Retirement Realities That Will Shock Your System

When you are in your 50’s and are thinking about your retirement and all the pleasant thoughts of having your time be all your own, you may be in for the shock of your life! I tell you this so that you react now and don’t wait a minute longer to prepare yourself for the retirement realities that may be just around the corner.

Retirement Realities That Will Shock Your System

Even if you are 40, or even 30 something, and you think retirement is a goal that is close at hand for you, you should know more about what waits in retirement that perhaps you think can’t or won’t happen to you. For most of us, 50 is a toll booth that stands between you and the path to a financially happy retirement in the sense that it’s a mile marker and it’s up to you to make sure you have your “easy pass” ready to meet the toll collector. It’s not too late to reach into your pocket for the exact change and make sure that you don’t have to get off the road and travel the long way towards your peace and contentment.

According to a recent survey done by GoBankingRates.com, 30% of all Americans over 55 have saved $0.00, nothing whatsover, towards their retirement. And even worse, 80% have planned and saved so little that they’re in imminent danger of being in poverty if they ever retire.

Retirement Realities That Will Shock Your System

But wait, there’s more. 42% of Millennials haven’t begun saving for retirement. More than half of Generation X have less than $10k saved for retirement. And most alarming of all, 28% of people over 55 have no retirement savings at all!

Scary, isn’t it? The truth is there’s still time to do something to help yourself and your spouse turn around what appears to be a disaster waiting for you.

This following list is a good way to begin the process to get your retirement back on the right track. The time to start is now no matter what your age. Check it and see if you have prepared and acted in what most experts and I feel are essential to the peaceful “golden years” that are sneaking up on all of us more quickly that we realize.

1. Budget for a longer life, 70 is the new 65

If you’re paying any attention, you realize that people are living longer today than ever before. According to the Center for Disease Control, the number of people living to 100 rose 44% in the last 15 years. If you make it to age 70, then you can expect to live into your 90’s. So how does that affect your retirement planning? If you thought that Social Security is your safety blanket, keep in mind that it was never intended to support you fully when you retire. The average retiree still provides 56% of other income sources besides Social Security to live on, and that is only at basic comfort levels. Review and budget what your expected expenses will be and how they can be adjusted to increase your disposable income now.

2. Start saving immediately, if not sooner!

The old saying “it’s never too late” isn’t always the truth. But age 50 is is the final countdown and is the time when you can still change your fate. Auto-save from your paycheck. You’ll hardly notice it. Just put it towards some kind of interest bearing or investment purpose to build up your retirement kitty. There’s been a “golden rule of finance” for generations and that rule is simply: pay yourself first! That means before mortgage payments, credit cards and any other expenses you may have. That’s the best way you can make up for your lost time in preparation for retirement.

3. There’s no such thing as extra money

Bonus? Birthday money? Tax refund? All of those and more should go directly into your retirement fund. The ability to bump the numbers up quickly are critical. Don’t assume that you can splurge with windfalls now, but think about the future when that money may be insuring your lifestyle for years ahead. Treat your retirement as an emergency (unless of course you don’t have an emergency fund, which you should get first).

4. Never dip into your retirement accounts

No matter what your age, this is my rule. After age 50, I may have to beat you mercilessly if you even mention “borrowing” from those accounts. You can never make it up if you have saved for decades and then take that money and use it. Time is your best friend in retirement investing and at age 50+ you will have wasted years of growth and compounding if you break the rules.

5. Take advantage of free money

Matching funds in your 401k must be maximized. If you don’t have that happening when it’s offered, you are just plain foolish. You can find some way to make it happen even if it means you drive a smaller car or shop the sales every time you buy new clothes. C’mon, it’s free money! It’s the only thing I know of that can enhance your retirement without you reaching into your pocket. Matching funds are like a gift from heaven!

6. Increase your Traditional IRA contributions

It’s not free money, but it is a tax differed reduction of your income when you do your tax returns each year. This year, those 50 and over can take $6,500 as a contribution (all others under 50 can take up to $5,500). That’s a way the government is allowing you to make up for lost time and you need to do it every year they allow it if you’re behind in your planning.

7. Beware the dreaded inflation factor!

If you have been lulled into thinking that inflation just isn’t going to happen, wake up and smell the coffee please. Yes, the past several years have seen surprisingly low inflation rates but reality check 101 says that over many years it has and will continue to rise. Consider this: If something that costs $500 today increases just an average of 2% a year over the next 25 years, it will then cost $823. And even more shocking, if it increases just 4% a year over that span, it will almost triple to $1,333. I’m old enough to remember back in the early 1980’s when inflation was in the double digits so it can happen. You must be prepared for it.

