How to Avoid One of the Biggest Retirement Mistakes

Written by Danielle Kunkle

There are thousands of baby boomers nearing retirement every day. According to Investopedia, about 75% of these baby boomers admit to being behind on saving for retirement. The other 25% may soon come to realize that they aren’t as prepared as they thought they were.

They may come to this realization because most baby boomers are unaware of the fact that Medicare, although paid for during your working years, isn’t free.

Most new Medicare enrollees are surprised to find out that everything they have been paying towards Medicare was only for one part of Medicare, Part A. Once they calculate their potential costs for all the other parts of Medicare, they conclude that their savings aren’t as adequate as they thought.

So how do you avoid the biggest retirement mistake you could make? Simple, you need to plan. Follow the steps below.

Discuss Things Beyond Money with Your Financial Advisor

Now that you know that Medicare isn’t free, you need to discuss the costs of your healthcare in retirement with your financial planner.

Not only that, but you need to discuss with them how often you go to the doctor, what kind of lab work and tests you get on an annual basis, and anything else that might cause a divot in your savings. This may seem like too personal of a subject to discuss with a financial planner, but it’s necessary.

According to Fidelity, on average, a couple will need $280,000+ in retirement savings just for healthcare costs. Discussing your health status can help you and your financial advisor plan for potential expenses such as needing a Medicare Supplement plan or long-term care coverage.

Be Ready for the Unexpected

Never assume that your health will be in tip-top shape for the rest of your life. Yes, you may be healthy now, but that could literally change within a day. Similar to an emergency fund, set aside money in the chance that you become chronically ill.

Suppose you get diagnosed with cancer. Chemotherapy alone costs tens of thousands of dollars in one calendar year, not to mention the surgeries you’d need.

You’ll want to be prepared for an unexpected diagnosis just like this one. If you become ill, the last thing you will want to worry about is how you will be able to afford to fight for your life. Put the right coverage in place to protect yourself.

Plan for Possible Loss of Employment

We’d like to think that our place of work will always have a spot for us when we get into retirement age. However, ageism in the workplace is no myth. Sometimes, employers see the new, younger applicant walking in as the best person to take over a job you’ve been doing for years.

With more baby boomers planning to continue active work past the age of 65, the possibility of having your position taken away from you grows. Therefore, you should never bank on always having that biweekly check flowing into your account.

Have money set aside to replace your income if you were to lose it suddenly.

Set Up an HSA

An HSA is a health savings account. Having this account allows you to be able to put away money without having taxes being taken out of it. The purpose of this account is to help pay for qualified medical expenses.

As of 2019, the maximum contribution amount for an individual is $3,500, while the maximum contribution amount for families is $7,000. Those who have an HSA and are at least 55 years old is allowed to contribute up to $1,000 extra each year.

Qualified medical expenses you can use your HSA to pay for include but are certainly not limited to, hospital services, long-term care, dental and vision services, and even insurance premiums. You can also use your HSA to cover your immediate family member’s qualified medical expenses.

How to Set Up an HSA

To be eligible for an HSA, you must be enrolled in a qualified high-deductible insurance plan. Once you have that setup, you will be able to set up your HSA either through your employer or a bank.

Next best step is to have money be auto drafted from your checking account to your HSA. This will help you make sure you always have a steady flow of money going into your savings account.

Health Savings Accounts with Medicare

Having Medicare while contributing to your HSA is not allowed. If you enroll in any part of Medicare, you will no longer be legally allowed to contribute to your HSA.

Therefore, to continue to be able to contribute to your HSA past 65, you must delay enrolling in Medicare. The only way you can do this without having to pay a late penalty later is to continue to have creditable coverage.

The most common form of creditable coverage past age 65 is a large employer group health plan. If you continue to work for an employer with 20 or more employees and keep their group plan, you can delay Medicare and continue to contribute to your HSA.

Start Now

The biggest retirement mistake is just failing to plan ahead. If you haven’t been putting enough into savings, start now. Try to start at least doubling the amount you save monthly to try and make up for lost time. The more you can put away now, the better your retirement will be in the long run.

Ingredients of a Happy Retirement

The retirement we ultimately decide to live is personal. Within the parameters of our individual financial situation and current health status, how we choose to live is up to us. We manage our days. We fill the calendar. We are in control.

Retirement affords the unique opportunity to become the person you want rather than the person you are supposed to be. The trick is to figure out who that is as soon as possible. As Zane Grey said, “we’re burning daylight.”

Everyone has advice to give. Friends generously share specifics of their retired life, perhaps bragging a bit, maybe complaining a tad. Books enumerate the good and bad pointing out pitfalls and pinnacles you are likely to encounter. Retirement bloggers share their journey as they learn to navigate their individual retirement jungle. Each source sheds some light on what it means to live retired 24 hours a day seven days a week. Yet none of these sample cases is necessarily how YOU will live your retirement. Your path to retirement is yours to blaze.

When it comes to the manufacturing the perfect retirement I don’t believe there is a generic one-size-fits-all recipe. We are different people. Our interests are all over the map. What excites you may bore the pants off me and visa versa. Each of us is responsible to find our respective way. How we get there is not always easy to predict. Plan on taking some missteps along the way but keep going.

And who wants a “perfect retirement” anyway? Perfect anything requires an attention to detail that has no place in the free flying life we can experience as retirees. It sounds like unnecessary stress if you ask me. I prefer to view retirement as a work-in-progress, a continually changing experience where we weed out what we don’t enjoy and add in what we love. What works one day may not another – that’s perfectly fine. It should be about making the most of each day. And the awesome reality of retirement is you get to decide exactly what that “most” consists of.

