July 9, 2012 — Your editor started work on Topretirements,com 6 years ago this month. Since the site went live in late 2006 we have written hundreds of articles and created over 2500 reviews of potential cities and communities. You would think we would have learned a few things about retirement during that time, and in fact we think we have. This article, which seems to focus mostly on retirement mistakes, will provide a brief rundown of some of the major lessons we have learned during the incredibly fun and rewarding time it has been our pleasure to serve as your unpaid and, hopefully, helpful retirement advisor. Each surprising lesson also comes with a corresponding piece of advice to deal with it.
What I’ve learned:
1. Most people are seriously unprepared for retirement
Folks like you who visit and contribute to Topretirements are the exception – most people nearing retirement haven’t spent enough time preparing for what they are going to do after their working days come to an end.
Solution: Our number 1 recommendation is to develop a priority list about what you want to do – if you know where you are going you have a chance of getting there.
2. Money is going to be a big problem for many
Baby boomers in general are going to get hammered financially once they retire. The blows are coming from all directions: we haven’t save enough, the comfortable pensions we counted on turned into smaller 401ks, we’ve gotten too used to an unsustainable high standard of living, our portfolios were hurt in the financial crash, and finally, our investment returns are a fraction of what we thought they might be.
Solution: Don’t retire until you can afford it. Keep working, save all you can, cut your expenses.
3. Even the smartest people make uninformed decisions when it comes to collecting Social Security.
We continue to be amazed by how many really smart and financially savvy people start collecting Social Security at age 62, instead of waiting until their full retirement age (usually 66), or better yet, age 70. Many of these folks are still working (so they lose some of their benefits), don’t need the money, and have no reason to suspect they will die before 78 years of age (the breakeven age after which point early collectors lose). Almost no one has thought through what their spousal collection strategy should be. The rush to start collecting could cost some high earning, very healthy couples as much as $250,000 over their lifetimes, according to a new study from American Enterprise Institute, “The Decision to Delay Social Security Benefits“. But of course, the decision of when to start collecting is complex and highly personal.
Solution: Do your homework. Start with our series on Social Security Collection Strategies. Then talk with your financial advisor, visit the helpful Social Security website, and map out a plan.
4. Too many people don’t want to be retired – yet
It is a sad fact that so many baby boomers have become casualties of the late recession. Long term workers were laid off as companies merged or cut their payrolls. But there are also significant numbers of retirees who retired too early by their own choice. Now many of them are bored, or more likely, have discovered they don’t have enough money for a comfortable retirement.
Solution: If you are working, think about delaying your retirement for a few years, or at least keeping part-time status. If you are looking to get back into the workforce take decisive action. Learn a new skill, or move to an area where jobs are more plentiful. Unfortunately, jobs are not going to go looking for you.
5. Retirement choices more often random than designed
This relates to observation #1, people don’t spend enough time planning their retirements. So all too many folks find themselves moving to the first place they visited or heard about. They don’t visit enough places before they decide. They buy too quickly, when it would have been smarter to rent first. They move to where some of their friends are, or just stay where they live now – when there might have been some better choices.
Solution: Don’t let apathy affect your retirement. Take our Are You Ready for Retirement Quiz and map out your future.
6. Bugs, snakes, and humidity are bigger hot buttons than we ever imagined – and there are legions of people who “hate” Florida
We were totally unprepared for the steady torrent of comments on this site that humidity is the #1 reason for avoiding a particular place to retire. The comments are usually directed at the Southeastern U.S., and Florida in particular. Although as we write this in steamy Connecticut, we wonder. Bugs and snakes are often the animal corollaries of humidity.
Solution: If you truly hate humidity, head for the American West.
7. Tax issues are frequently misunderstood, particularly when it comes to their relative importance
There is a large population of retirees for whom finding a low tax state or city is paramount. And we agree that for certain retirees, finding a state that can save you valuable tax money is a very good idea. But all taxes are not equal, and states are very hard to compare. As an example, even in some notorious high tax states like Connecticut the earnings thresholds are high enough that you might not have to pay income tax in that state, particularly since Social Security is exempt there on middle income folks. If you own property in Connecticut, however, you will pay higher property taxes than in almost any southern state. People who receive sizable pensions are the most likely to save big dollars by moving to a state that exempts their particular type of pension. Sales tax is usually a non-issue for retirees – they usually don’t spend enough for there to be meaningful differences between states.
Solution: Taxes aren’t easy to get a handle on. So don’t make a move for tax reasons unless you have carefully studied all the angles – for your particular situation. A simplistic decision could be the wrong one.
8. People fail to grasp the notion that there are stages of retirement
It is natural enough, we all tend to focus on the next, immediate step. So when we are working, we think about and make our plans for the period right after we stop working. That is OK, but it is a smarter to try to keep the big picture in mind. Retirement in our 60s and 70s will be fun. If we have our health, it usually means an active lifestyle with sports, activities, and travel. But how about when we hit our 80s and 90s, as millions of us will be lucky enough to do? That big house in the suburbs is going to be an albatross. The expensive active community with the Jack Nicklaus championship golf course is going to be too hard. We might not be able to drive, and worse – our health might mean we need a caregiver. In short- retirement comes in stages, should we be so lucky.
Solution: We recommend that you keep the idea of stages in mind when doing your planning. Think about sticking closer to family. Or choosing a community that has a nearby Continuing Care Retirement Community or assisted living facility, so you won’t have to give up all your friends and familiar scenes if and when it comes time to move.
9. People tend to be pro active community – or anti active community. And Home Owners Associations are hot buttons for many.
Based on the comments we see in this Blog and in our Forum, active communities are a love-hate thing. Many people love the idea of an active community because there is so much to do and so many people to meet. But others loathe the concept, mostly because they resent having to follow anyone else’s rules, or pay dues to a Home Owners Association.
Solution: We urge you to find out for yourself which you prefer, rather than relying on anyone else’s opinion. If you are remotely interested, take advantage of a “Stay & Play” package at an active community. See for yourself, talk to everyone you can, and ask lots of questions.
10. There are lots of places that could be right for your retirement
This is the good news piece. Just as there are probably many colleges that would have been perfect for your son or daughter, there are undoubtedly dozens of towns and communities where you can have a happy retirement.
Solution: Relax – if you do your homework, visit lots of places before you decide, talk to everyone in sight- the odds are overwhelming you will make an excellent choice. Good luck!
For further reference:
Top 10 Misconceptions about Retirement
Baby Boomers Guide to Selecting a Retirement Community
Are You Ready for Retirement Quiz
Comments? As always, there is nothing better than the Comments of our members. What have been surprised to learn about retirement – or what worked out exactly the way you thought it would? Please share your thoughts and observations in the Comments section below.