Many pre-retirees sensibly devote a good deal of attention to forecasting how much they'll spend in retirement, thinking through their basic living expenses as well as how much they'll spend on extras like dining out and travel. They anticipate when they'll need to replace their roofs, when it will be time for a new car, and how their medical expenses are likely to trend up as they age.

But it's simply not possible to forecast each and every expense with precision. In a recent Investing During Retirement Discuss forum thread on Morningstar.com, I asked our retired readers to share which retirement expenses had caught them off guard. Health-care-related expenditures topped many retired readers' lists, with dental work most frequently cited as an unpleasant source of additional costs. Other readers noted that happy aspects of retirement--new grandchildren, travel, and hobbies--had bumped up their in-retirement expenses. To read the complete thread or share your own expense surprise during retirement, click here.

'An Unanticipated Dental Event'One of the most striking aspects of the discussion was just how many posters mentioned dental expenses as a cost they had underrated prior to retirement. Although many employed people are covered under their companies' plans, retirees can't typically purchase insurance, and costs for significant dental work can be exorbitant.

LFremont summed it up as follows: "The one cost area that is uncontrollable and hard to anticipate is dental. I don't think there is any decent insurance to protect you, and the cost can be really substantial."

And in contrast with other expenses, such as home and car maintenance, dental costs can be lumpy, making budgeting difficult. Orygunduck wrote, "Dental expenses are tough to predict, as a couple of crowns can run up costs, quickly! I liken it to having to have major work done on your car's engine and transmission at least once a year."

Posters Jkimel44 advised that the best defense against rising dental costs is to set aside a fund to defray them as they occur. "Put a little extra money aside each year to cover an unanticipated dental event."

'Health Insurance Is Also a Growing Burden'Although dental care received a large number of mentions, many readers cited health-care insurance premiums, as well as additional medical expenses not covered by Medicare, as a source of unanticipated costs during retirement.

Health-care insurance is a particularly large and unwelcome expense for retired people who aren't yet eligible to obtain coverage under Medicare. Gizmo25 shared, "Health-care insurance was expected to be expensive, but the actual amount was a shock. I retired at 57, my wife at 53. Over one third of our living expense is for health care, and Medicare is still a couple of years away."

Reddog is facing down a similar situation. "My wife is pre-Medicare, and insurance is a whopping $4,000 a year, even with my company's plan. Yikes, pretty outrageous."

The rapidity with which health-care premiums have risen caught Gyer12 off guard. "Health-care insurance premiums went up 100% after the first year of retirement and 30% last year."

Original post:
What Unexpected Expenses Crop Up in Retirement?

LONDON The final swim of Michael Phelps' incomparable career was a victory lap, a coronation and a mere formality.

Phelps' butterfly leg in the 400-meter individual medley helped propel the United States to an emphatic victory and sent Phelps into retirement with his 22nd career Olympic medal a staggering 18 of them gold. Both totals are records and it will take a long time before those totals are even challenged, much less broken.

Phelps was joined on the winning relay by backstroker Matt Grevers, breaststroker Brendan Hansen and freestyler Nathan Adrian. The U.S. has never lost an Olympic 400 medley relay, and this one was never in doubt after Phelps regained the lead on the third leg. The Americans won with a time of 3:29.35. Japan (3:31.26) took the silver medal and Australia (3:31.58). captured the bronze.

"I could probably sum it up in a couple of words and just say, 'I did it.'" Phelps said of his career. "Through the ups and downs, I've still been able to do everything that I've ever wanted to accomplish. I've been able to do things nobody's ever done and that's what I've always wanted to do."

"The memories I have for this week will never go away," he added.

This victory gives Phelps four gold medals and two silver for the London Olympics an impressive haul for a 27-year-old and especially impressive after his shaky start here.

Phelps shockingly missed the podium in his first event, the 400 individual medley, then regrouped by winning the 100 butterfly and 200 IM and swimming strong legs on the gold medal-winning 800 freestyle relay. His silver medals were in the 400 free relay and 200 butterfly.

His final three swims all ended with him on the top step of the podium, listening to the "Star-Spangled Banner." Phelps was more emotional on the podium than he had been in Olympics past, as the emotional weight of his career's end sunk in.

