Navigating Financial and Emotional Surprises in Retirement

Retirement is a significant milestone, often accompanied by the anticipation of relaxation and freedom. However, it’s essential to be aware of potential financial and emotional surprises that can arise. With proactive planning, you can help ensure a secure and fulfilling retirement.

Budget for home repairs and maintenance

Transitioning from a regular paycheck to a fixed income requires careful budgeting. While some expenses may decrease, others, such as home maintenance, can remain substantial. Even if you took care of some repairs before retiring (like repairing the roof or upgrading your HVAC system), unexpected repairs can occur at any time. That’s why creating a realistic budget that accounts for ongoing costs is crucial.

Pro tip: The Mercer Advisors Financial Planning website is included at no extra cost for clients and is accessible via the Mercer Advisors client portal. You can link your financial accounts (such as checking, savings, credit cards, and money market accounts) to effortlessly track expenses. The platform automatically uploads your spending activity, generates pie charts, and detailed expense reports for easy review.

Understand Social Security benefits

Deciding when to claim Social Security benefits is a critical aspect of retirement planning. While you can start as early as age 62, deciding when to start depends on your unique situation. While waiting until your full retirement age, or as late as age 70 can increase your lifetime benefits, it’s important to consider your health, family history, and financial needs. For example, if family members typically don’t live past 75, you’re single or have limited income, claiming benefits at 62 might be a good option.

Also, think about other available retirement assets. Claiming benefits earlier could let your portfolio grow longer. Consider your retirement goals, lifestyle, and any immediate financial needs, like family caregiving. Social Security was designed to provide support when you need it. For more information, visit our library of Social Security articles.

Pro tip: Review your Social Security Statement at www.ssa.gov to make sure your earnings record is accurate. The Statement also gives estimates of monthly benefits at age 62, 65, full retirement age as well as age 70. Collecting Social Security benefits before your full retirement age comes with earned income limits which may require you to payback some benefits. Currently, benefits are also potentially taxable on your federal (IRS) return as well as a few state returns.

How to determine your full retirement age

If you were born in 1957 or earlier, you’re already eligible for your full Social Security benefit. The full retirement age is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960 until it reaches 67. For anyone born in 1960 or later, full retirement benefits are payable at age 67.

Age to receive full Social Security benefits

Year of birth	Full retirement age
1943-1954	66
1955	66 and 2 months
1956	66 and 4 months
1957	66 and 6 months
1958	66 and 8 months
1959	66 and 10 months
1960 and later	67
Note: If you were born on January 1 of any year, refer to the previous year.

Source: Social Security Administration. “Retirement Benefits.” SSA.gov, January 2025.

Manage required minimum distributions

Once you reach age, you are required to take annual required minimum distributions (RMDs) from your retirement accounts. The amount of your RMD is calculated by dividing the value of your Traditional IRA by a life expectancy factor, as determined by the IRS. You need to calculate your RMD for each IRA separately, but you have the flexibility to take your total RMD amount from either a single IRA or a combination of IRAs. However, RMDs from Qualified Retirement Plans or Inherited IRAs must also be calculated separately and can only be taken from their respective accounts.

RMD age is 73 for birth dates through December 31, 1959 and age 75 for birth dates January 1, 1960 and after.

Your first RMD is generally taken in the year you reach RMD age. An election is available to postpone your first RMD, which then requires two RMDs the following year, the first must be taken no later than April 1 of the year after you reach RMD age and the second by December 31st. After that, subsequent RMDs must be taken by December 31 of each year. If you don’t take your RMDs, you’ll have to pay a penalty.

It’s important to note that you don’t need to take RMDs from Roth IRAs unless you have established an inherited/beneficiary Roth IRA.

Special rules are in place for 401(k) and 403(b) plans which can delay taking RMDs until the year you retire, as long as you work for the company that sponsors your plan and you don’t own more than 5% of the business.

