3 Retirement Assumptions That Could Hurt You Big Time

Source The Motley Fool

Key Points

  • It's common to have pre-conceived notions about retirement before you get there.

  • Don't assume your expenses will drop and that Medicare will cover all of your health-related needs.

  • Also don't assume that you'll love being retired, because the opposite could end up being true.

  • The $23,760 Social Security bonus most retirees completely overlook ›

When you're deep in the throes of a stressful career and you've got many working years ahead of you, it's easy enough to romanticize retirement and imagine it as an ideal period of life where all is right with the world. In reality, retirement may end up being more of a struggle than you'd imagine from both a financial and logistical standpoint.

These three assumptions about retirement in particular might lead to a world of disappointment. So it's important not to buy into them.

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1. Your expenses are guaranteed to drop

You'll often hear people say that once you retire, you can expect to spend less. So naturally, you might assume that you'll be able to manage with a much lower income.

It may be that some of your expenses decline in retirement, such as housing if your mortgage is paid in full by then. But don't assume that every bill of yours will be lower once your career comes to an end. You may find that many of your expenses stay the same or even increase.

Take leisure. With more free hours to fill, you may find yourself spending more money than you used to on entertainment.

The same goes for travel. Sure, you may have more flexibility on when to take trips, but longer journeys could mean higher bills.

Make sure to map out a realistic retirement budget so you're able to set a savings goal that allows you to maintain the lifestyle you're hoping for. And make sure to invest your 401(k) or IRA efficiently so that your savings are able to grow.

Also figure out how Social Security will play a role in your retirement income picture. The longer you hold off on claiming benefits, up until age 70, the more money you'll get each month.

2. You'll have all of your healthcare costs covered by Medicare

A lot of people look forward to being eligible for health coverage under Medicare. But don't assume that Medicare will pay for all of your health-related needs.

First of all, there's a cost to being a Medicare enrollee. In addition to paying monthly premiums for Part B, you may have a Part D or Medicare Advantage plan that charges a premium as well.

Then there are out-of-pocket costs like deductibles, coinsurance, and copays to think about. And that assumes Medicare pays something toward your care in the first place.

Certain services, like dental care and eye exams, aren't covered by original Medicare. So you'll have to foot the bill for those entirely unless you have a Medicare Advantage plan that will pay for them.

It's important to understand the costs you'll face while enrolled in Medicare so you're not thrown for a loop. Better yet, sock money away for future healthcare costs so you're better equipped to cope with those expenses. A good bet is to contribute to a health savings account while you're working and reserve that money for retirement.

3. You'll love having all of that free time

When you're working 40 or more hours a week and have little time to do the things you love, it's easy enough to assume that you'll be thrilled to no longer have to work. But you may be surprised to discover that once you're actually retired, there is such a thing as too much free time.

It's pretty common for retirees to end up bored and restless as a result of not having a way to anchor their schedules. So you may actually want to plan on working part-time in retirement, even if just a few hours a week, to add some structure to your routine.

That work doesn't have to be a job you hate, though. Quite the contrary -- find something you'll enjoy doing, whether it's teaching an instrument, caring for pets, or being a tour guide a couple of days a week in your city.

It's natural to assume certain things about retirement when that milestone is still years away. But rather than make assumptions, talk to people you know who are already retired and ask what their experience is like. Chances are, they'll share some insight that could help you better plan financially and emotionally for your senior years.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

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The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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