Love The Hustle Blog

3 Retirement Financial Surprises to Watch Out For

By nature, retirement is something completely foreign to those of us still working. So, at least, financially, many are blindsided by surprises when they hit their golden years. Everything from unexpected expenses to major shifts in financial needs could throw you off your game plan during this time period.

But that doesn’t mean you can’t prepare. Here are some retirement surprises to look out for, and how to prepare for them:

A drastic change in your budget

It might seem like your retirement budget would stay the same, or even shrink in retirement. What many don’t account for is that their change in lifestyle can result in drastic month-to-month shifts in spending and retirement surprises. In fact, all your free time could result in much larger spending needs, for instance, if you want to travel or go on adventures in retirement.

Rather than be blindsided by these costs, your best bet is to develop a realistic, evolving assessment of your costs in retirement.

You still need investment growth

Although it’s referred to as your retirement savings, the truth of the matter is that your investments will likely still need to grow in your golden years. With the average retirement lasting decades, most individuals require an investment plan that accounts for withdrawals and continual growth of the underlying investment.

To plan for this surprise, work with a financial advisor who will help you develop a retirement roadmap. You’ll want one that anticipates possible market volatility and downs during your retirement, that still allows your wealth to last.

Taxes on retirement investments

Even though you aren’t drawing a traditional income in retirement, tax issues can get more complex during this time, because of required minimum withdrawals. For many tax-advantaged investments, like IRAs, the government requires you start withdrawing from them at 70.5, lest you face major tax penalties. In many cases your investments are taxed when they are withdrawn as well.

The smart investor will account for these withdrawals, not only to avoid penalties, but to account for that wealth not growing, and other possible options to invest it after.

How to avoid retirement surprises

As holistic financial advisor, we examine every aspect of our clients’ financial lives to ensure a smooth and worry-free retirement. If you’d like to learn more about our services, don’t hesitate to contact us today.