Retirement is an evolution. The person we are five years down the line is not the same person we were at the beginning. We learn, adapt, try a little of this, experiment with a little of that, and slowly learn how to make the most of our second act. That intensity and drive that was part of the working me has morphed into a more mellow go-with-the-flow retired me. I think my wife appreciates the change. I know my heart doctor does!

I write this blog from a little two-seater rocking chair, looking out my front door at my recently pruned roses whose healthy shiny leaves are beginning to return for a new season. A wind chime softly tones while a single bird twitters in the tree perhaps chiding the barking dog down the way. After weeks of rain – a rare occurrence in the Valley – the sun is out, the temperature is warm, and the sky is blue. Does it get any better?

Earlier today my wife and I went to Trader Joes – we love that place. We wander the isles finding intriguing new offerings along with our basics like fruit, veggies, bread, nuts, etc. My latest discovery is the Herb Popcorn – talk about addicting. From there I drove a few miles down the road to take a 90 minute walk along the shoreline. The California coast is definitely my sweet spot. Combine one part majestic coastlines strewn with craggy rocks, add a dose of booming waves breaking mercilessly on said rocks, throw in a pinch of riotously blooming cacti, and last but not least include the possibility of spotting a breeching whale lingering on horizon – that is my recipe for inspiration. When at the ocean it feels life just makes sense. One of my favorite quotes: ”the voice of the sea speaks to the soul.”

I think living a happy retirement comes down to figuring out what you most enjoy and then doing it. Sure there are days when you don’t feel 100 percent – that is part of the program. But when you do feel good make the most of it. Don’t worry about what you used to be able to do – do what you can. Be forever curious – the world is amazing in so many unique ways. Take a chance and venture outside your comfort zone. Remember you are not obligated to do anything. If a new direction turns out not to be what you expected, abandon ship! Move on to the next adventure, the next hobby, the next challenge, and the next reason for living.

Living a happy retirement life is something we all hope to experience. Good luck on your journey.

Choosing The Right Car In Retirement

Written by Sally Perkins

Today’s retired Americans – ‘Baby Boomers’ – own 70% of the country’s disposable income, making them the most likely to be able to spend out on expensive holidays or valuable assets. One asset retirees may want to invest in is a car. This may be particularly relevant to those who want to make the most of various road trips. Or it might just be that certain retired people want to update their car as a way of celebrating such a significant milestone. Whatever the reason, it is important to weigh up a number of key considerations before deciding what type of vehicle to go for. 

Consider the purpose of your motor

The most suitable car for you will depend on the size and style of vehicle you need. This, in turn, will depend on what you will be using the car for the majority of the time. If, for example, you are likely to be using your car most days, or have family you’ll often be giving lifts to, you may find a larger automobile the most appropriate. With 80-97% of American vehicles projected to be SUVs or trucks by 2022, this would be a popular choice. On the other hand, if you are only likely to be using your car occasionally, or for short journeys, a smaller car that is probably cheaper to run may be the best option for you. It is also worth considering how long you want the car to last. Are you, for instance, looking for something that will last for a considerable number of years, or are you likely to want to update the car again in a few years’ time? These factors will influence how much you should be looking to spend and whether you should for a used car or something new.

Don’t forget about maintenance costs

It goes without saying that the upfront cost of a car is just the beginning; the maintenance of the car is where the real costs start to quickly add up. This can be particularly true in the case of used cars, when the risk of problems arising is higher than with new cars. Drivers will often be covered by a three year warranty when buying a new car; used cars don’t come with this benefit, making them more of a risk in that sense. With maintenance costs for new cars (including tire changes) hitting an average of $99 per year, it is imperative you get an up-to-date history of any car you are interested in buying. Whether you opt for a new or used car, large or small, be sure to research thoroughly any aspects that are known to be problematic and pricey to maintain. This can help you gain clarity and lessen the chance of you having unexpected costs early on.

Prioritize the safety features of a car

Of prime importance when it comes to purchasing a car is safety. Strict safety regulations for new cars, along with the focus on safety features in the design of modern cars, mean that new cars are likely to be a safer option than older models. The emergence of features such as Automatic Emergency Braking (AEB), Blind Spot Detection and lane assist helps keep drivers and pedestrians safer on the roads, whilst also helping to keep you more relaxed and confident behind the wheel. This might be particularly appealing for older drivers who tire more easily, particularly when it comes to lane assist, which recognizes when the car is veering out of a lane and immediately guides the steering wheel back into the correct lane.

Consider leasing a car

One option to consider when it comes to updating your car is to lease one, rather than buying it. This is increasingly popular among drivers, with over 30% of new cars leased in America in the second quarter of 2018. Leasing involves paying a monthly cost for a car and offers you the benefit of driving a brand new car for a given number of years. Whilst you wouldn’t actually own the car, leasing has the advantage of providing you with a reliable vehicle under a manufacturer’s guarantee at a cost far lower than the depreciation of the vehicle. The downside of leasing is that you do not end up owning the car and you must have the car for a fixed term. It is also extremely costly to end the contract early.  

The takeaway: take your time to decide

If you are retiring and fancy treating yourself to a car, then you no doubt deserve it. However, purchasing a car is an important decision that obviously involves parting with a lot of money. For this reason, be sure to think carefully about your circumstances and the types of vehicles that will best accommodate your needs. Safety and affordability are key, so make sure you do your homework on the sums involved and the safety record of any model you are interested in. Think carefully about whether to buy a new or used car, or whether to lease. Finally, test drive any car you are considering, preferably at different times of day and with at least one passenger on board. This will give you a sense of what driving the car is like in different conditions, whilst also enabling you to receive honest feedback from others on their experience in the car.