3 big risks that can quickly turn your retirement dreams into a nightmare — even with a healthy nest egg

Strategies that can be used once retired include making qualified charitable distributions (QCDs) or investing in a qualified longevity annuity contract (QLAC).

With multiple sources of income and different tax treatments, some retirees find their taxes are more complex to calculate than they were during their working years.

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Many of us have a vision of an active retirement — spending our days playing golf, gardening, volunteering or traveling.

However, most of us will experience declines in cardiovascular health, muscle mass, bone density and cognition as we age. About 44% of people 65 and older report having a disability and about one-third of those 85+ have some form of dementia.

Deteriorating health might force us to rethink how we’ll spend our retirement days, but it could also influence how we spend some of our retirement dollars. In all, a 65-year-old may need $165,000 in after-tax savings to cover healthcare expenses — and as you age these costs will make up an increasing portion of your total expenses.

Between ages 55 and 64, healthcare costs will make up about 7% of your expenses, but this rises to 12% between ages 65 and 74 and 16% when you’re 75 or older.

A person turning 65 today has about a 70% chance of needing long-term care during their remaining years and about 20% will require care for more than five years. The costs for this can range from an annual national median cost of $26,000 for adult day care to a median of $75,504 for homemaker services — and a whopping $127,750 per year for a private room in a nursing home.

Preparing for these costs starts before you retire and may even influence when you retire. For instance, if you retire before you qualify for Medicare, you’ll need to plan for bridging the gap in healthcare coverage. A financial planner can help you estimate your expected medical costs, including premiums for Medicare and other insurance and out-of-pocket expenses. Incorporate these costs into your planning and saving.

A 2019 survey of British retirees found that the “average retiree grows bored after just one year.” This is partially why 20% of retirees surveyed by T. Rowe Price in 2022 were working either full- or part-time and another 7% were looking for work. While almost half (48%) of respondents were working for financial reasons, almost as many (43%) were working “for social and emotional benefits.”

It turns out that for some people retirement can be boring and lonely. It’s a big adjustment to move from the purpose, structure and social interaction that comes with working every day. Like much else around retirement, this can be eased with some prior planning.

Before retiring, take time to think about what’s important to you and how you could incorporate this into your golden years.

For example, that might mean working part-time in a similar field or volunteering for a cause you believe in, or maybe even going back to school and studying something you’re passionate about.

It may take some trial and error, but retiring well involves more than just planning your finances — it involves planning your new life.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.