Pro tip: Roth conversions can potentially save taxes in retirement by avoiding RMDs as well as taking advantage of potentially lower current tax rates, especially if you anticipate being in a higher tax bracket later in retirement. It’s crucial to carefully evaluate your individual financial situation before making this decision as you’ll need to pay taxes on the converted amount upfront.

Consider Medicare and healthcare costs

With increasing life expectancies, retirees must plan for the possibility of outliving their savings. Healthcare costs, often underestimated, can significantly impact retirement finances. While Medicare provides essential coverage, it doesn’t cover everything. Premiums, deductibles, co-payments, and prescription drug costs can add up quickly. Additionally, higher income levels can lead to increased Medicare premiums. Understanding these potential costs and planning accordingly, such as consideration of supplemental insurance policies, can help mitigate unexpected healthcare costs.

Watch our webinar to learn more about Medicare and supplemental plans, costs, and how to obtain coverage.

Although we want to believe we’ll stay healthy and in good shape long into our retirement years, long-term care may still become necessary. Even a sizable retirement nest egg can be wiped out with assisted living costs estimated at $4,995 per month, memory care at $6,200 per month, independent living at $3,100 per month, and in-home care at $30 per hour.¹

Understand the financial costs of downsizing and relocating

Downsizing or relocating to another state can reduce your overall expenses, including income taxes, mortgage payments, property taxes, insurance, and maintenance costs. A smaller home often means less upkeep, maintenance, and lower utility costs, helping to free up time and resources. However, it’s important to be mindful of these potential surprises:

• Overestimating what your current home is worth. Visit websites including Realtor.com or Zillow.com for information on what homes in your area have sold for recently. Major banks including Bank of America have online estimators you can use to help determine your home’s value. Local real estate agents can also provide estimates of your home’s current market value.
• Spend time in the area. If you’re considering relocating to a new area, spend some time there and visit potential homes. It’s beneficial to experience the area in different seasons to ensure you’ll be content year-round. Consider renting for a year before buying. Many retirees move impulsively, regret their decision, and end up moving again.
• Factor in moving costs. According to Moving.com, local moves can range from a low of $501 for a studio apartment to $2,988 and higher for a 4–5-bedroom house. The cost for a long-distance move can range from $1,123 to more than $14,107 depending on how many miles you’re moving and the size of your move.²
• Don’t ignore the tax implications and closing costs. According to current IRS rules, with the sale of a home, most couples can exclude up to $500,000 in gains from their taxable income. That means you won’t need to pay taxes on the first $500,000 in profits you’ve make from selling your home. Singles can usually exclude up to $250,000.³ And don’t forget about those closing costs. You’ll have legal fees, recording fees, title insurance, and a long list of other charges including real estate commissions when using an agent.

Pro tip: Don’t forget the importance of family and friends as well as climate and activities when considering a new state to live. Out of the 50 states, 41 have some type of income tax, so it’s essential to check the estate tax regulations of any potential new state. If a move is in your future, it’s critically important to have your foundational estate documents including wills, trusts, power of attorney and health care proxy paperwork redone, as these protective documents are specific to each state.

Plan for activities that bring joy and meaning

Retirement can bring about several unexpected emotional surprises, including loneliness, social isolation, and feelings of boredom or a lack of purpose. Engaging in new hobbies, volunteering, or even part-time work can help provide structure and fulfillment. Studies have shown that having a sense of purpose can lead to a longer, healthier life.⁴

For 40 years, Mercer Advisors has helped clients throughout their retirement journey. If you’re ready to learn how we can help you achieve the retirement lifestyle you deserve, let’s talk.

¹  APlaceForMom.com. “2024 Report Cost of Long-Term Care and Senior Living.” A Place For Mom, 2024. 

²  Moving.com. “Moving Cost Calculator for Moving Estimates.”

³  Internal Revenue Service. “Topic No. 701 Sale of Your Home.” 5 February 2025.

⁴  Suttie, Jill. “To Live Longer, Find Your Purpose in Life.” Greater Good Magazine, 20 November 2024.

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