Will I Run Out of Money? (And 4 Other Retirement Fears That Keep You Up at Night)
You’ve worked hard, saved diligently, and now you're about to retire. Yet, instead of pure excitement, you may feel uneasy.
You’re not alone.
Retirement anxiety is real, and the number one question people ask me is, "Will I run out of money?"
Let’s be honest: the idea of retiring is exciting, but it can also feel scary. Let's talk about the five biggest retirement fears. And, more importantly, how to tackle them head-on. Knowing your real retirement number could help alleviate these fears, as well!
Fear #1: Healthcare Costs Draining Your Savings
Healthcare expenses in retirement can feel overwhelming. Did you know the average retired couple today may spend over $300,000 on healthcare alone - and that’s just regular medical expenses, not even including long-term care? It’s no wonder medical bills keep retirees awake at night.
What you can do:
- Consider Medicare supplemental plans, like Medigap or Medicare Advantage, to limit your out-of-pocket costs.
- Explore options like long-term care insurance or hybrid insurance policies to protect against the huge expense of nursing homes or assisted living.
- Create a healthcare savings strategy early, setting aside funds specifically for future medical needs.
Planning now can significantly reduce worry later.
Fear #2: A Market Crash Ruining Your Retirement
The thought of the stock market crashing when you're about to retire can be terrifying. And yes, a downturn early in retirement could significantly impact your portfolio if you’re unprepared.
But here's the important part: market drops only cause lasting damage when you panic and sell investments at the wrong time.
What you can do:
- Use a diversified investment approach. A popular option is the "bucket strategy," where you have cash for immediate needs, bonds for medium-term stability, and stocks for long-term growth.
- Have a clear plan ahead of time to avoid emotional decisions during market fluctuations.
Market drops are temporary; a solid plan helps ensure your retirement security is permanent. Be thoughtful about how much portfolio risk you take in retirement.
Fear #3: Losing Your Purpose After Retirement
It might surprise you, but losing your sense of purpose after leaving your career is one of the biggest fears retirees have. Jobs give us identity, routine, and social interaction. Without these, some retirees struggle with feelings of emptiness.
What you can do:
- Before retiring, create a vision for your retirement lifestyle. Ask yourself: "What am I passionate about? How do I want to spend my days?"
- Consider volunteering, part-time work, hobbies, mentorship, or traveling.
- Staying engaged makes retirement fulfilling and meaningful.
Remember, retirement isn't just about finances. It’s about building a life you love.
Fear #4: Taxes Eating Away Your Retirement Income
Yes, taxes follow you into retirement—and they can take a surprising bite out of your nest egg. Required Minimum Distributions (RMDs) from retirement accounts, taxes on Social Security, and state taxes can quickly add up. Plus, losing a spouse can unexpectedly push you into higher tax brackets.
What you can do:
- Plan tax strategies years before retirement, such as Roth conversions, to reduce future tax bills.
- Sequence your income and withdrawals in a tax-efficient way, lowering your overall retirement tax burden.
Strategic tax planning protects your savings, keeping more money in your pocket for what matters most.
Fear #5: Running Out of Money in Retirement
This is the big one. Running out of money tops retirees' fears. Yes, even above healthcare, taxes, and death itself. It's natural to feel anxious when you go from receiving a steady paycheck to living off your savings.
But running out of money isn't about how much you've saved, it's about how wisely you use it.
What you can do:
- Create structured retirement income streams. This includes Social Security, pensions, annuities, investments, and possibly part-time income.
- Follow strategies like the "4% withdrawal rule" or dynamic spending plans that adjust based on market performance and your spending needs.
- Regularly revisit your plan to adjust for inflation, unexpected expenses, and life changes.
Having a clear retirement income plan builds confidence. Instead of worrying, you know exactly how and when to use your savings.
Let’s take action and dispel those retirement fears
Feeling worried is completely normal, but it shouldn’t control your retirement. Here are some great next steps:
- Identify which retirement fears worry you most.
- Get proactive: establish clear plans for healthcare, market downturns, taxes, purpose-driven activities, and income streams.
- Consider working with a financial advisor who understands retirement planning to ensure your plan is solid and flexible enough to adapt.
You've worked hard. Now, let’s make your retirement years confident, purposeful, and worry-free.
Remember, the perfect retirement plan isn't about having the most money saved, the highest probability of retirement success, or even the smartest financial advisor.
The perfect retirement plan for you is the one you act on.
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Sources
Fear of Outliving Savings:
Prudential Financial 2024 Pulse of the American Retiree Survey indicates that 67% of 55-year-olds fear they will outlive their savings.
Prudential - Pulse of the American Retiree
Healthcare Costs:
The National Institute on Retirement Security reports that 66% of Americans are worried about rising healthcare costs in retirement (number feels low in my experience with clients).
NIRS - 2024 Public Opinion Research
Market Volatility:
Some common financial retirement concerns and strategies to address them, emphasizing the importance of managing risks due to market volatility.
Taxes:
AARP outlines common retirement fears, including concerns about taxes, and provides strategies to address them.
AARP - Conquer Your Retirement Fears
Disclosure:
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Cetera Advisor Networks LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice. A diversified portfolio does not assure a profit or protect against loss in a declining market.