The realities you face when you stop working might be a far cry from your retirement dream. Of course, retiring broke or not being able to retire at all are among the worst-case scenarios.
But there are plenty of other snags you might encounter. If you haven't properly prepared for leaving the working world and living without a paycheck, you'll have to face the ugly truths about retirement.
Click through to find out 14 downsides of retiring that no one talks about, along with solutions to avoid each potential problem.
Your Net Worth Becomes Meaningless When You Retire
You might have diligently been setting aside money for the future and have a big nest egg now. But even $1 million might not last long in retirement if you live in a state where the cost of living is high.
Unfortunately, when people set retirement savings goals, they often do so without actually knowing how much they'll need each month to cover expenses in retirement, said Niles Geary, co-founder and CEO of Voyage Partners, a financial planning firm in Johnson City, Tenn. Only 38 percent of workers have estimated how much income they would need each month in retirement, according to a survey by the Employee Benefit Research Institute and Greenwald & Associates. "Your net worth becomes meaningless when you retire," Geary said. "The only thing that matters is how much income your net worth produces."
Solution: Create an Income Plan
For starters, don't assume that you'll spend a lot less in retirement. Most retirees spend between 80 and 90 percent of what they were spending during the year before they retired, Geary said. So your savings need to be able to generate enough monthly income to sustain your current spending habits.
If you're already retired and didn't calculate how much income you would need to cover monthly expenses, you might have to make adjustments in your spending. Geary recommends distinguishing your needs from your wants and calculating how much you need to get by each month versus what you're also spending on wants."That gap has gotten pretty big," he said. Eliminating many of your wants might help you make your retirement savings last longer.
Taxes Can Take a Big Bite Out of Retirement Income
Another big problem retirees face is a larger-than-expected tax bill on their retirement income. "Everyone thinks their tax rate will go down when they're retired," Geary said. "That's a misconception."
If you've saved most of your money in a tax-deferred retirement account such as a 401k, you will have to pay taxes on your withdrawals at your regular income-tax rate. So if you need, say, $50,000 a year to cover expenses, you'll have to withdraw even more than that to cover taxes.
Solution: Create Tax-Free Sources of Income
You need to have savings that you can access tax-free to reduce your tax bill and keep more of your money. You can do this by saving in a Roth IRA or Roth 401k because you can withdraw money from accounts tax-free in retirement. "Ask your employer if you have a Roth option," Geary said. "Most of the time, the answer is yes." If not, ask your employer to add a Roth 401k to your account options.
Funding a permanent life insurance policy also can provide a source of tax-free income in retirement because you can borrow from the cash value of your policy. Talking to a financial planner can help you decide if this is a good retirement savings strategy for you.
Inflation Can Impact Your Retirement Income Needs
As you calculate your retirement income needs, you'll need to take inflation into account.
"It's important to understand that the effects can be stealth. Inflation affects our purchasing power," said Marguerita Cheng, CEO of Blue Ocean Global Wealth, a financial planning firm in Gaithersburg, Md. If you want to maintain your current standard of living in retirement, count on spending more over the years as the cost of living rises.
Solution: Invest in Equities
Over the past several years the annual inflation rate in the U.S. has hovered around 2 percent, according to the Bureau of Labor Statistics. If you don't want your purchasing power to be eroded by inflation, invest in assets with a higher rate of return to avoid running out of money in retirement.
"The solution is to include equities in your investment mix," Cheng said. Because you will need your savings to continue to grow while in retirement, you should keep stocks or stock mutual funds in your portfolio even after you retire.
You Might Outlive Your Savings
When asked, most people would likely say they want to live a long, healthy life. But this can be a downside to retirement for those without adequate savings.
The average life expectancy in the U.S. is 78.8 years, according to the Centers for Disease Control and Prevention. However, about one in four 65-year-olds today will live past age 90, according to the Social Security Administration. That means some people could spend decades in retirement.
Solution: Plan for a Long Retirement
It's impossible to predict the future. But the Social Security Administration does have a life expectancy calculator that will show you the average number of years you can expect to live based on your gender and date of birth. You can use this figure as a starting point when calculating how long your retirement savings need to last.
To be safe, though, your plan needs to provide you with enough income to meet your needs for potentially 30-plus years, Geary said. If you're not on track to have enough savings, you might need to delay retirement.
