As retirement nears for millions of aging baby boomers, the realization of how to pay for retirement becomes a challenge for many.
Expenses that one was accustomed to while still working and raising a family changes dramatically once retirement arrives. The biggest challenge for many is how to maintain the same lifestyle in retirement as during working years.
Unfortunately, many have realized that Social Security and menial retirement savings just aren't enough to make up for lost wages. This either forces many retirees to seek part-time employment or merely live a less desirable lifestyle in order to minimize expenses.
Unforeseen expenses such as an illness not covered by Medicare or health insurance, home repairs, and emergency cash outlays may deplete valuable cash savings and derail what was thought to be a well executed financial plan. Retirees have found that liquidity during retirement is critical, thus avoiding the necessity to sell investments at gains or losses and even reducing income derived from them.
The biggest surprise that retirees are having is the increasing costs of drugs and healthcare. The Employment Benefit Research Institute has identified several expenses not necessarily planned for that are common among retirees: Special diets with foods and ingredients that may be more expensive than average, medical & toiletry items such as supplements and diapers, special transportation, Medicare part A & B items not covered.
Sources: Employment Benefit Research, Social Security Adm., Medicare.gov