Five Things Retirees May Forget to Plan For

Rodney Brooks

Retirement is tough enough, but it can be really tough for the people who did little or no planning.

It’s tough enough even for those who do plan for retirement. After all, there is much to consider. Which means that there could be a possibility for some people to either forgot something or underestimate it when planning for retirement.

Those things can be critical, and not including them in your retirement plan or not preparing enough could be a source of stress during your retirement.

Some things people could potentially overlook:

  1. Long-term care. Whether they buy long-term care insurance or not, long-term care is many times not part of the initial retirement plan, says Reid Abedeen at Safeguard Investment Advisory Group in San Diego.  

So, how much can long-term care cost in retirement? An analysis from Fidelity Retiree Health Care Cost Estimate says a 65-year-old couple retiring in 2016 will need $260,000 to cover health care costs in retirement. That’s up 6% from last year and the highest estimate since the company began calculations in 2002, according to Fidelity.

Meanwhile, Genworth, which provides long-term-care insurance, says the monthly cost for a semi-private room in a nursing home is $6,844 (national median) and $3,628 for an assisted-living facility.

“People don’t want to address the issue of how will I pay for long-term care,” says David Blackston of Blackston Financial Group in The Villages, Fla. “What will they do? How will they pay for it?”

“People do not want to talk about long-term care,” he says. “If they don’t do it, they are asking for trouble. Most people say ‘I don’t want kids taking care of me.’” Long-term care isn’t something that everyone will wind up needing, but if it is something that concerns you and if planning for that need, should it arise, is something that you would like to explore, then you should discuss the options available to you with your financial professional.

  1. People are discounting how long they are going to live,” says Abedeen. “They only think they will live to their mid-80s. But all statistics show that one of the couple has a chance of living into the 90s.”

Why is that important? Because people can face a very real threat of running out of money in retirement if they underestimate longevity. Years ago people retiring in their 60s expected to live another 10 or 15 years. Today someone retiring in their 60s could potentially expect to live just as long in retirement as they did in their work life – 30 years. That means people’s big concern about retirement – running out of money – is both real and legitimate.

  1. “People forget about taxes all the time,” says Abedeen.

He says what they forget is that retirement vehicles such as 401(k)s and IRAs are tax-deferred, not tax-free.

Understanding how taxes affect your retirement is important and we can provide you with general information about how taxes affect certain financial vehicles used when planning for retirement, but we cannot provide specific guidance on your individual situation. Instead, we encourage you to consult with your tax advisor or attorney for such matters.

  1. Paying down debt before retirement. “They forget to pay their loans off,” says Blackston. “If you are going into retirement you should not be in debt. You should be out of debt.

One of things a lot of people forget is you aren’t getting that big of a tax deduction by having a mortgage,” he says. “I tell people I’m not interested in your interest rate. I want to know your cash flow.”

“People should walk into retirement with as little debt as possible, especially high interest loans like credit cards and student loans,” Abedeen says.

Also, he says, depending on the individual situation, it can be good for people to pay off their mortgages. “It’s a big load for a lot of people that they would love to have get removed from them,” he says.

  1. Health care costs. “This is something that really bugs me,” says Blackston. “Health care costs are going thorough roof. The cost of health insurance is going through roof. I’m 62 and the family plan I paid $650 a month went to $1500 a month. I had a $10,000 deductible, and it went to $12,500. That’s if you’re not retired.”

 

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