10 Difficult Realities of Retirement Planning
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Retirement planning is not the end of life, it is only the beginning chapters of a new era in life. What is important to note is that retirement is something that must be strategically planned out. You should spend years planning for retirement.
Depression, downsizing, and potentially outliving your retirement or potential issues that you should anticipate and plan for before retiring. Here are 10 difficult realities of planning a retirement.
1. Living Out Retirement is Not the Same as Preparing for It
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It is very normal to experience feelings of anxiety throughout each phase of retirement planning. Retirement is a post-working lifestyle where you must live out the rest of your life on a predetermined and self-administered allowance. You will soon give up a lifetime of working and planning to experience the unknown for the rest of your life. Discuss any apprehensions you have with your partner and retirement planning specialist.
2. You May Feel Like You’re Losing an Identity
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Retirement planning aims to map out your monthly and annual financial allowances after retiring from work. Still, a vocation is synonymous with an identity for most people. Retiring can feel like giving up an identity and a purpose in life for some prospective retirees. Remember that retirement is just another chapter in your life. Your identity is validated by your actions as a person, not a job title.
3. Post-Retirement Depression
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According to a 2020 federal scientific study over one-third of retirees suffer from post-retirement depression. Along with feeling a loss of identity retirees may feel adrift in life, retirement regret, or like they have nothing to offer the world. It’s very hard to go from a lifetime of familial purpose and gainful employment to being retired overnight. Don’t be afraid or embarrassed to seek out the help of a mental health specialist if needed.
4. Downsizing
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One of the cardinal rules of retirement planning is to downsize your life as much as possible relative to your budget. You may have to downsize from a larger house to a smaller house or even an apartment to accommodate your retirement planning needs. Downsizing can be an emotionally traumatic activity for retirees to endure. Retirees have to throw away, sell, or donate a lifetime’s worth of sentimental belongings, collections, furniture, assets, properties, or more to accommodate their retirement planning needs. While downsizing is hard to do, it’s important to on needs, not wants, when preparing for retirement.
5. Post-Retirement Activities
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Many retirees worry about how they will fill their time after retiring. Most people spend years planning for their retirement. Use that time to strategize what you might do post-retirement. Make plans for post-retirement activities long before you retire. Don’t just let this specific anxiety become a festering worry for months or years beforehand. Retirement is about being in control of your post-retirement life and intensive planning is a form of control.
6. You Should Avoid High Cost of Living Cities
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Inflation has made life expensive for everyone lately. Still, life usually becomes exponentially more expensive for retirees post-retirement. The average cost of rent in the United States is almost $1,400, although it can easily be double that price in high-cost-of-living states and cities.
Life in the United States is extremely expensive and won’t become cheaper anytime soon. Your retirement planning strategies may require you to live in smaller and remote cities and towns to accommodate your lifestyle needs.
7. Retiring Abroad Might Be Your Best Option
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American citizens have been relocating in increasing numbers to Mexico within the last decade. Americans are doing this to take advantage of the lower standard of living while still being close to the USA. The number of American Social Security recipients retiring abroad surged to 450,000 in 2022. Retiring to a safe developing country somewhere in the world might be the best way for you to optimize your retirement savings. This is not a decision to make on a whim, but it might be a good option to consider to make the most of your retirement.
8. You Must Live Exactingly On a Budget
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Retirement is a post-working lifestyle budget. Every penny must be accounted for during retirement planning. It isn’t enough to save money for your retirement, you also need to budget and allocate your lifestyle expenses accordingly. You should understand how much money you must spend every day, week, month, and year throughout your retirement. Trying to live financially spontaneously during retirement could endanger its viability.
9. Employer-Sponsored Retirements Are Taxed
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Unless you have accrued retirement savings in a Roth IRA or Roth 401(k), every withdrawal you make from a tax-deferred retirement account like a 401(k) will be taxed. Your retirement account savings will be taxed as if it is an income. The point is that more of your retirement savings will be eaten away every time you make a withdrawal.
10. You Could Outlive Your Retirement Planning
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The average American has a life span of about 76 years. There is no specific age for retirement, but most people retire in their early or mid-60s. You could potentially outlive your retirement unless you have saved enough money in your retirement account to last 20+ years. You should make plans for this contingency with your retirement planning advisor.
Retirement Planning
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Start planning for your retirement as early as possible. Get the assistance of a retirement planning expert if possible. Always remember to treat retirement as the start of a new chapter in life, not the end of it.
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Allen Francis is a full-time writer, prolific comic book investor and author of The Casual’s Guide: Why You Should Get Into Comic Book Investing. Allen holds a BA degree from Marymount Manhattan College. Before becoming a writer Allen was an academic advisor, librarian, and college adjunct for many years. Allen is an advocate of best personal financial practices including saving and investing in your own small business.
