The Windfall Elimination Provision (WEP) is a little-known rule that reduces your Social Security retirement…
Multiple surveys show that too many Americans have not saved enough for the retirement lifestyle they envision. Most people recognize that their employers will not provide pensions, so they’re largely on their own for retirement savings.
But a lot of people still have assumptions about retirement planning that may not be realistic. The sooner you realize that these assumptions may not be feasible, the sooner you can adjust your retirement planning in time to have a comfortable retirement.
“I’ll just keep working”. The median age of retirement is 62, and that hasn’t changed in the last 20 years. The biggest reason for retiring from employment is health – people simply are unable to continue working. Additionally, company downsizing and restructuring is a common occurrence, and older workers who are caught in the layoffs are often unable to find replacement jobs at the same pay level.
“I’ll rely on Social Security”. Although Social Security is the main source of retirement income for many current retirees, the average benefit is just over $1,000 per month, which is far from enough to live on in most areas of the country. Additionally, for those retiring in the next couple of decades, the benefit will likely be decreased unless the federal government takes action soon.
“I’ll just live on less”. It is possible to live frugally in retirement, especially if you eliminate major debts before you retire. But many people are unprepared to move to a much smaller house, or move from an upscale home to a small apartment, or completely cut out vacations and dining out. Retirement is stressful for many people even in the best of circumstances; drastically scaling back one’s lifestyle at the same time only compounds the stress.
“The kids don’t need us anymore”. Even after your children are grown, they may still need help from you. With the recent economy, it’s not uncommon for people in their 20s and 30s to have trouble finding suitable employment and to need financial help from their parents. And many parents have difficulty refusing to help, even if it means jeopardizing their own retirements.
Another expense many people overlook is health care. The average couple age 65 to 74 spends $4,383 per year out-of-pocket on health care in retirement. Medicare covers only a portion of total health care needs, and there are premiums, copays, and extra payments associated with that. A couple age 85 or over spends $6,603 per year out-of-pocket. Surveys show that 55% of people older than 50 believe they haven’t saved enough for health care costs, and 38% say they haven’t saved at all for health care.