8. Create alternative income streams

Social Security is in danger. We all have heard the horror stories about it. Many younger people feel that it won’t exist for them in their future. I don’t believe that’s going to happen, but there is a good possibility that retirement rules will be changed in the effort to maintain the system. Look, Social Security was never intended to be the sole support of a retired worker. Besides, back in 1935 when it was conceived, people didn’t live as long as we are today so the monies were more appropriate then as opposed to now when we can collect at age 62 and live until 100.  You probably need to add income streams from investments, savings bonds, real estate, side hustles, pensions or even part time jobs in retirement if you are going to be living at the same level you are today. The best alternative is to downsize your lifestyle. If you were to sell your $250,000 dollar home today at age 50, and buy a new home at $150,000, you can generate $75,000 in additional retirement income in just 15 years. Add in the reduced utility and real estate taxes, and that number goes up even more. Doing it now, after your kids may be grown and out of the house makes it practical. If you don’t need that extra size and space, why not cash it out as soon as you are able? Eliminating your mortgage in retirement is such an advantage it’s almost a spiritual experience.

9. Prepare for expensive medical issues

It’s a fact that as you age, medical issues occur with greater frequency. You will definitely need money to handle insurance, doctors, hospitals, tests and medications as you enter retirement’s traditional time. It is costly and ever increasing, even as I write this post. Medical costs and insurance for my wife and me have been at 30% of our income for years, and it has been a real headship. Is it going to change? I doubt it. You need to have an emergency medical fund as a part of your retirement plan to protect yourself. Consider long term insurance plans or even deferred annuities to help you deal with this issue.


If you have prepared yourself properly for retirement, it still doesn’t hurt to review your planning and where you believe you are on that path. If you’re worried and feel you’re not where you want to be, now is the time to reconsider what you can do to change your future. You will only truly understand the challenges of retirement finances when your weekly paychecks stop coming and you are left on the proverbial “fixed income” that is referred to by most retirees. Social Security alone will not cut it in the world of retirement realities.

Are you planning retirement soon? Are you one of the many who has no plan? What are you doing today that will make your retirement years comfortable and stress free? Are you looking at a rosy future?

Image courtesy of Ryan McGuire at gratisography.com (with changes)

30 Comments

  1. We are so in agreement with you about eliminating the mortgage. Many think differently and I haven’t thought of the correct way of expressing how it feels. But you just nailed it with “spiritual.” That’s exactly right! Thank you for such a great list of tips, Gary.

  2. Emily @ JohnJaneDoe

    I’d say this: go onto the social security website and look at what you’re projected draw is. Then multiply it by 75% (what I’ve read the projected cut is once all surpluses run out). Now compare that to what you need to live on. For most of us, that should provide some strong motivation for saving.

    Also, by 50, paying down any debt (including any mortgages) needs to be a high priority. You want to make sure that you are paid off by the time you can no longer work.

  3. Jack

    Great points, all.

    Medical costs are my biggest concern. My mother purchased a supplemental long term care policy several years ago. This provides additional money for when you have to go into an assisted living situation. Having seen what my grandparents have gone through in this regard, getting a similar policy is high on my to do list.

    1. Great thinking, Jack. When I was younger, I didn’t purchase a supplemental long term care policy because they weren’t well known (they only began in the 90’s). If I had realized, I would have certainly been interested. It can really make a big difference when you’re older and have serious health problems.

    1. I think that the longevity factor is something that people don’t think about as carefully as they should. The downsizing aspect is really important not only because it makes sense, but in so many areas just comes naturally with the empty nest and the need for space and material things declining as you age.

  4. Jayson @ Monster Piggy Bank

    There is still a high tendency that a person retires with no savings, Gary. It’s still a shock for me as I give a high regard to savings for better retirement life.

  5. Creating multiple income streams is a huge focus of mine before retirement. We plan to invest traditionally in the market, but also have rental properties and some other investments in place to make sure we don’t have to rely on social security at all. Saving in our HSA accounts is another big priority-since they are tax-free contributions, then grow tax-free and are also tax-free at distribution when you used on medical expenses I’m hoping to be able to avoid expensive long-term care insurance policies and provide this to our future old selves instead.