After receiving his final gold medal, Phelps got a lifetime achievement award from FINA, the sport's swimming federation. The trophy boasted the words "greatest Olympian of all time," a title he only took partial credit for.

"I've been able to become the best swimmer of all time and we got here together," Phelps said of his longtime coach Bob Bowman.

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Michael Phelps swims into retirement with 18th Olympic gold on U.S. 400 medley relay team

With more than 50% of its current population under 25 years of age, India's great "demographic dividend" needs to change a few habits--immediately--or it might be too late.

India is on its way to becoming the most populous nation in the world by 2025, surpassing China. By 2050, the number of Indians older than 65 will cross 200 million from about 80 million currently, while the number of Indians older than 80 will be at 43 million, second only to China.

According to a survey by HSBC titled, "The Future of Retirement--It's Time to Prepare," by 2050 India's elderly will equal the number of its children for the first time ever. Furthermore, a United Nations study points out that, in line with the global trend of increased life expectancies and declining fertility rates, old-age dependency ratios will increase, particularly in developing countries like India.

Quite clearly, greater resources will need to be set aside for the elderly. There is a "significant requirement for retirement planning, both at the individual level and for the Indian population as a whole," says Canara HSBC OBC Life Insurance's appointed actuary Chirag Rathod. "This requires increased awareness as a society about the need for proper retirement planning and the real threat of outliving your savings."

Given the sheer scale of this impending demographic shift, India's plan--or the lack of one--to take care of its elderly deserves a closer look.

Current Retirement AccountsIndia doesn't currently have a broad Social Security plan like the United States, but policymakers have created some retirement-focused savings vehicles.

Established in the 1950s, the Employees Provident Fund is most similar to the U.S. Social Security program, but its coverage is much more limited. Participation is compulsory only for employers with 20 or more workers and for workers who have a basic salary of more than INR 6,291 per month. Both employee and employer contribute an equal amount (either 12% of basic salary or INR 780) to the individual's EPF account, on which participants get a fixed interest rate. The EPF falls under the purview of the Employees Provident Fund Organisation, which has traditionally given the responsibility of managing these funds to state-owned or government-backed lenders.

The EPF is not without its problems. The first is reach: It covers only the organized, formally employed segment of the working population, while the vast majority of Indians--including entrepreneurs, self-employed businessmen, the agricultural labor force, and others--work in the so-called unorganized sector. In addition, even though the government offered a high interest rate in the early years of the plan, yields have since come down. Although the EFP's automatic contributions instill investing discipline on workers, participants can withdraw their savings after leaving their current job in lieu of transferring their account to their next employer, in the process dealing a big blow to their retirement savings potential.

In a move away from the defined benefit EPF, the Indian government established the National Pension Scheme in 2009 in an attempt to create a defined-contribution plan along the lines of the 401(k) in the United States. However, unlike the 401(k), which is offered through employers in the U.S., any Indian citizen between 18 and 60 years of age can invest in the NPS, which is administered to individuals through point-of-presence service provider outlets, which act as collection points.

NPS participants can exercise some control over how their contributions are invested. The government has defined three asset classes: 1) E--high return/high risk, which invests in predominantly equity market instruments; 2) C--medium return/medium risk, which invests in predominantly fixed-income instruments; and 3) G--low return/low risk, which invests in purely fixed-income instruments. Participants can choose to invest their entire amount in the C or G asset classes, but only up to a maximum of 50% in equity (class E). In case participants are unwilling or unable to exercise a choice regarding their investment strategy, funds are invested in accordance with an auto-choice option across the asset classes in percentage allocations prescribed by the Pension Fund Regulatory Development Authority depending on the participant's age.

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For India, Time for Retirement Planning Is Now

Dreams of retirement have traditionally included moving hundreds or even thousands of miles away to exotic locations, golf courses and endless summer days. The reality, however, is that more Americans are staying put during retirement out of necessity or the desire to remain in a familiar environment. According to an analysis of U.S. Census Bureau data by Richard W. Johnson, Director of the Urban Institute's Program on Retirement Policy, only 1.6% of retirees between the ages of 55 and 65 moved across state lines in 2010. The remaining 98.4 percent either stayed in their existing homes or made in-state moves.

