The countdown to retirement can include all sorts of plans — setting aside extra cash in in the 401(k) plan, aiming to pay down debt, dreaming about the first trip you’d like to knock off your bucket list.
But retirement experts will tell you that it’s the things that you don’t plan for that derail retirements all the time.
Here’s look at three things you might not anticipate when it comes to retiring.
1. No one really knows when it’s time to say ‘Game over’
Many folks on the job in their 40s or 50s might like to think they’re going to retire at age 65 or 68. But more likely than not, they end up being way off in their estimates, said David M. Blanchett, head of retirement research for Morningstar Investment Management in Chicago.
Reality gets in the way of plans and many Americans end up retiring earlier than expected, Blanchett said. Someone who plans to retire at 65, for example, could end up retiring at 63.
The reasons: Corporate downsizing, health issues, job requirements change and workers can be let go.
On average, research shows that people retire about four years earlier than they expect, Blanchett said.
Given that it’s hard to target one’s retirement age, it’s more important to save earlier in life and save more money than one might like toward retirement.
Simply planning to work a few more years might not be feasible if you’re older and don’t have adequate savings.
“Bad things happen all the time,” Blanchett said.
2. No one expects to lose a pension
As workers change jobs, they may leave retirement accounts behind with their old employers. Companies that offered pension plans go through mergers; some go out of business.
Some companies just disappear and people can’t find them.
“We’re living in an economy where things change constantly,” said Karen Friedman, executive vice president and policy director of the Pension Rights Center.
The Pension Rights Center works with people to help find lost pensions. See www.pensionrights.org or call 202-296-3776. You can also go to www.pensionhelp.org to see if one of six programs serving 30 states can help you find missing pension money.
The Mid-America Pension Rights Project serves Michigan, Indiana, Kentucky, Ohio, Pennsylvania and Tennessee. Phone: 866-735-7737.
Emily Spreiser, legal program director for the Pension Rights Center, said in some cases the center has been able to find pensions of $150 or $200 a month. While that might seem like a tiny amount, many retirees have been from low-income households and the extra money meant a great deal to them.
“Tiny is a very relative term,” Spreiser said.
It’s important that retirees not write off a pension as “lost.” The money very well may be sitting safely in a pension plan or financial institution, waiting for you to claim it.
Other resources are available to help find retirement cash, too.
The Pension Benefit Guaranty Corp., which tries to find missing people owed benefits from terminated pension plans, expanded its Missing Participants Program to terminated 401(k) plans to connect more people with their lost retirement savings. The expanded program is voluntary for certain plans and will be available for plans that terminate on or after Jan. 1, 2018.
The PBGC has an unclaimed pension search for more than 70,000 people for unclaimed benefits totaling $400 million. See www.pbgc.gov to do an online search. Or call 800-400-7242 and speak with a member of the PBGC’s team.
3. Divorce is a real risk in retirement
The divorce rate for those 50 and older has nearly doubled since the 1990s. Some of that is blamed on baby boomers who may have divorced and remarried earlier in life, as the second or third marriage can be less stable in general.
At the same time, about one third of divorces in 2016 among adults 50 and older involved couples who had been in their marriage for at least 30 years, according to data from the Pew Research Center.
“They’re calling it gray divorce,” said Phil Serra, wealth management adviser and senior vice president for Merrill Lynch in Farmington Hills.
Too often, Serra said, couples don’t understand how divorcing later in life can affect their ability to retire in a few years or how well they’ll be able to live in retirement. He said couples should carefully examine how their cash flow will be impacted, as well as the tax implications of any divorce.
“Unfortunately, people sometimes make a decision that is emotionally driven without the proper planning involved,” Serra said.
The cost of the divorce, including lawyer’s fees, is one thing.
But other nasty financial surprises may include: A reduced line of credit after the divorce, compared with what the couple was able to borrow together. A tougher time saving for retirement, possibly as support is provided to the couple’s children. Higher daily living expenses because two separate households cost more than living together under one roof, according to a report released in June by the Center for Retirement Research at Boston College.
In addition, some assets, such as stock or the family home, could need to be sold when the market is down. And there are transaction costs associated with those sales.
The report concluded that divorce substantially increases the likelihood of being at risk in retirement. Calling it quits on a marriage can raise the risk more than the impact that the Great Recession had on retirement, according to the Center for Retirement Research.
The average financial wealth of households that didn’t go through a divorce — not including the value of the home — is $132,000 or about 30 percent higher than divorced households, according to the retirement research center’s study.
“When they encounter a divorce this late in life, it’s very hard to recoup those lost assets,” Serra said.