Long-Term Care Costs Could Wipe Out Your Savings
Even if your nest egg is large enough that you won't outlive your savings, you still could run out of money if you don't have a plan to cover long-term care costs, Geary said. If you reach age 65, there's about a 50-50 chance you will need some sort of long-term care, according to the U.S. Department of Health and Human Services. This sort of care isn't cheap.
The median annual cost of an assisted living facility is $45,000, and the median monthly cost of a private nursing home room is $97,452, according to the Genworth 2017 Cost of Care Survey. "You could easily burn through $1 million taking care of one person," Geary said.
Solution: Get Long-Term Care Coverage
Don't expect to cover long-term care costs with health insurance or Medicare. These provide only limited coverage for specific types of long-term care, according to the Administration on Community Living. And you likely won't have enough money to self-fund your care, Geary said.
That's why you should consider a long-term care insurance policy. If you don't like the idea of paying for insurance you may never use, you could get a life insurance policy that provides a long-term-care benefit. You can save money on premiums and reduce your risk of being denied coverage if you apply for a policy before age 50, Geary said.
You Might Not Be Prepared for High Healthcare Costs
If you aren't prepared to cover healthcare costs in retirement, you could be in for a shock. Fidelity Investments estimates that a 65-year-old couple retiring this year will need $275,000 to cover medical expenses in retirement. That doesn't even include long-term care costs.
If you haven't factored healthcare costs into your retirement savings and spending calculations, you might have trouble paying for medical care in retirement.
Solution: Reduce Costs and Build Health Savings
There are several steps to deal with rising healthcare costs in retirement. You might benefit from working longer to continue receiving subsidized health insurance from your employer. Also, you can contribute to a health savings account while you work if you have a high-deductible health plan. You can withdraw HSA funds in retirement tax-free for qualified medical expenses.
Opt to have any significant medical procedures you know you will need while still employed to optimize the use of your health coverage, said Laurie Kane Burkhardt, a certified financial planner with Modera Wealth Management in Boston. "Consult with health insurance experts to evaluate your choices for post-retirement insurance coverage and ensure that you select the best coverage for you," she said.
Living on Social Security Alone Will Be Challenging
The average monthly Social Security retirement benefit is $1,413, according to the latest figures from the Social Security Administration. That's only $16,956 a year. "If Social Security is all you have, you will find out very quickly you do not have enough money to meet your needs," Geary said.
He said there are people in Johnson City, Tenn., where he lives, who are trying to get by on Social Security alone and have to make a decision each month whether to buy their medication or food. "It's a very scary and sad place to be," he said.
Solution: Maximize Social Security Benefits
Of course, if you want to avoid retiring on Social Security alone, you'll have to build savings while you're working. If you can't amass that big of a nest egg, make sure you don't start collecting Social Security early at age 62. If you do that, your benefits could be permanently reduced by as much as 30 percent.
You can maximize your Social Security income by waiting to claim benefits until after your full retirement age. If you wait until age 70, the maximum benefit currently is $3,698 per month, which is almost $1,000 more than the maximum benefit for someone claiming benefits at the full retirement age of 66.
You Might Become Bored
Brett Anderson, president of St. Croix Advisors in Hudson, Wis., said he often hears retirees complain about boredom. "They used to work five days a week, eight to 12 hours a day, and only had 52 Saturdays a year," he said. "Once retired, now they have 365 Saturdays, and not everyone can golf seven days a week. "
Getting your financial house in order before retirement is important. "But don't overlook how you'll stay relevant or spend your time being impactful in your golden years," Anderson said.
Solution: Create a Bucket List
If you don't plan what you will do with your extra time in retirement, you could become depressed and may end up spending more than you planned in an attempt to fill your time, said Byrke Sestok, president of Rightirement Wealth Partners in White Plains, N.Y.
To prevent boredom in retirement, Sestok recommends making a bucket list of all the things you wanted to do while working but never did. They can include volunteering, exercising more, learning a new skill or language or developing a hobby. "This is the time to pursue those activities, and jumping right into the retirement mindset is likely to provide satisfaction," he said.
You May Have to Keep Working
You might have to go back to work after you retire for a variety of reasons. And it might not just be part-time work.
There's a higher percentage of older workers who now work full-time rather than part-time in retirement, according to a report published by the Brookings Institution. In 1995, 56 percent of workers 65 and older worked part-time, and less than half worked full-time. By 2014, 60 percent of workers ages 65 and older were full-time, and 40 percent were part-time.