SEE: Retirement Planning

The decades following World War II saw plummeting poverty rates in the aging population because of the introduction of Social Security and Medicare, and due to the abundance of employer defined-benefit pension plans. This influx of retirement money made it possible and normal for people to move to sunny spots during retirement. Current economic conditions, as well as changing views on the definition of a successful retirement, are leading more people to stay put during retirement.

Why Stay? There are many reasons to stay put or "age in place" during retirement, some of which are due to necessity while others can be attributed to choice. The 2008 financial and falling real estate prices have made it challenging for some to sell their existing homes, limiting alternatives during retirement. Many pre-retirees who counted on selling a home and using the proceeds to purchase a smaller home or condominium during retirement have been left with a tough choice: sell the home for much less than anticipated, or stay put.

Retirees also remain in the existing homes, or at least the area, out of choice. Established professional, social and family networks may be difficult to give up. Professional connections may help retirees secure part-time or less stressful full-time work during the retirement years. Social networks provide important opportunities for people to remain active in both physical and mental terms. An established circle of friends is, for many, an invaluable component of a successful and happy retirement. And family, of course, is also a consideration. It is often difficult to move away with children, grand-children and great-grand-kids in the area. While it is enjoyable to spend time with family and spoil the grand-kids, children often move into an important and active role in the care of aging parents.

By the time the retirement years roll around, many people also have an established and trusted group of service providers from local doctors and hospitals, to car mechanics and salon professionals. In certain situations, these providers may cross into the "staying put out of necessity" category, particularly doctors of chronic medical conditions. By staying put during retirement, all of the necessary and important relationships professional, social and service are in place and familiar.

SEE: Journey Through The 6 Stages Of Retirement

Considerations When Staying Put While "planning for retirement" often refers to saving financially for the golden years making investments, balancing portfolios and the like planning also needs to involve taking care of the human side of retirement.

Health Maintaining or adapting a healthy lifestyle is an important and often overlooked part of retirement planning. The old adage "use it or lose it" is especially relevant to physical and mental activity. A study published by Oxford University Press 2009 on behalf of The Gerontological Society of America found that people who are nearing retirement age show the highest rates of weight gain and obesity . S tudies also have shown that mental decline is not inevitable as we age: keeping the brain active through mental stimulation improves memory and other brain functions.

Being proactive about health by eating well, getting physical activity, and seeking mental stimulation can lead to happier retirement years. Like most plans, it is best to write down realistic goals and determine an approach for meeting the goals and share the goals with friends and family. Without a written plan, it is easy for things like healthy eating and exercise to fall to the way side.

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Reasons To Stay Put During Retirement

If youre like most people, you probably own a few IRAs, a 401(k), and a Roth IRA. And, if youre like most people you might have a wee bit of trouble keeping track of all the key dates associated with those and other retirement accounts.

Yes, Uncle Sam didnt make it easy on those of you saving for and living in retirement. IRAs have numerous deadlines that people need to be aware of, said Jeffrey Levine, an IRA technical consultant with Ed Slott and Co. Most of the time, missing a key deadline is an irrevocable and irreparable mistake. Even in the rare cases when a deadline mistake can be fixed, the solution tends to be costly and time consuming.

Thankfully, however, there are plenty of folks, including Levine, who know the key dates for you to put on the calendar nowbefore the rest of the year gets away from you. (In other words, enjoy August.)

Sept. 30

Anyone who is inheriting an IRA from someone who died in 2011 should pay close attention to the Sept. 30, 2012 cash out date, said Levine. This is the last day to pay offcash outa beneficiary of an account so that they will not be considered when calculating required minimum distributions or RMDs from an inherited IRA.

Yes, Sept. 30 is the deadline by which certain beneficiaries must be removed from inherited IRAs, according to Denise Appleby, editor of IRA News, Views, and Tips.

Generally, if you are one of multiple beneficiaries, you are required to use the life-expectancy of the oldest beneficiary in the group to calculate your RMD amounts, Appleby said. If you are one of the younger beneficiaries, using the life-expectancy of the oldest beneficiary can reduce the amount of time over which you have to distribute your inherited IRA, and can negatively impact income tax and tax planning opportunities.

This issue is compounded if one of the many beneficiaries is whats called a nonperson such as a charity or an estate. That might require the amount to be distributed over an even shorter period, said Appleby.

