How to Face Some of the Greatest Challenges of Retirement

By Markets Fool.com


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Most of us are very much looking forward to retirement, but as wonderful as we may think retirement will be, it's not without challenges. For best retirement results, read up on it before you actually retire, and plan for how you'll deal with some important issues. Below, three Fool contributors offer advice on how to not run out of money, how to spend your time, and how to keep your costs down.

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Outlive your nest egg

Sean Williams: With Americans living longer than ever, perhaps the biggest concern for seniors is running out of money. There are two specific things pre-retirees and seniors should be doing to ensure they don't outlive their nest eggs.

First, even when retired, seniors should be following a detailed monthly budget. A monthly budget is often thought of as a tool for your working years that'll help you save enough for retirement. However, a budget can also ensure that you don't overspend and outlive your money during your golden years. Here's why it can be a tough challenge for retirees: Without wage income, monthly income will likely fall. This steep drop-off in income catches more than a few seniors off guard, and causes them to burn through their nest eggs at a rapid pace.

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The solution? Consider formulating a retirement budget well in advance of actually retiring, and slowly ween yourself onto your retirement budget well ahead of time. This way, when you actually retire, your jaw won't hit the ground if your income suddenly drops 20% on a monthly basis.

In addition to having a monthly budget, seniors and pre-retirees would be wise to have a withdrawal plan in place regarding how they'll access their money during retirement. The reason this is important is because how you access your nest egg can impact how much you'll pay annually in taxes. Obviously, the less you pay in taxes, the longer your nest egg could stretch.

What considerations should be made? For starters, Roth IRAs are among the most desirable retirement tools for seniors because money within them can grow completely tax-free for life. This means it won't count toward your income during retirement regardless of how much, or how little, you withdraw each year. Things are a bit trickier with a 401(k), traditional IRA, and other tax-deferred plans, which will eventually require an annual minimum withdrawal that could push your income higher and move you into a higher tax bracket.

Taking the time to do just a little bit of planning each year could go a long way toward extending the life of your nest egg.

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Fill up that free time

Brian Stoffel: Here at the Motley Fool, our goal is to help the world invest better. Usually, this means the type of investing that involves buying shares of certain companies -- but it's not limited to that.

The most precious resource you have isn't money -- it's your time. And you'll have a lot of free time once you hit retirement. Studies by Wes Moss, chief investment strategist for Capital Investment Advisors and host of theMoney Mattersradio program, show that how you spend that time will play a huge role in how much you enjoy retirement.

He has found that retirees who are happy have 3.6 "Core Pursuits" when they enter retirement, while those who are unhappy report having fewer than two. A Core Pursuit can be defined as any activity that is intrinsically rewarding for an individual to participate in. In short, it helps give your life meaning and isn't done solely for monetary rewards. Your Core Pursuits could be playing with grandchildren, gardening, or driving race cars... it's different for everyone.

The key part of his findings is that retirees need to have these pursuits in place when they enter retirement. That means waiting until you call it quits on work isn't enough. You need to start devoting time to Core Pursuits now if you want to be happy in retirement.

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Get healthy

Selena Maranjian: One of the biggest challenges many people face in retirement is the cost of healthcare. Not only can it be hefty, but many folks don't realize quite how hefty -- and therefore are underprepared for it. How much are we talking about? Well, Fidelity Investments releases an annual estimate of how much a 65-year-old couple will spend out of pocket in retirement on healthcare, and their latest number is $260,000!

That's just an average, though -- your particular costs may end up being lower (or higher!). According to a recentEdward Jones survey, about 60% of Americans of varying ages are worried about healthcare expenses in retirement.

One way to prepare for these potentially major expenses is to sock away a lot of money. That's an excellent strategy. Another one, though, also can be quite effective, while costing much less: Get healthy and stay healthy. I'm well into middle age, myself, and am not terribly fit. I'm planning to work on getting in better shape, though, via eating healthier foods and exercising more.

I want to do so not only to lose weight, but to keep my blood pressure lower, avoid diabetes, and lower my cholesterol levels. Being healthy is a great way to reduce your chances of developing various conditions and diseases that can cost you a lot of dollars, as well as quality of life.

If you dream of an active and enjoyable retirement, work toward it not only by saving and investing money, but also by focusing on your health.

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