26 percent of seniors say life is worse in retirement

When we think about retiring, we like to imagine ourselves kicking back and snagging a piece of the good life. Unfortunately, things don't always shake out that way.

In fact, 26% of seniors retired for 10-plus years and 27% of recent retirees say their lives are worse now than they were during their working years. That's the latest from the new Nationwide Retirement Institute study, which also found that 75% of recent retirees blame a lack of income for their negative feelings. Meanwhile, 85% of long-term retirees cite high living costs as a detriment to enjoying their golden years.

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7 things to do before you retire
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7 things to do before you retire

Figure out your stable retirement income.

Take stock of any pension or Social Security income you expect to get during retirement. This stable income should form the basis of your budget, but probably won’t cover all of your expenses. This is your base retirement income that your savings and investments build upon.

Look at your other retirement income sources.

Determine what you can expect to draw down from your personal retirement investments. You may want to meet with an investment advisor to develop a withdrawal strategy. If you want or need to continue working in retirement, you can also include any part-time income you expect to receive for the first few years of retirement.

Make your retirement budget.

Figure out how much you plan to spend during retirement. This can help you get a handle on whether or not you actually have enough money to retire in the coming year.

One good exercise is to figure out the absolute minimum you need to get by. This means paying essential bills including health care expenses, clothing, food, transportation and other essentials. Then, determine your ideal retirement budget. If you could have the retirement you really want, how much money would that take? This lets you add in things like dining out, traveling and other luxuries.

At a minimum you should be able to cover your bare bones budget indefinitely. But it’s better to delay retirement until you can afford the lifestyle you want. Working an extra year or two might help you to finance a more enjoyable retirement.

Check into your investments.

As you approach retirement, it’s a smart time to double check your portfolio allocation. You should be shifting your money into lower risk, lower reward investment options, such as bonds. You can still take some risks, if you can stomach potential declines in your investment portfolio. Just be cognizant of how a downturn in the market could affect your retirement plans.

Figure out your health insurance.

If you are 65 or older you may qualify for Medicare, but you should also look at supplemental insurance policies you might need. If you don’t yet qualify for Medicare because you’re retiring early, be doubly sure you have enough cash flow to cover an individual health insurance policy.

Use your paid time off.

Check into your bank of vacation time or paid time off. You should definitely use this before you retire, unless you can translate those banked days into cash at the end of your working years. If you plan to look for a new place to live in retirement, that’s an especially good use of any banked time off you have available.

Make a plan for your time.

Figure out what you plan to do with your time during retirement. The transition from working every day to a life of leisure can be surprisingly emotional. The best way to fend off boredom and depression is to stay active physically, mentally and socially.

Take some time now to plan a retirement celebration, vacation or to find some volunteer opportunities you can step into as a retiree. This will help smooth the transition into your golden years.

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If you want to avoid finding yourself similarly dissatisfied with retirement, you'll need to take steps to ensure a healthy income stream. And that means saving aggressively during your working years and not relying too heavily on Social Security.

You can't live on Social Security alone

A big reason why so many seniors struggle in retirement is that they assume Social Security will cover the bills, and therefore don't save when they're younger. But that's just one of many misconceptions about Social Security that can hurt you.

Contrary to what you may have been led to believe, you cannot live on Social Security income alone. At best, those benefits will replace about 40% of the average worker's pre-retirement income, but most seniors need roughly double that amount to keep up with expenses.

Furthermore, Social Security has, at least in recent years, been doing a poor job of keeping up with inflation. Annual cost-of-living increases over the past half-decade have been minimal or nonexistent, and what little extra money seniors manage to get going forward likely will be swallowed by rising Medicare premiums before it lands in their pockets.

Therefore, relying on Social Security by itself to pay the bills in retirement is essentially setting yourself up to be miserable and financially stressed. And frankly, you deserve better.

Save, save, save

If you'd rather make the most of your golden years rather than stress your way through them, you'll need to do some serious saving during your career. If you're younger, you have a clear advantage: time. That's because the longer your savings window, the more you'll get to benefit from compounding.

Here's how that might work. Imagine you give yourself 30 years to save for retirement and commit to socking away $500 a month. At the end of that period, you'll have put $180,000 into your retirement plan. But if you invest that money heavily in stocks and score an average annual 7% return, which is actually a couple of points below the market's average, you'll wind up with about $567,000 to work with. That's a $387,000 gain.

If you wait longer, however, you won't benefit quite as much from compounding. You'll still grow your savings, but the results won't be nearly as impressive.

Case in point: Investing that $500 a month over just 15 years will result in an out-of-pocket contribution of $90,000 and an ending balance of $151,000, assuming that same 7% return. And while a $61,000 gain is better than nothing, it's not nearly as remarkable as the $387,000 we just saw.

Now, if you're wondering where the money to save will come from, it's simple: Cut back on expenses and stash whatever cash you don't spend in your retirement plan. Will that take work and discipline? Yes. Will it be worth it in the long run? Yes.

Remember, you don't necessarily need to make drastic changes to drum up some decent retirement savings. If you drive an ordinary car instead of a luxury vehicle, limit the extent to which you dine out, and cancel the pricey gym membership you rarely use, you might free up $500 a month in your budget to put away for the future.

Another option? Look at a side hustle, which might allow you to generate extra income without having to sacrifice some of the indulgences you've come to enjoy in your day-to-day life.

No matter what steps you take to save for retirement, make it a priority to avoid winding up miserable and cash-strapped down the line. Otherwise, you might come to find yourself in a rather sorry state when your golden years roll around.

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