1. Health Care Costs Before Medicare
Private health insurance before age 65 can be expensive, often capped at 8.5% of household income. For instance, a mid-level silver plan for a single person earning $54,360 could cost around $385 monthly or $4,620 yearly.
2. Early Withdrawal Penalties
Retiring before 59 ½ may incur a 10% penalty on withdrawals from tax-deferred accounts like traditional IRAs and 401(k) plans. Traditional account withdrawals are also subject to income taxes.
3. Impact of Compound Interest
Saving consistently over time leverages compound interest for retirement funds. For instance, $250 monthly contributions from age 25 to 55 could grow to about $237,000, doubling to $464,000.
4. Longevity and Retirement Savings
Increasing life expectancy means retirement savings must sustain longer periods, with retirees expected to manage finances for 28.6 years (women) and 25.1 years (men) on average.
5. Retirement Spending
Retirement expenses may exceed expectations, especially early on, due to lifestyle changes and leisure activities. Initial spending surges on travel, renovations, or relocation may equal or surpass pre-retirement expenses.
6. Continuing Housing Expenses
Housing costs persist in retirement, with many retirees still carrying mortgages or facing maintenance and property tax expenses. Homeowners should budget for repairs and replacements
7. Challenges of Finding Extra Income
Securing additional income in retirement, such as through part-time work, can prove difficult due to inflexible schedules and limited opportunities. Despite intentions to work post-retirement.