Tropical beaches…tennis and golf…sailing on crystal blue waters…exotic travels…

Whatever you dream about when you think of retirement, the reality could end up being much different, and much more stark, unless you take steps to bolster your nest egg right now.

By tackling these 5 retirement traps before they spring up, you’ll be better able to live the dream…and keep it from turning into a bleak financial nightmare.

  1. Dig out of debt, and don’t take on more.
    More retirees than ever are being crippled by debt, forced to keep up with steep monthly payments despite the drop in income. Once you’re retired, your financial flexibility decreases, making it much harder to cope with that huge monthly expense – especially when extra unexpected costs crop up.

    In 2016, retirees paid an average $1,322 in credit card interest.

    The most unexpected factor here: student loan debt. In fact, the number of older Americans with outstanding student loans quadrupled over the past ten years or so to more than 2.8 million! And the average outstanding loan for the 60+ crowd comes to about $23,000 – a huge chunk of retirement savings for most of us.

    And, according to the Consumer Financial Protection Bureau, the struggle to pay down this debt can lead to late and missed payments, loan default, and even the inability to meet basic monthly expenses. While it’s generous and kind to help fund your child’s or grandchild’s college education, don’t let it undermine your financial security.

  2. Medical bills can wipe out your savings.
    Hold on to your seat…The average healthcare costs during retirement for couples on Medicare top $260,000 (including Medicare Part B premiums). And if you suffer a chronic illness – like cancer or Alzheimer’s disease – or a life-changing injury (like a hip fracture), your costs will skyrocket.On top of that, experts predict that Medicare will be insolvent by 2028 (at the latest) unless significant changes are made…and those changes will probably translate into fewer benefits and higher costs for you.

    So what can you do? More than most people realize, actually…

    • Fund your HSA account to the max. Anyone with a high-deductible health insurance policy is eligible to open a Health Savings Account (HSA). You (and possibly your employer) contribute pre-tax dollars to the account. The earnings build up tax-free. The account lasts until you use it up (it’s not a use-it-or-lose-it account). And as long as you use the money for qualified medical expenses, you won’t pay any tax on withdrawals, either. You can contribute up to $3,400 ($6,750 for a family) to an HSA in 2017…and if you’ll be 55 by December 31, 2017, you can stash away an extra $1,000.
    • Get dental insurance. Medicare won’t cover your teeth, but you’ll still be going to the dentist – and those costs can really add up. To make sure dental costs (like $1,000 root canals) don’t break the bank, cover your teeth with dental insurance.
    • Get long-term care insurance. Long-term medical care costs will wipe out your nest egg…long-term care insurance is surprisingly affordable, especially if you lock-in lower rates while you’re still healthy. Contrary to what most people think, neither Medicare nor Medicaid will cover long-term care costs (Medicaid will only kick in when you become impoverished). Long-term care includes things like rehab after an accident or illness, home-based care, and nursing home stays…at least one of which most people over 65 end up needing at some point.
    • Plan for medical expenses. Most people don’t bother budgeting for medical expenses in retirement – they think Medicare will just cover everything…but it won’t. Whatever your healthcare costs are now, they will probably be higher as you get older. Take that into account when you’re calculating your expected retirement cost of living.
  3. Set firm financial boundaries with your kids.
    About 60% of adults 50 and older offer some form of financial support to their children – whether it’s loans, gifts, or letting them live with you. And while it’s admirable to care for your family, it can also decimate your retirement nest egg.As hard as it is to act business-like with your loved ones, that could be critical to your financial future. If your child needs a loan, treat it like a loan – with terms that include a repayment schedule and nominal interest – and put it in writing. Then, at the very least, if the loan doesn’t get repaid, you may be able to get a tax write-off for the “bad debt.”

    If your child has hit hard times, and needs to move back home, have a candid talk about limits – both time and money. Helping your child regain their self-sufficiency, build up confidence, and get back on their feet does more for them than unending financial support. Plus, the more you subsidize your child, the faster your money will run out, leaving all of you in dire financial straits.

  4. Don’t depend on Social Security.
    It’s all over the news: Social Security doesn’t really have enough money to support all of us – even though we’re working longer and retiring later. And even if you get your full benefits, it probably won’t be enough to live on.For 2017, the maximum possible benefit for a worker retiring at age 70 is $3,538 per month – and that’s based on pre-retirement earnings of $8,426 a month. So if you were making upwards of $101,000 a year (on average, for a good chunk of your working life), you’d be eligible to get about $42,000 a year from Social Security… less than half of what you were used to bringing in.

    Full retirement age for Social Security is 66 and 2 months (as of 2017)

    That $3,538 benefit also comes with a catch – you have to delay retirement to age 70… and most people don’t. You can start as early as age 62, but then your monthly benefits will be sharply reduced.

    And because most Americans haven’t earned an average $100K a year, the average Social Security benefits are nowhere near $3,500 a month.

    In fact, the average payment is closer to $1,400 a month – barely enough to cover basic housing expenses, and nowhere near enough for a dream retirement.

  5. Update your portfolio strategy.
    A lot of financial advice about retirement is well meaning but just plain wrong. It’s based on how retirement used to work – and that won’t help you in the future. People are living longer than ever before, interest rates are practically non-existent, and the stock market is just as volatile (if not more) than ever. Even people with substantial retirement savings are falling short. But you can take steps to avoid that, reducing your financial anxiety and insecurity, and giving you a better shot at a fully funded retirement.

    • Designate a “safe money zone.” When you step into retirement, put 2 to 5 years worth of expenses into a “safe money zone,” like a savings account. This money won’t grow substantially, or earn super returns, but it will be If the markets take a dive, you’re immediate living expenses are covered, and that gives your portfolio a chance to recover when the markets turn around.
    • Set up a guaranteed income stream. Annuities – don’t stop reading! I know annuities have a really bad reputation – and I don’t disagree with a lot of that. BUT, there are some very simple, straightforward immediate income annuities that give you a guaranteed monthly payment for the rest of your life. Don’t get sucked in by bells and whistles and greedy salesman. Know what you want before you buy, and stick with what you want. This strategy guarantees you won’t run out of money, and gives you a safety net that allows you to keep investing a portion of your portfolio.
    • Invest in some high-yield securities. Add solid dividend-producing stocks and top-rated bonds to your holdings. These investments are not expected to increase in value – you’re not looking for growth here, and you won’t be trading these securities frequently. These are income investments, and their purpose is to add to your cash flow regularly.
    • Stay in stocks. Retirement used to involve a fairly short long-term time frame, but not anymore. Most people live in retirement for 25 years or more – but their portfolios don’t take that into account. They follow standard advice to shift almost entirely out of stocks and into cash and bonds. But in this low-interest environment, that strategy won’t work for the long haul. Keeping a portion of your portfolio invested in growth funds gives your nest egg a chance to keep pace with – and even outpace – inflation, and reduces the chance that you’ll run out of money.
    • Stay diversified. Keep your portfolio well diversified, meaning don’t just keep stocks and bonds in there, and diversify the stocks and bonds you do hold. For true diversification, include other asset classes (like real estate), and invest across countries and market sectors. The best way to do this is through low-cost ETFs (exchange-traded funds) that offer diversified access to hundreds of different investments and market sectors.