Fear is one of the most powerful emotions, and it plays a significant role in decision-making, especially when it comes to major life changes. Retirement is no exception. After years of hard work, the idea of leaving your career behind should be exciting, but for many, it is a source of anxiety. Fear can either freeze you in place or drive you to make positive changes. In my years as a financial planner, I’ve seen a few common retirement fears time and again, and today I’m going to help you overcome them so you can approach retirement with confidence, not fear.
Here are the five most common fears of retirement, and how you can overcome them.
1. Fear of Running Out of Money
Perhaps the most common fear of all is the concern that your savings won’t last as long as you do. Whether you call it longevity risk or just the fear of outliving your money, this is something many retirees worry about, and for good reason. With people living longer than ever, the risk of depleting your retirement savings is real. However, there are plenty of strategies you can implement to ease this fear.
How to Overcome It:
Start saving early and consistently: One of the best ways to avoid running out of money is to start saving for retirement as early as possible. The earlier you start, the more time your money has to grow through compound interest. It may seem obvious, but it’s worth repeating—build strong financial habits as soon as you can, and your future self will thank you.
Consider annuities for guaranteed income: Annuities can be a valuable tool in your retirement toolbox. They provide a guaranteed stream of income for life or for a set period. However, be cautious. Annuities are often oversold, and they come with high commissions and fees. It’s crucial to do your due diligence before purchasing one, but for those who lose sleep over running out of money, annuities might offer peace of mind.
Adopt a dynamic spending strategy: One strategy I’m a fan of is the guardrail spending strategy. This approach adjusts your retirement spending based on your portfolio’s performance. Essentially, it helps prevent you from overspending when the market is down and underspending when things are going well. This can provide a structured way to ensure that your savings last throughout retirement.
Reduce your fixed expenses before retiring: Eliminating fixed expenses, like paying off your mortgage or any other debts, can give you a huge advantage. By reducing these financial obligations before retirement, you can make your retirement income go further, allowing you to weather market fluctuations more easily.
The bottom line is that you can significantly reduce the fear of running out of money by planning early, exploring smart financial products like annuities, and being flexible with your spending.
2. Fear of Skyrocketing Inflation
Inflation is another common worry for retirees, especially after the last few years when prices soared. As inflation eats away at your purchasing power, it can feel like your retirement savings aren’t stretching as far as they should. But just because inflation exists doesn’t mean you need to lose sleep over it.
How to Overcome It:
Invest in appreciating assets: One of the best ways to fight inflation is by investing in appreciating assets, such as stocks and real estate. Historically, the stock market has returned around three times the rate of inflation. While stocks can be volatile in the short term, over the long run, they tend to outpace inflation, protecting your purchasing power.
Balance your portfolio: It’s natural to want to move to a more conservative investment strategy as you approach retirement, but going 100% cash could be a mistake. Cash loses value over time due to inflation, so it’s essential to maintain a balanced portfolio that includes stocks, bonds, and other assets. This balance helps you mitigate the risk of inflation while also giving your portfolio the chance to grow.
Look into inflation-protected securities: There are certain financial products specifically designed to combat inflation, such as Treasury Inflation-Protected Securities (TIPS). These securities adjust their value based on inflation, making them a low-risk option for a portion of your portfolio.
Smart shopping: You can also fight inflation with smart shopping habits. For instance, buying in bulk at wholesale clubs like Costco can save you a lot on groceries and household items, reducing the overall impact of rising prices.
Returns of various asset classes vs. inflation since 1926
While inflation can erode your buying power, it’s not an insurmountable problem. With proper planning and a smart investment strategy, you can protect yourself from the worst effects of inflation.
3. Fear of High Healthcare Costs
The cost of healthcare in retirement can be staggering, especially if you retire before becoming eligible for Medicare at age 65. Without employer-sponsored health insurance, medical expenses can quickly eat into your savings. This is a valid concern, but there are steps you can take to plan for these costs.
