8 Brutal Truths About Retirement You Need to Hear

Brutal Truths About Retirement You Need to Hear

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Brutal Truths About Retirement You Need to Hear
Cheapism / iStock

Harsh Truths

Retirement comes with a lot of promise — the golden years, they call it. You imagine you’ve done your part and now is your time to travel the world, and spend time with your family, without worrying about making ends meet — Uncle Sam has you covered. Unfortunately, the reality is a bit bleaker


Nearly 66% of Americans nearing the age of 65 are not financially prepared for retirement, according to a recent survey by the Retirement Income Institute and Alliance for Lifetime Income. More than 52% say they will rely primarily on Social Security as their main income source, with an average expected annual benefit of $22,000. 


In this economic climate, retirement is far from a paid vacation. The sooner you realize this, the better you’ll prepare for it. 


Here are 8 brutal truths about retirement.

Bird's Nest Filled With U.S. Dollars on a Black Background
Bird's Nest Filled With U.S. Dollars on a Black Background by American Advisors Group (CC BY-SA)

1. You’ll Need a Lot More Money Than You Think

Retirement is likely to cost you much more than expected—up to 130% of your pre-retirement salary, not the 70-80% often presumed. A study by fintech company MoneyComb and the Center for Advanced Hindsight at Duke University shows that retirees tend to underestimate their spending. Once you’re retired, every day feels like Saturday, meaning you have all the time in the world to spend money and finally pursue those lifelong goals, like traveling or buying that car you've always wanted. However, you might forget that now you have no employer-covered perks like tech and travel expenses.


On top of that, inflation could significantly impact costs, with estimates showing that a 65-year-old couple might need $490,000 for healthcare alone by 2033.


So take the experts' 2 cents and plan for higher costs than the misguided 70%.

Closeup of 'Tax Rate' Button on Calculator With Pen, Sheet of Expenses Underneath
Closeup of 'Tax Rate' Button on Calculator With Pen, Sheet of Expenses Underneath by Ken Teegardin (CC BY-SA)

2. You’ll Still Have to Pay Taxes

This comes as a surprise to many retirees who thought their financial obligations to Uncle Sam were done for good — you will still need to pay taxes even in retirement. Your Social Security benefits, pensions, and withdrawals from retirement accounts can all be taxable, depending on your income level, filing status, and the state you live in some states don't tax retirement income and Social Security benefits). If your income exceeds $25,000  as a single filer or $32,000 for joint filers, you may be liable for federal taxes on your Social Security benefits.

Closeup of Social Security Check Coming Out of a White Envelope, Hand Holding, Blurred Background
LPETTET/istockphoto

3. Social Security Won’t Cover All Your Needs

One of the most common mistakes retirees make is relying too heavily on Social Security, but the reality is it will cover only about 40% of your pre-retirement income. The Social Security Administration assumes this based on an average income of $44,000.


So, it’s wise to start budgeting early to get a clear picture of how much you’ll need in retirement. Remember, expenses like Social Security and Medicare contributions will disappear, but others may stay the same or even increase.

Opened Bottle of Prescription Pills Spilled on U.S. Dollar Bills
Opened Bottle of Prescription Pills Spilled on U.S. Dollar Bills by Images Money (CC BY)

4. Healthcare Will Be Your Biggest Expense

Another retirement hard truth that many retirees are not prepared to hear is that healthcare can take a huge bite out of your retirement savings. According to Fidelity Retiree Health Care Cost Estimate, the average 65-year-old retiree might need around $165,000 just for healthcare expenses. Moreover, these expenses are expected to rise by 5.6% annually through 2032, making it vital to plan ahead. Medicare does help but doesn’t cover everything, especially long-term care. To stay safe, you should use a Health Savings Account (HSA), explore supplemental insurance like Medicare Advantage or Medigap, and try to stay proactive with regular checkups and manage a healthy lifestyle.

Senior Couple Sitting on the Couch Going Over Finances, With Papers and a Laptop
whyframestudio/istockphoto

5. Early Social Security Claim Reduces Benefits Permanently

Claiming Social Security benefits early can seriously reduce your monthly payments. Let's say you were born in 1962 and choose to start benefits at age 62 in 2024 — your monthly payment would be permanently reduced by 30%. To receive the full benefit amount, you should wait until your retirement age, which is 67 for those born in 1960 or later. Each year you delay claiming, the reduction lessens.

Side-View of Distraught Senior Woman Sitting on Her Small Bed, Selective Focus
FG Trade/istockphoto

6. You Might Outlive Your Savings

More than 50% of Americans over 50 are worried that they might live longer than they can afford to, with only 17% feeling confident they might keep their lifestyle in retirement, according to a recent survey from the Transamerica Center for Retirement Studies.


To make sure you don't outlive your retirement savings, financial experts recommend saving at least 15% of your income annually, investing in tax-advantaged accounts like a 401(k) or IRA, and adjusting your contributions over time.

People Attending a Funeral Outside With Light Brown Wooden Casket, Rainy Weather
People Attending a Funeral Outside With Light Brown Wooden Casket, Rainy Weather by Felip1 (CC BY-NC)

7. Spouse's Death Can Wreck Finances

Nobody wants to think about the death of a spouse, but when it ultimately happens, you'll want to be prepared. When your partner dies, it will not only be an emotional blow but a financial one as well. You’ll lose one of the two Social Security benefits, and you might also stop receiving a pension if your spouse was getting one. Additionally, you could find yourself in a higher tax bracket when filing as a single person.

Smiling Senior Woman Looking at Photo Album Among Packed Boxes During a Move
sturti/istockphoto

8. Downsizing Isn’t Always the Solution

Downsizing in retirement might seem reasonable—after all, you’re an empty nester, and if you’ve lost a spouse, you probably don’t need a huge house just for yourself. But there are several reasons to think twice. With rising mortgage rates, you could end up paying more for a smaller home than you currently do. The real estate market is tight, so finding a smaller, affordable place might be challenging even if you sell your home for a good price.


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