The reality is that these are reasonable and rational fears. Running out of money after you have retired and been out of work for a few years is indeed terrifying. You’ll be older and much less able to head back to work. Just think about the rising medical bill costs as you grow older and the increased need for savings to help cover these expenses. (No, Medicare does not pay for it all by a long shot.)
So, what are you supposed to do about the reasonable and rational fear of running out of money? The first step is to create a written retirement plan!
Most people have managed their financial lives day to day, month to month, or year to year. This is fine when you are receiving money every month and always have the potential to earn more. Retirement is different. In retirement, you need to make a fixed set of resources last for twenty or thirty years.
Retirement is the time to have the best and most detailed financial plan possible. You can create your own spreadsheet, work with a financial advisor, or use a trusted online planning resource – just beware of simple retirement calculators.
Yes, it can be scary to face your fears, but it’s the only way to really overcome them.
The NewRetirement retirement planner is one of the the most comprehensive and powerful tools available. Forbes Magazine calls the system “a new approach to retirement planning,” and it was named a best retirement calculator by the American Association of Individual Investors (AAII) and CanIRetireYet.
Start by inputting your existing plans, then try different scenarios to strengthen your future finances:
- What happens if you delay the start of Social Security?
- Can you tap into home equity?
- Is there potential for reducing expenses now or at some point in the future?
- Are you realistic about healthcare spending?
- Experiment with different ways you might cover a long-term care need if it were to occur
- Try different inflation numbers and see how your finances would be impacted
Your confidence should grow as you play with your own plan and finances and see how you might be able to adapt in different scenarios with various strategies.
Once upon a time the fear that Social Security would disappear seemed more like an urban myth than a realistic scenario.
However, there is serious talk in Congress and catastrophic financial predictions that Social Security (and Medicare) will indeed be reduced or even cease to exist for future generations.
If you are young and worried about the fate of Social Security, then you either need to run for Congress now or take saving for retirement very seriously. Confused about how much to save? Get some saving advice from the financial gurus. Or, create a detailed retirement plan now and see for yourself how much you need to be socking away.
If you are near retirement age or already retired, then there is probably some very good news for you. Your benefits will likely be protected.
However, we are living in strange political times. So, if you are still concerned, then you could always run scenarios in a retirement planning calculator and see how dire your finances might be if benefits were reduced and figure out a way to compensate for the lost income through:
- Tapping home equity
- Reducing expenses
- Delaying the start of retirement (or getting a retirement job)
- Optimizing taxes and investments
The third biggest retirement fear is a set of concerns related to health and healthcare:
- Forty-four percent of workers are worried about declining health that requires long-term care.
- Thirty-eight percent are concerned about lack of access to adequate and affordable healthcare.
- Thirty-five percent fear cognitive decline, dementia, and/or Alzheimer’s disease.
Getting old is not easy. And, our healthcare system is ailing – especially in some locales. These too are well founded fears.
There are basically three problems to address with regards to health and healthcare retirement fears:
- Doing whatever you can to protect your own health
- Figuring out how to afford healthcare costs
- Making sure you have adequate access to healthcare
Your Own Health: There is no shortage of sound advice about taking care of your own health – explore the secrets of the super agers. In a nutshell: Eat well. Stay engaged, mentally and socially. Exercise.
If you’re still a little scared, there is continuing good news about medical care and health outcomes. Recent data even suggests that dementia rates are declining.
Affording Healthcare: The average out of pocket health care expenditure for a 65-year-old today will be a whopping $260,000 – not including long term care costs. Your fears are well founded.
These top line costs have to be factored into your retirement planning. The NewRetirement retirement planner does this for you. It also lets you explore the impact of different ways of planning for a long-term care event.
Adequate Access to Healthcare: Your access to healthcare and the costs of those services varies greatly depending on where you live. Worse yet, where you live can be a big predictor of how long you live.
In retirement, you may have more freedom to choose where you live, and access to high quality and affordable healthcare should be a big factor in your decision making about relocating.
We’ve spent our whole lives working, spending the money we earn, and hopefully saving a little, too.
When we retire, everything we have ever experienced about managing our own finances gets turned upside down. We no longer earn as much or any money from work and we are tasked with simply spending. It’s no wonder we have some big fears.
Like any fear, the best thing to do is tackle it head on. It can be emotionally challenging to face what scares you, but it is proven that people feel better once they do.
Create a written retirement plan today and face your fears head on.