1. The financial safety of your paycheck
The most immediate and undeniable change in retirement is the disappearance of a steady paycheck.
For decades, your income has arrived like clockwork. In its place are managed withdrawals from retirement accounts, Social Security and any other income sources you’ve set up along the way.
For many retirees, this transition is more jarring than expected. Moving from accumulation to spending can feel unsettling, an anxiety reflected in a recent study by the National Council on Aging (NCOA).
The study found that 80% of older adults are either financially struggling or at risk of economic insecurity in retirement. Inflation only makes matters worse, eroding the value of fixed incomes over time.
A solid withdrawal strategy, such as the safe withdrawal rate rule – it had been 4% before dropping recently to 3.7% – can help balance spending and preservation.
Diversifying income streams with annuities, rental income or part-time work can also ease financial stress. Delaying Social Security until age 70 can increase your benefits significantly, too.
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Learn More2. Your risk tolerance
When you’re working, taking risks with your investments doesn’t feel as scary. If the stock market dips, you know you’ll keep contributing to your 401(k) or IRA, and there’s time to recover.
But retirement changes the stakes. Market downturns impact your portfolio and how much you can safely withdraw each year.
When volatility hits, many retirees shift large portions of their savings into cash or ultra-conservative investments. It may feel safe, but it raises the risk of outliving your money.
According to MIT Management, such a move is known as the "sequence of returns risk" (SORR). Early withdrawals during a market downturn can deplete a portfolio faster than anticipated, leaving less capital to recover when markets rebound.
A balanced strategy is key. Keeping some exposure to stocks ensures that your money continues growing, while holding one to two years’ worth of cash reserves can help you weather short-term downturns.
3. Your perceived sense of purpose
Work isn’t just about earning money – it provides routine, social interaction and a sense of accomplishment. A study in the National Library of Medicine has linked a lack of purpose in retirement to increased health risks, including depression, cognitive decline and even verbal memory function.
The best way to avoid this emotional downturn is to plan beyond just your finances. Volunteering, pursuing passion projects or even taking on part-time work can help fill the void.
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Learn more4. Your employer-sponsored benefits
Losing a paycheck is one thing, but losing employer-sponsored benefits – especially health insurance – can be an even bigger shock. If you retire before 65, you’re on your own until Medicare kicks in, and even then, coverage gaps can lead to unexpected expenses.
Medicare doesn’t cover everything. Dental, vision, hearing aids and long-term care are largely out-of-pocket costs, and those can add up quickly.
Long-term care, in particular, is a financial landmine – the median national annual cost of a private room in a nursing home is nearly $117,000.
Planning ahead is essential. Some retirees opt for Medicare Advantage or Medigap plans to help cover gaps in coverage. Others set aside funds specifically for medical expenses, such as through a health savings account (HSA).
5. Your frivolous spending habits
Many retirees ramp up travel, dining out and hobbies, leading to what financial planners call the “retirement honeymoon” phase.
While this initial surge in spending may feel like well-earned freedom, it’s important to balance it with long-term needs.
Healthcare costs tied to aging tend to rise later in retirement, often leading to financial strain if early spending wasn’t kept in check. Tracking expenses and adjusting for different phases of retirement can help ensure financial stability throughout the decades.
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