4 retirement mistakes you can not afford – Motley's Fool

Retirement is supposed to be a nice time in life, but if you do not plan it properly, the opposite might be true. Here are four mistakes that could derail your retirement and leave you both miserable and miserable.

1. S & # 39; s only support social security

Although social security helps millions of seniors to survive financially, these benefits are not designed to support retirees. If you are an average employee, you can usually expect Social Security to replace about 40% of your previous income when you retire. Most seniors, however, need about double this amount to live comfortably, which means that if you do not save on your own for your beautiful years, you may not succeed.

Keep in mind that while some expenses, such as travel expenses, may disappear in retirement, most of your monthly bills will probably remain the same. Some might even go up. Take leisure, for example. Once you have more free time, you could start spending more to stay busy. Similarly, if you are often at home during the day and you have no office, you can spend more to heat and cool your living space. Make sure you save personal savings before you retire because you can only rely on Social Security to help you make ends meet.

2. Underestimate your health costs

Many seniors know that health care is a major expense they will face in retirement, but many seniors do not realize how expensive medical care can be. Investment giant Fidelity recently shared forecasts that the cost of retirement-related health care would rise to $ 285,000 for a 65-year-old couple retiring this year.

Of course, your health care tab will depend on many factors, such as your traditional Medicare or Medicare Advantage membership, your supplemental insurance, and your current health status. But know this: Fidelity's forecasts are just one of the many estimates available. HealthView Services, a provider of cost forecasting software, reports that retirement health care will actually cost $ 364,000 to a healthy 65-year-old couple. Therefore, monitor the cost of medical care, but most importantly, increase your savings so that you have the money to pay for it.

3. Forgetting taxes

Many people assume that seniors generally do not pay tax, but that is far from true. The IRS can intervene after your retirement income in several ways. First, if you keep your savings in a traditional IRA or 401 (k), your retirement will be taxed as ordinary income. The only way around this problem is to register in a Roth IRA or a 401 (k).

In addition, your social security benefits may be taxed at the federal level if they only represent a portion of your total retirement income. And if you live in a state that levies taxes on social security, you will also lose additional money at the state level.

The income you receive from a pension is also subject to tax most of the time (though there are exceptions to this rule). And if you earn investment income or interest on a non-tax-efficient account (such as a brokerage account or traditional savings account), you will also have to pay taxes. So it's a question of considering paying money to the IRS year after year. If you plan to be taxed at retirement, you can take it into account in your budget.

4. No planning for long-term care

Many seniors get injured or lose mobility with age. Thus, many people find that they can no longer live alone without any help. In fact, about 70% of people aged 65 and over end up needing long-term care, that it's a home-based caregiver, a assisted living facility or nursing home. And if you do not buy insurance to help cover the costs involved, you could suffer a financial shock.

According to Genworth Financial's 2018 cost of care survey, the average cost of assisted living facilities in the country is $ 48,000 a year. Retirement home care costs even more: $ 89,297 per year on average for a shared room and $ 100,375 per year on average for a private room.

That's why you really need a long term care insurance for retirement. The best age to apply is your mid-year to late fifties, because at that time, you will have more chances to enjoy a discount on your premiums based on your health and your age. That said, many seniors apply for insurance at age 60 and if your health is decent, it is certainly worthwhile to do so. Otherwise, a long period of care could actually erase your retirement savings, leaving you in ruins and vulnerable later in life.

Retirement can be a scary prospect from a financial point of view, but this is not necessarily the case. Avoid these mistakes and you will avoid much of the stress that many seniors face.