

Since life expectancies are getting longer, it's best to plan for this by saving more throughout your career and by making sure you're choosing a safe withdrawal rate early on in retirement.

Finally, outliving your savings is a very real challenge many seniors will face. The best way to overcome this is to prevent it by saving more than you anticipate needing, being conservative with withdrawals, and living on a budget.

If you've found your account has already run dry, you'll want to consider options such as moving to a cheaper area, downsizing, or even returning to work part-time if you can to supplement your income.

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By overcoming these 15 retirement challenges, you can make sure you have the money you need to enjoy your later years.

Just make sure you understand the obstacles that could affect your retirement security and are proactive about addressing them.

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