  6. Liz

    Excellent information here. Sometimes, I think there is no way we will ever be prepared for retirement, and we’re only in our mid-twenties. I do my best to save – but will it ever be enough? This is why I am so thankful for what the military has done for me. It has changed how I look at money and retirement.

    I grew up in a home that did not save for retirement and lives one month to another. I refuse to live like that. My husband and I are working on saving so we don’t have to live month-to-month and actually have a retirement to look forward to!

    1. Liz, you’re off to a pretty good start if you are managing to save even just a little each month. Knowing what it’s like to not have saved properly for retirement will push you so that you don’t repeat that kind of mistake. I’m not certain that you’re planning a military career, however the military has the best pension plan around and after 20 years no matter what age you are, you can start collecting. Good luck.

  7. Great points. I especially like reading these types of articles because as a millennial, I just started saving for my retirement within the past year. So far, I’ve got about $8,000 saved, and I’m only looking to up that. Right now, my employer actually offer 10% matching (Crazy!), but my salary is not high, so 10% of not much is still not much (but every little bit helps). Once I switch positions to start earning more, I plan on contributing as much as possible to a Roth IRA, and rolling over my existing retirement funds into my own traditional IRA. It’s VERY hard to prioritize retirement savings with everything else I have. I recently read a post, though(http://brokegirlrich.com/things-i-might-do-with-my-ira/) which has entirely reshaped how I think about retirement savings. Rather than think of it as suffering now, I’m now thinking of it as saving to be a bad-ass old future lady!

  8. Long term insurance needs to be researched VERY carefully because there are a lot of crappy plans out there that only partially cover needs, but good long term care insurance is invaluable. It’s pretty much the best gift you could give your adult kids.

  9. Yikes! We’re in our mis to late 20s and have close to 10k saved. I know it’s not as much as it should be but we’re at least making an effort. My husband is still finishing college so we’re a little late to getting into the right careers. I know we’ll have to save big time once we have extra money, but it’s all going to paying for life and tuition without debt.

  10. Everyone needs to read this post! As you mentioned, I am in the camp that believes that Social Security won’t be around; if it is, then yay for extra money! We’re taking up the multiple income streams approach in preparation for retirement. However, I don’t think I’ll ever stop working–so much we still want to do! 🙂

    1. Thanks for the compliment, Claudia. Making your plans for retirement and not counting on Social Security is a good way to make sure that you can cover your needs. If you enjoy working, and you feel like you don’t want to retire, you’ll have a lot of extra money in any event. I hope when you have to make those decisions that you enjoy whichever one you choose.

  11. Jamie

    Save, save, and save! Few people do not still know the importance of savings and its purpose for better retirement life. I just hope they realize that the earlier they save the better, easier life they’d have later on.

  12. Well, at least we’re all set for dealing with medical expenses. I know they’ll increase as we get older, but we already deal with a crap ton of them. So it won’t be a shock to the budget.

    Realistically, I don’t know that we’ll ever have enough money for me to retire. Given how little we’ve saved up to this point (turning 38 this year), it may just not be in the cards. I’m hoping to at least go down to part time. But we’ll see.

    In the meantime, the goals are:

    1. Open/max out a SEP
    2. Pay off the house
    3. Save for a rental house
    4. Pay off rental house

    Hopefully, a rental will help supplement our income if I do retire/semi-retire.

    1. Abigail, it looks like you’ve thought about this, which is way ahead of many people. Paying off a mortgage is really a biggie, because it relieves a huge chunk out of your monthly budget. Retirement may not be for everyone, so if you remain working and can produce another income from a rental, you may be in the situation that is just right for you. At age 38, you still have plenty of time to revise your plan if you choose to.

  13. Rachel

    Hey Gary! Great post! It never ceases to amaze me just how many people have not saved a dimed for retirement. As a millennial writing about personal finance, I am really trying to get the message across to my readers that you can never start saving early enough! Plan now so you can be successful later. I like how you aren’t afraid to be blunt and you don’t sugar coat the facts. Thanks & have a great day!
    –Rachel @ Tidy&Teal

    1. Thank you very much, Rachel. It’s so great to see young people like you becoming so involved in personal finance. Not only is it helping you to become more successful, but sharing it with your fellow millennials will give them such an advantage in their lives. I started quite late and wish I had someone advising me when I was in my 20’s and 30’s. Keep up the good work.

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