People spend multiple years in the workforce preparing for the retirement life that many dream of or picture. Once we hit retirement age, all kinds of adventure awaits. With the working days behind, retirement is when many people begin new hobbies to pass their days, spend more time with family, or relax more. Here are seven unexpected twists you may learn about in the fourth year of retirement:
Lasts Longer Than Expected
Unprepared for Retirement Surprises? Discover 7 Unexpected Twists Awaiting in Year Four
- Lasts Longer Than Expected
- More Tax Breaks
- Medicare Doesn’t Cover All Health Costs
- Senior Discounts
- Social Security Falling Short
- Benefits and Savings Are Taxable
- You Can Continue Saving
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The mean retirement age is usually 65, and the current life expectancy average is 78. However, many individuals live far longer than this age without proper preparation for retirement. This means there is more time to accomplish goals or tick items off the bucket list. With a longer life expectancy than reported, people must have a better retirement plan to ensure that resources last for an extended period.
More Tax Breaks
A pleasant surprise to learn during retirement is that many tax breaks are available, especially for retirees. Many states in the US are great for retired individuals as there are more tax breaks catered to help them live a more comfortable life. Some states do not tax retirement income, some offer tax breaks on dividends and interest, and some have special breaks on sales tax and property tax for retirees.
Medicare Doesn’t Cover All Health Costs
Retirees who hit the age of 65 can enroll themselves in Medicare and enjoy health insurance that covers different health costs. It must be noted that Medicare does not cover all costs, including potential long-term health costs, which can be challenging to cover, especially after retirement. However, certain kinds of paid premiums or supplemental insurance policies can cover some of these costs. However, these premiums or policies will require extra costs initially, which may only be possible for some retirees.
Senior discounts are discounted rates that retirees or individuals over 60 have the right to. These senior discounts can be a great way to save extra money during retirement. One thing that you will learn as years pass by as a retiree is that some of these discounted rates should be compared to other discounted rates for the same products or services from a different store. If one store has a specific senior discount rate, the same product or service can have an even more discounted rate at a different rate, which you can avail of and save more money.
Social Security Falling Short
As time passes as a retiree, one begins to realize that the social security payments do not cover the costs of basic needs, even for a retiree. The social security payment received by retirees provides a similar standard of living compared to individuals in the country’s lowest quartile of income earners. This is a big problem in the US as retirees have to turn to their savings to cover the costs of even the most basic needs, which may be problematic, mainly if some emergency arises.
Benefits and Savings Are Taxable
Another sour truth that retirees learn is that some of the social security benefits and retirement savings are taxable. Based on which state you retire in, state income tax is owed even on social security benefits, which leaves retirees with very few actual benefits. Withdrawals of money that was contributed to a 401(k) while working could also trigger federal and state income tax bills. Although taxes may still be owed even during retirement, the correct steps taken before retirement, like having a proper retirement income plan that considers taxes, can leave you better prepared for retirement tax payments.
You Can Continue Saving
If you continue to work after retirement, you can save money for your future. This can be done through saving in tax-advantaged retirement accounts. Or, if the employer you’re working for offers a 401(k), you can continue to contribute to the plan and save up. Retirees can continue to contribute to a traditional IRA till the age of seventy and a half or continue to contribute to a Roth IRA. Most retirees may be unaware of this. However, saving does not have to stop with retirement.
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