Retirement — is it a destination just around the corner, or does it feel like decades away? Either way, before you quit your job for good, make sure you have enough savings, passive income, and a few other things. It is important to make sure you have financial considerations.
If you're over 65, have nothing in your savings account, and are relying solely on Social Security to get you through your golden years, you could be in trouble if you're not adequately preparing for retirement.
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Kevin Huffman, owner of Criminil Trading, cited a survey by the National Retirement Security Fund that found 45% of all retirees say they don't have enough money to live comfortably.
“In other words, many retirees are struggling to afford the necessities of everyday life, from basic household goods to housing to health care,” Huffman said. “In the long run, the damage could be even greater. Social Security does not provide a standard of living close to the standard of living you enjoyed before retirement. The average Social Security benefit They only provide about 40% of their income.”
GOBankingRates spoke with Huffman and several other financial planners to discuss the consequences of not saving for retirement.
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Even if you retire from your career, you may still need money for basic living expenses. That means I have to get back to work in some way.
Doug Lawler, founder of Crossroads Financial Group, says people who don't properly fund their retirement “may need to delay retirement or continue working past retirement age.” Stated.
“Most people who are able to work will need to continue working full-time or part-time,” agrees Stephen Cates, principal financial analyst at Annuity.org.
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need to sell assets
If retirees over the age of 65 are unable to return to work, “they may need to rely on other sources of income, such as the sale of assets, debt, or assistance from government programs,” Lawler noted. “Each of these options can come with its own challenges and potential drawbacks.”
“For example, selling an asset could mean losing out on future growth potential or having to pay capital gains taxes. Borrowing money could result in high-interest debt that is difficult to repay. “There's a gender,” Lawler added.
Possibility of bankruptcy due to medical expenses
As we age, we need more care and attention to our health. When you retire, you may qualify for Medicare to cover your medical expenses, but it's not a comprehensive solution. If you don't have some form of financial backup for unexpected medical expenses, you could end up bankrupt or crippled by medical debt.
“Medicare helps, but it doesn't cover long-term care. Medicaid covers long-term care, but only after you've exhausted your assets and income, which means you have to be penniless,” says ChildFree Wealth. Jay Zsigmont, founder of
“Long-term care costs an average of $115,000 per year, with men spending 2.2 years in care and women spending 3.7 years in care. Without a long-term care plan, you can risk going bankrupt and relying on Medicaid. “There is, but that tends not to be the best care,” Zygmont said.
decline in living standards
If you have to go back to work, you won't have time to relax, see your family, or do the activities you wanted after retirement. If you have to downsize your home, you may find yourself in some strange living situations that you didn't plan for after work.
“Older adults may struggle to maintain their standard of living and may need to significantly reduce their spending,” Lawler says. “Not saving for retirement can increase stress and anxiety about your finances, which can have a negative impact on your mental and physical health.”
“Rising costs, such as property taxes and other items that increase costs faster than Social Security income, can make it harder to afford housing, medicine, and other necessities,” Cates noted.
Tips for planning for retirement
If learning about all the potential consequences of retiring without proper planning sends shivers down your spine, don't worry. There are ways to avoid this scenario.
“Although you're late to the party, there's no better time to save time than today,” Cates suggested. “The ability to save money for emergencies can give you the financial security you need for retirement.”
“It's important to delay receiving Social Security benefits as much as possible, ideally until age 70, when benefits reach their maximum value,” he advised.
He pointed out that living solely on Social Security leaves you in a situation of inflexibility, with little financial cushion for emergencies and unexpected expenses. “Without an emergency fund or other assets to fall back on, you may find yourself in debt due to unexpected expenses or having to choose to pay for necessities.”
GOBankingRates Details
This article originally appeared on GOBankingRates.com: Financial Planner: Everything That Happens When You Fail to Save for Retirement