So, if the IRA owner died in 2011, you can avoid this problem by removing older and nonperson beneficiaries by Sept. 30 of this year, said Appleby. Of note, she said, this removal process requires older and nonperson beneficiaries to take full distributions of their amounts by Sept. 30, 2012, or the older beneficiaries to properly disclaim their portion by Sept. 30, 2012.

Levine offered this example: Lets say a 65-year old died in 2011 and leaves their IRA 50/50 to their only child and the Red Cross, a charity. Since the Red Cross is not a designated beneficiary, if they were not cashed out by Sept. 30, 2012, the entire inherited IRA might have to be withdrawn within five years. On the other hand, if the Red Cross received their entire share of the inherited IRA and were cashed out, the child would be able to use his/her remaining life expectancy (as determined by IRS tables) to calculate their inherited IRA RMDs, allowing for increased tax-deferral and minimizing Uncle Sams bite.

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Don’t Miss These Critical Retirement Deadlines

Many people strive to retire early. But retiring early could reduce your Social Security benefits, which means you have to save even more on your own. Heres how early retirement impacts your Social Security payments, even if you delay receiving benefits until the full retirement age of 67.

Eligibility. You need 40 credits of work in order to receive Social Security benefits. For 2012, you can earn one credit for every $1,130 you earn, up to a maximum of four credits each year. If you worked for at least 10 years and paid Social Security taxes, then you probably will be eligible for Social Security.

Average earnings. Social Security payouts are typically calculated using your average indexed monthly earnings (AIME). This calculation involves adjusting (or indexing) your entire earnings history to reflect changes in wage levels and the standard of living throughout your career. Then your 35 highest earning years will be totaled and averaged out to a monthly earning.

Payouts. Your AIME is then used to calculate your primary insurance amount (PIA), which is the amount you will get if you claim Social Security at your full retirement age. For 2012, your PIA is the sum of:

(a) 90 percent of the first $767 of your AIME, plus

(b) 32 percent of your AIME over $767 and through $4,624, plus

(c) 15 percent of your AIME over $4,624.

However, these amounts may change in future years. And benefit payouts are decreased if you claim before your full retirement age, and can be increased if you delay claiming up until age 70.

Early retirement can impact this formula in a couple of important ways. If you retire significantly early, you will most likely stop working during your peak earning years. This will reduce your average earnings and, consequently, your Social Security benefit. And if you retire with less than 35 earning years, Social Security will average in zeros for those years.

For example, if you retire at age 52 after working for 30 years, your average earnings will be computed with 30 years of earnings plus 5 years of not earning. This will bring down your average earnings and reduce your Social Security benefit. This Social Security online calculator will allow you to see exactly how early retirement will affect your benefit.

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Early Retirement Will Impact Your Social Security Benefit

Retirement planning rules tend to be very specific to individuals financial situation, lifestyle, retirement plans and location. But there is one rule experts tend to agree on: Pay off your mortgage before entering your golden years.

When you look at where Americans spend their money, 30% to 40% is on housing, says Joseph Montanaro, a certified financial planner at USAA. When you look at retirement, you can create a much smoother income plan when you dont have that requirement. For retirees, reducing fixed expenses like housing provides more financial flexibility and less stress on an investment portfolio.

Most people in retirement are on a fixed income made up of savings, investments like a 401(k) or IRA, Social Security benefits and pensions. Not having to worry about making monthly mortgage payments can provide peace of mind, says Michael Eisenberg, a certified public accountant in Los Angeles.

Not having a mortgage payment will also free up cash flow. When you retire, the outflow of dollars changes as you may have other expenses, such as elevated health- care costs and discretionary goals. If you sell the house, all that cash will be available for other purposes, says Eisenberg.

If you dont sell your house, there still are other things you can do with that asset if necessary. In retirement, you cant get unsecured debt because you dont have any income, says chartered financial analyst Robert Stammers, director of Investor Education for the CFA Institute. You can get secured debt, and youll have your house.

How to Pay Off Your Mortgage

Before working to pay off your mortgage beyond the monthly payments, Stammers suggests eliminating other consumer debt like outstanding credit card bills and creating an emergency fund that covers six months of expenses.

