Retirement Surprises

Costly retirement surprises are neither expected nor pleasant.  It is best to be forewarned so that you can take action when you are faced with them.

1. Taxes...  Up to 85% of social security benefits can be taxed, depending on your annual income.  And all money withdrawn from retirement accounts (exception are Roth IRAs) is taxable.  Even if you do not need the money, Uncle Sam makes you start taking distributions at age 70 and a half.  You can take some steps to lower the tax bill by converting some or all of your retirement accounts to Roth IRAs.  You can also consider taking distributions from IRAs before you need to if you are in a low tax bracket and can get the money out by only paying 15%.  Investing in tax exempt bonds in your taxable accounts will also lower your tax bill.
2. Cost of Living...While some expenses decline in retirement, some increase.  Retirement is usually in phases...the go/go phase for the first 10 years, depending on your health, of course.  The slow/go phase from early 70's to early 80's.  The no/go phase for the rest of your life.  While this is a general assumption, it holds up pretty well.  Naturally, you will spend more in the first half of your retirement as you will be more active. 
3. Medical Costs....check to see if your employer extends health care benefits in retirement.  Stay active and try to maintain a healthy lifestyle.  Shop carefully for a medicare supplemental plan. Make sure some of your portfolio is invested in growth to keep up with ever increasing medical costs.
4. Market shocks...Planning for market volatility is a key to a successful and stress free retirement.  Having a well diversified portfolio comprised of cash, bonds and stocks will help you weather the most severest of storms. 

Don't let these stealth expenses catch you off guard.  Plan now!  And have a worry free rest of your life.