I found this on nextavenue.org, a PBS website for "America’s 50+ generation," and find it interesting. We consider ourselves “financial experts,” but can we really, truly understand retirement until we actually retire ourselves?
Greg Daugherty, a personal finance writer for nextavenue asked four financial experts how retirement has surprised them and what lessons their experience might hold for the rest of us. Below are the experts' seven surprises.
1. Medicare is a godsend, but it doesn’t cover some of your health bills in retirement. A full 87 percent of people over 65 have a favorable opinion of Medicare, according to a 2014 Economist/YouGov poll and the experts I interviewed do, too. Even so, they note, Medicare doesn’t pay for everything and those extra bills can add up fast.
Stan Hinden, a former retirement columnist for The Washington Post and author of How to Retire Happy, says he was unhappily surprised by his out-of-pocket cost of dental work, which Medicare covers only in rare instances. Ditto for routine hearing exams and hearing aids, which patients must also pay for on their own.
“Being stuck with those bills comes as a surprise to those of us who were used to having our employers’ insurance cover them,” he says.
2. Travel isn’t exactly cheap. Many of us dream of hitting the road, seas and skies in retirement, but these experts have found the credit card statements waiting for them after traveling to be unpleasant souvenirs.
Nancy Langdon Jones, a retired financial planner in California, says she never noticed how expensive travel was until she retired and was no longer going places for business. Work-related travel expenses, of course, are often reimbursed by our employers or at least partially deductible on our tax returns. In retirement, the bill’s on us.
Cruises, in particular, can sink even an ample travel budget, Jones added. Indeed, as many first-time voyagers are surprised to discover, extras like shore excursions, drinks, and Internet fees can add hundreds of dollars in costs even to a so-called “all-inclusive” cruise.
3. A paid-off mortgage can pay off personally for non-financial reasons. Whether it’s best to retire your mortgage before you retire can be argued both ways from a financial standpoint. Some advisers say that if you have a low mortgage rate, you’ll come out ahead investing any spare cash elsewhere. Others believe wiping that big debt off your personal balance sheet is just prudent planning when your cash flow may slow to a trickle. Jane Rose, Vice President Emerita at RTD Financial Advisers in Philadelphia, Pa., said ridding herself of a mortgage made sense for emotional reasons as much as economic ones. “What I didn’t realize was how happy and relieved it would make me feel,” she notes.
4. Investment risk can lose its allure. If you look forward to having more time to play the market once you retire, don’t be surprised to find your interest waning in a few years.
“I don’t follow the markets the way I used to,” says Warren Boroson, a longtime financial journalist and author of Everything You Need to Know About Investing…in Only 37 Pages! He’s given up buying and selling and has settled into a portfolio of conservative, income-oriented mutual funds.
Hinden, too, says he’s turned more conservative as an investor than he might have expected. “Even if you know enough about investing or have some good advisers, there’s still a risk that there could be a crash at any time,” he says. “The market can be a very unfriendly place.”
5. Taxes can get more complicated in retirement. For one thing, after age 70½ you must take annual minimum distributions from your traditional (non-Roth) IRAs and pay income tax on them. A portion of your Social Security benefits could also be taxable if your total income exceeds certain limits.
“I was surprised at first by the amount of taxes I owed,” Hinden says. “I didn’t have anything set aside to pay them and suddenly found myself looking around for money.” Hinden ended up paying estimated taxes each quarter to cover the shortfall and to avoid underpayment penalties.
6. Spending doesn’t always come easily. “The biggest surprise for me,” Jones says, “was how difficult it is to switch from saving mode to spending mode in retirement. It’s hard to watch your money dwindling instead of growing.”
Ironically, it’s often the best savers — the very people who probably have ample money set aside for retirement — who face the biggest struggle learning to part with it.
7. Adjusting takes time, but you will. When you lose your professional title in retirement, you can be forced to redefine yourself. Even the experts have gone through that sometimes-painful process.
“One day I was a financial planner and the next day I wasn’t,” Jones recalls. “It probably took me five years to really adjust. What finally helped was volunteering. That has made a huge difference.”
Also, after taking a class at the local rec center, Jones discovered a talent for painting. “I hadn’t painted since kindergarten,” she says.
Boroson continues to write but has also found other outlets including travel, theater-going and teaching courses in music appreciation, particularly opera — “despite my great age and advanced state of decrepitude,” he jokes.
Hinden writes a Social Security column for AARP and is contemplating another edition of his book.
Rose is also busy with travel and family but says she especially enjoys the opportunity just to relax. “My definition of a perfect day is two brief naps,” she says, “one in the morning and one in the afternoon.”
Source: nextavenue.org
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