When determining the best way to pay your mortgage early, experts recommend keeping your available cash in portfolio accounts. If youre going to liquidate your accounts to pay off your mortgage, ask whether it makes sense to use that money and leave yourself with no cushion, says Eisenberg. Youre leaving yourself cash poor.

Experts also recommend diverting extra cash to pay off your mortgage while youre working by changing the amount and when you pay, here are a couple options:

Accelerated Mortgage Payments. Split your mortgage payment in half and make payments every two weeks, says Stammers. Youre matching your payments with your cash flow, and youll make an extra two payments [or one monthly mortgage payment] each year. If you have a $225,000 mortgage at 5% for 25 years, for example, by paying your mortgage biweekly, you can shorten your mortgage by about three to four years and save about $28,000 in interest payments.

Continued here:
How to Pay Off Your Mortgage Before Retirement

(MoneyWatch) Although most Americans aren't confident about their ability to retire, people in other countries are even more pessimistic about their retirement prospects, according to a recent survey by Accenture.

Well, duh! I'd be pessimistic, too, if I lived in Mexico, Russia, or Spain. The consulting firm found that 92 percent, 92 percent, and 91 percent, respectively, of respondents in those countries were doubtful about their retirements. South Korea registered the highest level of pessimism, at 95 percent.

That makes sense. As the survey shows, people living in countries with struggling economies and that are experiencing political turmoil can't be expected to feel particularly optimistic about what the future will bring.

Worried about outliving your money? Americans aren't alone 8 ways to fight the system -- and profit Survey: Fewer than 1 in 4 trust financial system

On the other hand, democracy, freedom of speech, and respect for the law are characteristic of the countries with the lowest levels of pessimism about retirement. The countries with the lowest levels of pessimism are the U.K., Germany, Australia, and the U.S, with pessimism levels at 65 percent, 66 percent, 69 percent, and 70 percent respectively.

Besides being just interesting stuff to talk about at your next family or neighborhood get-together, what do these survey results mean to you? When you think about the observations I just made, it's easy to see that an important part of your retirement planning is voting and supporting a country that's run based on the rule of law (as opposed to countries run by dictators or the privileged elite). That's because only countries with strong economies and citizens with high confidence in its legal and financial systems can afford to have a large portion of their population not working, yet still consuming a significant part of the national output.

With that in mind, it's essential that we provide support for Social Security and Medicare, and think about the level of taxes needed to support these valuable programs. It's also important to consider income disparity when thinking about income taxes. And it's critical to think about our health care delivery system and the appropriate amount of government intervention that's needed to provide care for our citizens.

Another essential element to consider: the appropriate amount of regulation that's needed to balance consumer protection with support for innovation and service. Even though many people automatically disparage excessive regulation, we need laws and regulations to rein in the most damaging practices at financial institutions. We only need to look at the most recent scandal over global banks manipulating the London interbank offered rate for reasons why people don't trust the financial system. It's clear that a respect for the law was missing in those situations. For our own protection, we need to have laws that are both respected and enforced.

In spite of the retirement challenges that we face, when I think about how other countries are currently faring, I'm very glad that I'm living and retiring in the good 'ol USA! Thanks for listening -- and see you at the voting booth!

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Americans fear retirement less than other people

(MoneyWatch) Have you been inspired by the accomplishments of the Olympic athletes from nations around the world? I certainly have. Their sustained focus, commitment to doing whatever it takes to reach their goals, and attention to details is truly motivating. And although we might not be Olympic-caliber athletes, I think there are ways we can direct this energy to preparing for our retirement years.

The TV coverage offers insights into the intense commitment made by the Olympians. Some start training as early as age 5, while others start in their late teens or early 20s. But they all gladly forgo hours they could have spent in front of the TV or at the mall because they've made a conscious commitment to training for a worthwhile goal they can visualize in their minds.

Planning for retirement is very similar. Some people begin saving for retirement or start a long career with an employer that offers good retirement benefits as early as their 20s. Others don't start planning and saving seriously until their 30s or 40s, but they still make it to the retirement podium stand. One thing's for sure, though: If you don't put in much effort at any age, you'll never reach your goals, whether that's going to the Olympics or achieving a gold medal retirement.

