The average human experience in America is to be born, go to school, go to work, then retire. We spend most of our adult lives working, and while we are working, we hear many buzzwords: 401k, retirement, social security, Medicare, etc. Depending on your age, you may not pay too close attention to these words. But while retirement may be far off for some, as many get closer to retirement years, they start hearing these buzzwords more and more and are concerned about how they can impact them.
A 30 something year old worker may just contribute to their 401k, pay their share of social security and Medicare taxes, and not really think about where their money is going. For those 5-10 years away from retirement, they may pay closer attention to it.
Someone who is 5 years out from retirement and getting bi-weekly paychecks, for example, will be hit with a reality check when they realize they have only 130 paychecks left in their lifetime. Retirement is not meant to be scary; it is to be a time of celebrating their life-long accomplishments. It is a time to enjoy the fruits of their labor. But for some who are celebrating retirement, they may have some fears in the back of their mind, after they step out of the work force permanently.
It is very common to fear the unknown and knowing that you will be living off your savings for the rest of your life can be little stressful if you’re not prepared. There are many factors that can affect your retirement nest egg, such as running out of money, outliving their assets, unexpected large expenses, health issues, rising inflation, poor investment choices, and rising taxes. While these are well-founded and legitimate fears, they don’t have to be something that keeps you up at night.
Running out of money, outliving your assets, and providing for unexpected large expenses are the most common fears amongst pre- and post-retirees. This is concerning because it is very difficult to get back into the workforce if you have been out for so long.
Another fear is unexpected health issues and the costs associated with them, especially if you need some extended care beyond the hospital. It can be very expensive and can really put a strain on your retirement assets causing you to run out of money sooner than expected.
In retirement, the rising cost of living and rising taxes can also erode your nest egg as well. Also, pre-, and post-retirees need to make sure they are invested appropriately for their goals and risk tolerance. You could be invested too conservatively, causing your investments to be eroded with time and inflation, or you could be invested too risky causing your retirement assets to be highly susceptible to market volatility.
The old saying “measure twice and cut once” also applies when you’re stepping into retirement, you want to make sure these fears are addressed. Retirement is a time to unwind and enjoy the fruits of your labor with your loved ones, rather than living in fear of what can happen. Hiring a Financial Planner who understands retirement with the heart of a teacher, can coach you and walk with you through your retirement years to plan for any of these contingencies.