How to Overcome It:
Budget for healthcare separately: When planning your retirement budget, make sure you’re factoring in healthcare expenses as their own category. You can’t assume that healthcare costs will stay stable—they often increase as you age, and it's better to be over-prepared than caught off guard.
Use a Health Savings Account (HSA): If you’re still working, consider maximizing contributions to a Health Savings Account (HSA). HSAs offer tax advantages that can help you save specifically for healthcare costs. The money in these accounts grows tax-free and can be used to pay for qualified medical expenses in retirement.
Plan for long-term care: Many people forget to plan for long-term care costs, which can be incredibly expensive. Whether it’s in-home care or nursing home care, these expenses can quickly deplete a retirement fund. One option to consider is a reverse mortgage, which allows you to tap into your home equity if you need extra funds to cover these costs.
Stay healthy: The simplest way to lower healthcare costs in retirement is by leading a healthy lifestyle. Retirement often gives you more time to focus on your health, so make exercise, healthy eating, and preventative care a priority. Staying healthy can help reduce medical expenses later in life.
By budgeting carefully and using tax-advantaged accounts like an HSA, you can prepare for healthcare costs and enjoy peace of mind.
4. Fear of Stock Market Volatility
Stock market fluctuations can be nerve-wracking, especially if a crash happens right after you retire. But market volatility is a normal part of investing, and there are strategies to protect yourself from its impact.
How to Overcome It:
The bucket method: One popular strategy is the bucket method. This approach divides your investments into three buckets: short-term, medium-term, and long-term. Your short-term bucket should contain safer assets like cash and bonds, which you can draw from during periods of stock market volatility. The long-term bucket is invested in stocks, which you leave untouched until the market recovers. This method gives you the security of knowing that your short-term needs are covered while still allowing your long-term investments to grow.
Guardrail spending strategy: Another way to manage volatility is through the guardrail spending strategy, which adjusts your spending based on how your portfolio is performing. If the market drops, you reduce your spending by a small percentage. When the market recovers, you can increase your spending again. This strategy helps you avoid withdrawing from your stock investments at the worst possible time.
Stock market volatility is inevitable, but with the right plan in place, you can weather the storm and keep your retirement portfolio intact.
5. Fear of Social Security Cuts
The possibility of Social Security benefits being cut is a concern for many retirees. There’s also uncertainty about when to claim benefits to maximize their value. While this fear is understandable, it’s important not to let it dominate your retirement planning.
How to Overcome It:
Know your options for claiming: While delaying Social Security until full retirement age or even 70 is often recommended to maximize benefits, some people prefer to claim early at age 62. Weigh the emotional benefit of receiving your benefits sooner versus the financial benefit of waiting. A lot of retirees find peace of mind in knowing they’re getting a steady check, even if it’s smaller than it could have been.
Stay informed on potential changes: While Social Security may face challenges in the future, it's unlikely to disappear entirely. Policymakers have several options, such as raising the full retirement age or increasing payroll taxes, that could help sustain the program for future generations.
Save independently: Regardless of what happens with Social Security, the best way to prepare is to save as much as you can in your own retirement accounts. That way, you’ll have your own savings to rely on and won’t need to depend as heavily on Social Security for your income.
Final Thoughts:
Retirement doesn’t have to be dominated by fear. By addressing these common retirement concerns and taking proactive steps, you can approach your golden years with confidence. Whether it’s saving early, investing wisely, or having a solid healthcare plan, there are plenty of strategies to help you overcome these fears.
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About the author
Jake Skelhorn
Jake is a CFP Professional with a focus on planning for both traditional and early retirement. He’s a Florida native, growing up in Fort Lauderdale and now residing in Jacksonville with his husband Chris and their 120-lb “puppy” Barli. Jake enjoys cooking (favorite cuisine to make is Thai), traveling, and spending time with friends and family as much as possible.
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