Olympic training takes many aspects. In addition to developing the techniques and skills for their particular events, Olympians spend hours and hours working on endurance and weight training, are careful to get the proper nutrition, and pay daily attention to their mental and emotional state. They develop strong social networks with their coaches and teammates in order to get the support they need to succeed.

It's the same with retirement planning. You'll need to make important decisions about financing your retirement, such as when to start your Social Security benefits; how to turn your 401(k), IRA, and retirement savings into a retirement paycheck; how best to deploy your home equity; and how to protect against the threat of ruinous long-term care expenses. You'll want to improve or maintain your physical health with the proper nutrition and exercise. And you'll want to nurture a robust social network that will give you pleasure in life and provide the support when you need it.

When the Olympians are standing on the medal podium, there's no doubt they think the time and effort they spent on their training has been worth it. And although you won't get a gold medal to denote your retirement accomplishments, you'll know you've won when you reach your goals: You're financially independent from work, you're doing what you want to do, your physical and mental health are excellent, and you're building your legacy. You'll look back and know that all the planning has been worth the effort.

The good thing is that planning for retirement doesn't require an Olympian effort; we need to spend just a fraction of the time spent by the Olympians to reach our goals. It will, however, take many more hours than most people are currently spending. For example, a recent post from the Boston College Center for Retirement Research states that people may put more thought into buying a car or a mattress than they do planning for retirement. The illustration that starts this post aptly shows us what we need to do to create a gold medal retirement.

How to recession-proof your retirement Retirement planning for the 99 percent 12 weeks to plan for your retirement

The above photo is of my dad, who, as you can see, literally had a gold medal retirement. After a 30-plus year career as a professor at USC, he and my mother participated in senior track and field events, traveled around the world, and kept in constant contact with family and friends. He passed away peacefully at age 88 with family gathered around his bed. My mom and dad created their gold medal retirement from a middle class life, by making a sustained effort to save their money and manage their expenses during their working years, by nurturing their family connections, and by taking care of their physical and emotional health. (You can learn more from their experience from my posts, "How to recession-proof your retirement" and "Retirement planning for the 99 percent.")

In order to achieve the retirement you want, you'll need to keep your eye on the ultimate goal: Living a "rest of life" in which you're financially secure, healthy, and prospering in every sense of the word. We can all be like Olympians -- if we train like them.

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Train for a gold medal retirement

CHICAGO, Aug. 1, 2012 /PRNewswire/ -- Young Americans are hoping for an early retirement. However, many have not taken the important first steps of knowing how much money they will need and starting to save, according to a report issued today by the BMO Retirement Institute, Broadening the Approach to Preparing for Retirement.

The report found that:

"There is an obvious dichotomy between what young people think about retirement and what they're actually doing to prepare for it," said Tina Di Vito, Head of the BMO Retirement Institute. "While it's encouraging that young adults appreciate the importance of retirement planning, there's clearly a disconnect between the concept and then putting the tangible pieces in place, such as determining how much money you'll need and starting to save. This is especially concerning given that so many expect to retire before the age of 60."

The report also outlined how important attitudes and role models are in helping young people become more proactive in preparing for retirement.

Behaviors and Attitudes Fall Short

The report found that behaviors and attitudes are strong predictors of financial preparedness for retirement. Educating young adults through practical hands-on general money-management experiences, such as budgeting, may help instill good financial habits and encourage them to seek information about saving for retirement.

The report revealed that the level of involvement in saving for retirement is relatively low in most young people. They are not spending enough time gathering information on retirement planning, attending seminars, consulting others on retirement planning, or thinking about how much they should be saving in order to secure their financial future.

"Having a general appreciation of how much money you'll need in retirement involves the important first step of visualizing what you want your retirement to look like," said Di Vito. "Only then can you develop an effective savings plan. This process takes time, research and self-reflection, and the attitude you have entering into it will largely determine your success."

Role Models are Key

Role models such as parents and other influential adults are critical to helping young people think differently about their financial future. The report found that many young people turn to family and friends to discuss retirement planning and then seek out information on their own. Consulting others appears to be the most effective, with 38 percent taking action as a result of these conversations. Meanwhile, retirement planning seminars appear to be the least effective at nudging young adults into action. Even with more than one-third (34 percent) attending these seminars, only 28 percent took action.

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BMO Retirement Institute Report: Young Americans Want to Retire Early, but Many Are Not Saving