Solution: Find Work You Enjoy
You shouldn't necessarily view returning to work in retirement as a bad thing. In addition to the financial benefits, working can help ward off boredom. "There is a sense of fulfillment in work. It keeps us busy and also provides us with a sense of purpose," said Alexander Rupert, a certified financial planner with Laurel Tree Advisors in Pepper Pike, Ohio.
You don't have to return to the job or field you left. There are senior-friendly jobs that are perfect for retirement and might offer the chance to explore other interests you have. And many retirees are finding a niche in the gig economy, Rupert said. "Working in the gig economy entails setting your own hours, only working as often as you like and earning as much as you're willing to work -- the flexibility that many retirees seek while still getting a sense of fulfillment and earning a little extra cash," he said.
You Might Have to Move in With Your Kids
An overwhelming majority of parents don't expect any financial support from their children in retirement, according to a recent GOBankingRates survey. But that doesn't mean they won't end up turning to them for help.
In fact, the percentage of older adults living with children has increased in recent years, according to the Center for Retirement Research. Those who move in with their kids are usually forced to do so because of economic distress.
Solution: Make Your Retirement Savings a Priority
If you don't want your kids to support you in retirement, one thing you can do is stop giving them financial handouts. A survey by TD Ameritrade found that baby boomers are losing $11,011 a year to their millennial children because they're helping support them financially. That's money boomers could be stashing in savings to improve their chances of not having to rely on their kids for help in retirement.
You May Feel Guilty About Spending Your Savings
If you've spent years pinching pennies so you can build your nest egg, you might be ready to retire to enjoy the fruits of your labor. But you could find that breaking out of your frugal mindset is difficult because you've developed an addiction to saving money.
"People who have done an excellent job of saving for retirement often have a difficult time spending the money they accumulated because spending does not feel natural," Sestok said.
Solution: Create a Budget
To avoid feeling guilty about spending your retirement savings, Byrke recommends developing a minimum and maximum budget based upon assets and retirement income sources. Then set a monthly spending goal.
"It seems odd that this is a problem when Americans, in general, are unprepared for retirement," he said. But people who have a fear of spending their savings can miss out on life goals and enjoyment if they don't make an effort to use their money.
You May Be Forced to Withdraw Retirement Money You Don't Need
If you have saved in a retirement account such as a 401k, IRA or SEP-IRA, you are required to start taking minimum withdrawals the year you turn 70 1/2. You have to withdraw a certain amount even if you don't need the money.
"I have many clients who will say, 'I don't need to take this much out,'" Geary said. But if you don't, you'll have to pay a tax penalty equal to 50 percent of the amount you should've withdrawn.
Solution: Don't Stash All of Your Savings in a 401k
The best way to avoid having to take required minimum distributions that you don't need is to save in different types of accounts rather than just a 401k or IRA, Geary said. For example, you could stash some of your savings in a Roth IRA, which isn't subject to required minimum distributions. If you have a Roth 401k, you could convert it to a Roth IRA when you retire, Geary said.
Roth vs. Traditional IRA: Which Retirement Plan Is Best for Me?
Moving Might Be a Bad Idea
Selling your home and relocating to a cheaper locale might seem like a smart financial move in retirement. "A lot of retirees immediately decide to move away and start over," said Leon C. LaBrecque, CEO of LJPR Financial Advisors in Troy, Mich. But moving in retirement can backfire.
LaBrecque said he has a retired client who has moved five times in 10 years. They kept relocating until they found their ideal spot. "It's a waste of money and energy," he said.
Solution: Test Out New Locales First
Before packing your belongings and putting your home on the market, LaBrecque recommends renting in the place you're considering for a couple of months. If you find that city or lifestyle isn't right for you, you can return home without the hassle.
Related: 50 Cheapest Places to Retire
Keeping Up with Your Friends May Be Harder
You might have more time to hang out with your friends in retirement. But once you start socializing more frequently and planning activities together, problems might arise.
"You may have had a similar career as your best buddy, but if he or she saved better than you, your retirement lifestyles may not match up," said Kristi Sullivan, owner of Sullivan Financial Planning in Denver, Colo.
Solution: Make Sure You're Setting the Budget
To avoid having to feel like you must keep up with your friends, "be the one who suggests activities first and keep them within your budget," Sullivan said. And don't be afraid to decline invitations to outings that would break your budget. "If you can't afford the round-the-world cruise, don't go," she said.
Click through to learn about money myths that can destroy your retirement.
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This article originally appeared on GOBankingRates.com: The Downsides of Retirement That Nobody Talks About