Many Americans first see retirement as a process of saving enough money, and when that goal is achieved, they finally settle into rest and relaxation in their later years.
But a new study finds that too many challenges often threaten to derail this end game.
Nearly half (48%) of today’s retirees say their retirement included more surprises and challenges than expected, according to a recent survey of more than 12,000 North American adults across five generations by Edward Jones.
Retirees often face five situations that can significantly disrupt their well-being after retirement—including their finances—the death of a family member or close friend, personal health problems, health challenges of a partner or spouse, financial setbacks, and retirement itself.
Anticipating these challenges may also help those planning for retirement include preparations for those common setbacks—at least financially.
“We said, ‘Well, we’re going to really dive in and understand what retirement means to people today,'” Lena Haas, president of Wealth Management Advisory and Solutions at Edward Jones, told Yahoo Finance. “How do they feel in general? What is holding them back? What helps them succeed?
Here are the important points.
Death of a family member or close friend
The most common disorder is the death of a close family member or friend, according to 42% of people in the study. For those who lost their spouse/partner, 77% said this was a very devastating event.
It’s not surprising, said Haas.
She said that many couples often plan to retire together to improve their savings. She noted that the death of the husband can also affect the income, especially if the husband was still working at the time.
“All of a sudden you’re faced with a situation where your income is often not what you expected while your expenses remain the same, or even higher,” Haas said. “So if you have a house, if you have a mortgage, that won’t change when someone dies.”
Correcting the financial path: Retirees should consider working with a financial advisor to help plan for the possibility of such an event. According to the study, “27% of retirees and 30% of former retirees are currently working with financial advisors, and 94% of them are confident in their ability to handle financial changes in retirement.”
Retirees facing the death of a spouse or partner can also turn to government and social service programs to improve their financial security. But few are currently doing this. Only 16% of pensioners went to these services. Of those who do, 88% say it has improved their well-being in retirement.
Personal health issues
The second most common challenge that retirees face is personal health problems. Three out of 10 respondents faced such challenges, and 45% described them as very annoying.
As the longevity of the population increased, Haas noted, there was also an increase in the incidence of long-term illnesses. Not only do these things reduce the quality of daily life for retirees, but health issues can greatly increase medical expenses and an individual’s ability to earn an income.
“There are a number of those diseases that are essentially chronic diseases that require very beneficial care, and that have a very significant impact on not only people’s physical health…but also their general financial well-being and well-being with their families,” Haas said.
“It forces people to become less physically active, it forces people to often reduce or move away from their jobs, and it forces people to increase their medical spending.”
Haas encouraged retirees to obtain supplemental medical insurance, noting the toll that health problems can take on retirees.
Correcting the financial path:
According to the study, 45% of retirees have taken out supplemental health insurance to cover out-of-pocket medical costs. Among this group, 42% said the move had greatly improved their lives.
Health problems of the spouse or partner
Likewise, a spouse or partner’s health problems can pile on financially and potentially cut off the other partner’s ability to earn an income. Just over 1 in 5 (21%) mentioned this common disorder, but 42% said it was very annoying.
“What often happens is that health care expenses balloon if someone develops a long-term illness,” Haas said. “It may also be that the other spouse may have been forced out of their job in whole or in part to become a caregiver. And so you see a direct correlation with how that affects the whole financial picture.”
Women tend to bear a disproportionate amount of this burden, which can also hurt your odds of retiring on time. The study showed that while 56% of women had to adjust their lifestyle in retirement due to financial constraints, only 41% of men reported doing the same.
“Often, women apply to be carers to family members, spouses, parents, or perhaps an aunt and uncle with a health condition,” Haas said. “It takes women longer in their careers to become caregivers for an extended period of time. So it affects their career trajectory.” [and] How quickly can they get an increase in compensation.”
Correcting the financial path:
Investing in long-term care insurance—which covers at-home care, community services such as adult day care and transportation, and continuing care in a nursing home or assisted living accommodation—can ease the financial burden and allow relatives to rely on professionals for care-taking. But few get that coverage, according to the study. Only 15% of retirees and 12% of retirees reported having it.
Major financial setbacks
According to the study, one in five retirees experienced a major financial setback, with inflation and the rising cost of living proving to be the most significant shocks. This was followed by medical or dental expenses, household expenses or repairs, a decline in the value of investments, and financial assistance to family members or friends.
As a result, nearly half of retirees cut their daily spending, according to the report, while three-quarters of Americans cut their daily spending.
“They also emphasize in an interesting way how thrifty they are and equate thrift with being really smart and thoughtful in their choices versus kind of the archaic definition of being cheap,” Haas said.
Correcting the financial path: The study showed that retirees can mitigate financial challenges by reducing debt and increasing savings. About half of retirees said they had reduced their mortgages or debt. Nearly 60% of these retirees say doing so has greatly improved their retirement years.
Unexpected retirement
The report said that retirement itself can be a major challenge for some retirees. For example, the study indicated that 30% of retirees said they were forced to retire unexpectedly. Reasons included health problems, job loss, and family responsibilities, including caregiving.
This can become a major financial setback if you plan to take in more years of work to save enough for retirement.
Correcting the financial path: Haass advised potential retirees to include an unexpected retirement in their financial planning.
“It’s really important to script and say, ‘Okay, I’m looking forward to working until a certain age.'” I think I will work later. But what we see in the data is that there is a strong possibility that something will happen that will force you to retire early. [are] Other modifications you might make? “
Dylan Kroll Reporter and researcher at Yahoo Finance. Follow him on Twitter at @employee.
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