Common challenges faced by new retirees

Ah retirement; the most talked-about, worried-about, and excited-about, not to mention planned-for topic in society today.  Despite all the conversations and resources available, a successful transition from the working world to the retirement “bliss” we keep hearing about remains elusive and constitutes fertile ground for error, particularly for new retirees.  

Similar to the first year of marriage or parenthood, many people who think they’re prepared for retirement learn the hard way that the next chapter, that is life after work, comes with its own challenges. 

Part-time work

Many retirees are opting to continue work part-time in order to supplement retirement income and maintain social interaction.   

In fact, this has become one of the most popular retirement plans today.  

While it may seem simple enough, unless your working arrangement is lined up ahead of time, you may find it difficult to find suitable employment post-retirement.  

“Most people don’t plan to retire to a more difficult or stressful job, let alone for less pay” says retirement expert, Robert Laura.   

Make sure that you plan ahead and line up the actual work you will be doing or you may end up regretting your decision. 

For example, if you plan to be an entrepreneur, don’t wait until you’re retired to write that business plan or if you love your job and plan to continue working in the same role at part-time hours, talk to your employer to learn more about their policies and procedures to keep your expectations realistic. 

The family plan

A recent study explored the top priorities for new retirees in 2013 and found that ‘spending time with family,’ especially children and grandchildren, was ranked as number one.  

While this is a heartwarming thought at first glance, you may find that your retirement plan and your family plan differ.  

For example, Mr Laura points out that, “a common faux pas is holding onto more space than needed.  

Some couples will refuse to downsize their home because they want to host family events.”  

Bud Hebeler, a retirement expert, makes a great point in saying, “if the space is rarely used, taxes, utilities and maintenance can eat away at savings at an inflation-like rate.” 

In addition to this, it’s not uncommon to find retired couples moving homes, cities or even countries to be closer to their kids and grandkids.  

Before making this move, consider factors other than family, such as cost of living, climate and friendships.  

Remember that young professionals are extremely mobile and will not hesitate to move for the next big job opportunity.  

In this case, you may find yourself living alone in an expensive area that you don’t particularly enjoy without your family around, which defeats your original purpose.     

Insurance costs

I once heard a retirement expert word it perfectly, “your eyes, ears and teeth retire!”  

This being said, health care costs do not. While we are aware of the ailments that can be associated with aging, the hard truth is that the cost of health insurance is not going anywhere.  

Be sure to include the rising cost, and possible increased need, of health care into your retirement plan to ensure that you are adequately covered.  

Going overseas

If you have international ties, whether you’re planning to retire in Bermuda or in another jurisdiction, you may want to consult with your tax planner to address the role that taxes will play during retirement.  

Make sure you are fully aware of government and private pensions that you are eligible for and educate yourself on the effects of withdrawing retirement funds from your 401(k) or RRSP keeping in mind that any funds withdrawn are taxed as if you earned them.  

If you are planning on retiring overseas, it will be worth having a chat with your financial planner to discuss getting started with investments denominated in another currency.    

For example, you will find that converting your investments to Canadian dollars ahead of time will mitigate your currency risk and make for a smoother transition into the country. 

If you have fallen into the trap of considering (or not considering) these common mistakes in your retirement plan talk to our Wealth Managers today to put an air-tight plan together and make sure your retirement truly is bliss! 

Need more retirement guidance?  Elyse Rayner is a Wealth Manager for AFL Investments and can be reached at (441) 294-5738.