• 10 Financial Challenges Retirees Face Today

  • by Austin Quinn
retirement mistakes

Retirement isn’t as easy as it used to be. Between rising healthcare costs, inflation, reliance on Social Security, and several other factors, many seniors can’t afford to reach retirement as easily as they might have been able to in the past. If you’re ready to retire and you’d like to learn more about the kinds of hurdles others have faced, check out the following list of rising financial challenges.

  1. Surprises – Life is unpredictable. Unexpected expenses like a sudden trip to the emergency room or a random house fire can cut deep into a retiree’s savings. However, disasters aren’t the only kinds of surprises you could face. Significant market swings and sudden, unforeseen downturns may happen at any moment.
  2. Inflation – In past decades, inflation rates have reached frightening highs – sometimes, rates have even surpassed 10%. Thankfully, current rates are at historic lows. Whether or not rates will remain low is a different question, and nobody can be absolutely certain. In any case, inflation will harm a retiree’s savings no matter how low the rates are.
  3. Longevity – Seniors are living longer than ever before, but few are saving enough to last the test of time. If you expect to live well into your nineties, you may end up spending as many years in retirement as you did working. Saving up for thirty to forty years of retirement is no easy feat – especially when you have few sources of guaranteed income to rely on.
  4. Taxation – When you’re in a high tax bracket, you need to pay especially close attention to your investments. Mutual fund managers often fail to account for taxes when looking for a profit, and this also tends to result in “phantom income”. These capital gains are often reinvested into additional shares, meaning that, even if you don’t actually see these returns, you’re still taxed on them anyway. Investing is a messy business, so proceed with caution.
  5. Leaving Your Legacy – With many seniors on the back foot themselves, it can be hard to provide for children and grandkids while also keeping up with your own bills. Even if you have enough money to retire comfortably, federal estate taxes may be much higher than expected.
  6. A Tough Job Market – Seniors are working longer than ever before, but, like millennials, they’re having a tough time finding work. Once you’ve been out of the workforce for a while, it’s not easy to pick up where you left off. On average, seniors have an easier time holding a job, but they also face greater challenges when looking for work. Businesses are always looking for cheaper labor, meaning that even though competition is fierce, entry-level wages are still low.
  7. Rising Healthcare Costs – Retirement is usually a relaxing period in life. However, as prescription drug prices and insurance rates continue to rise, many seniors will find healthcare to be a much larger burden than expected. Chronic illnesses and sudden medical emergencies can devastate savings accounts.
  8. Debt – Nowadays, seniors are reaching retirement age with much more debt than previous generations. According to a report from Harvard University’s Joint Center for Housing Studies, about 40% of households above the age of 65 were still paying a mortgage. By contrast, in 1992 this number stood at roughly 18%. Senior debt is only expected to rise in the coming years as more seniors emerge from the workforce with student loan debt (yes, student loans!).
  9. Historic Interest Rates – Low interest rates can be great for taking out a new mortgage or refinancing old debts, but they can also be a burden when trying to earn sustainable returns on fixed-income investments. Certificates of deposit, money market accounts, and other investment methods simply aren’t outpacing inflation as they did in the past.
  10. Reliance on Social Security – According to the Social Security Administration, around half of all seniors count on Social Security as a majority of their income during retirement. In fact, this problem is so severe that around 47% of unmarried, aged individuals count on Social Security for 90% of their income.