3/7/2012 8:49 PM ET|
5 expenses keeping you from retiring
If you don’t plan properly, you could get stuck at your job long after the time you thought you'd be putting your feet up.
Wouldn't you love to retire right now? Unfortunately, retiring successfully means planning carefully and accurately for the expenses you'll incur in your post-working years. Along the way, a number of bumps could throw your plan off track.
1. Stock market drop
After the crash of 2008, it's clear that we can't simply hope that the stock market will always rise or stay level, and that's especially true the closer you are to retirement. One of the first changes you may have noticed after the crash was the hit to your investment portfolio. The Dow Jones Industrial Average plummeted from its intraday height of 14,280 in October 2007 to 6,443 in March 2009, a staggering 7,837-point difference.
Not only did investments take a big hit; for many people, the ability to earn an income, and thus invest further, also suffered. According to the Bureau of Labor Statistics, the 2007-2009 recession saw the steepest increase in the unemployment rate compared with other post-World War II recessions. Suddenly, many Americans found themselves with portfolios worth a fraction of what they had been a few months earlier -- and also without a way to increase their savings to make up for the deficit.
2. Boomerang kids
According to studies by the Pew Research Center, the number of Americans living in multigenerational homes has been increasing since 1980. In fact, this last recession marked the largest increase in the number of multigenerational households in recent history, with the number rising to 51.4 million in 2009 from 46.5 million in 2007. With the tough job market, increasing student debt loads and the overall trend of later-in-life marriages, more young adults are moving back in with their parents.
This means parents are bearing the burden of additional living expenses. The average cost of raising a child born in 2010 until age 18 in the United States averages $226,920, according to U.S. Department of Agriculture estimates (.pdf file), and the additional expenses of housing a child beyond that age can really eat away at parents' finances.
The Centers for Disease Control and Prevention reports that as of 2009, the divorce rate in the United States was about 50%. Not only is a divorce a huge lifestyle change, but the financial impact can be devastating. At minimum, a divorce means a shift in how a couple's income is allocated. For example, each partner may be paying for housing costs individually instead of together.
A divorce sometimes means one partner may need to go back to work after years of working in the home. Retirement assets will likely be divided, and this is all before considering what the actual divorce will cost. A lawyer will likely charge hundreds of dollars an hour, and the less you and your spouse agree on the terms, the longer and more expensive the divorce process can be.
4. Lifestyle changes
If you've recently taken up an expensive hobby, such as traveling, you're obviously going to need more money than you may have estimated for your retirement. In addition, if your health deteriorates or you are diagnosed with a serious medical condition, you'll probably have to factor in the costs of health care and medications as well as additional expenses, such as accessibility adjustments to your home should you become disabled. Make sure that you keep up to date on what your medical insurance will cover and that you include the cost of premiums in your post-retirement budget.
5. Poor planning
This is the most commonly cited reason for delaying retirement. You need to be aware of the potential problems that may throw off your retirement plans (like the ones listed above), and it's crucial that you hedge your investments and plan as best as you can for these surprises. Luckily, making and sticking to these plans isn't as complicated as it might seem. Start educating yourself by reading informative materials, then seek out retirement consultants to make sure you're on track.
The bottom line
Don't be intimidated by your finances. The earlier you get started, the easier saving for your retirement will be and the less disruptive it will be to your present life. Inform yourself and create a reasonable plan so you'll be ready to retire before you know it.
More from Investopedia:
VIDEO ON MSN MONEY
Five expenses that keep you from retiring:
Food, utilities, taxes, house/car payments and health insurance.
My husband and I are looking for the one with the best health insurance deal to keep working. Health insurance for 2 oldsters that arnt medicare elligable yet is equal to a mortage. That's the #1 factor.
Don't purchase new cars, pay credit cards off monthly, live BELOW your income, be vigilant in looking for good deals when buying anything. SAVE FOR YOUR EMERGENCY FUND and RETIREMENT FIRST. In this environment your emergency fund should be 9-12 months of living expenses.
REMEMBER TO THINK BEFORE A PURCHASE- IS THIS A NEED OR WANT?
I have not purchased a new car since 1988!. Our current cars a 1992 Honda Accord w/ 284K miles and a 1998 Toyota Avalon with 200K miles. The secret is to maintain the vehicles, especially changing the oil and filter regularly and find a good honest mechanic. These cars still run and look great; plus we do not have car payments.
Just because your friends and neighbors make dumb decisions, does not mean you need to follow them. Be in control of your future by making good decisions.
Out of my $2800.00 a month, I pay almost $400.00 just for health care.....I've got 3 more payments left on my home (I tripled the payment), no car note, a couple of credit cards and no savings.
I have tried to save but it just seems when I get ahead I get knocked back by 3 so I just quit trying.
Once the house is paid for we'll see and go from there. Best I can do right now.
Still, it bears repeating.
My husband is 60 and I'm 62. We could both quit today if it weren't for the drain of heath insurance costs for the two of us. We have plenty of money saved and invested to live comfortably until 90+....just not enough to pay exorbitant insurance rates for 3 and 5 years, without having company insurance benefits. Frankly, we are hoping that by the time the Health Care Act is fully enacted in 2014, the competition between insurance companies will be such that rates will go down. By then, I will be 64.5 and only 6 months away from Medicare, but we should be able to pay for insurance for my husband until he reaches Medicare age...IF the rates go down!
buy a used car... drive that used car till the wheels fall offf.... don't buy all the latset newest gadgets and 'toys. you will do o.k. for yourself.
i have been the REAL recycler as i bought well used cars and i drive them till they won't any more.
My response ......duuuuhhh ....... ever hear of common sense?
Stock market drop is an expense? Poor planning is an expense? Not helpful.
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.