We spend years optimistically planning for retirement, picturing ourselves lounging on sunny beaches, traveling to foreign destinations, or playing pickleball with good friends. But the closer we get to our ideal retirement date, the more daunting the transition can feel. Anxious thoughts can begin to replace those once rosy, relaxing images as we confront the reality of achieving and sustaining the retirement we envision.
However, our retirement fears don’t have to keep us up at night. They can instead become powerful motivators, spurring us to make moves now that can set us up for the best possible retirement down the line.
Here are five of pre-retirees’ most common fears and some helpful strategies for conquering them so you can enjoy this next stage of life.
1. Fear you’ll outlive your savings
Given the impossibility of predicting what the stock market, inflation, tax laws or even our health might do, many of us worry about our savings when heading toward retirement, struggling with financial uncertainty and concerns that we don’t have enough stashed away to support ourselves.
How to Conquer It
Delay collecting Social Security. Waiting until age 70 to claim Social Security benefits is one of the best things you can do. “You get a better deal from the government by waiting, as your benefit amount increases 8 percent each year you delay. Then you have a good base of inflation-protected income that lasts as long as you’re alive,” says Michael Finke, a wealth management professor. If you cannot afford to hold off claiming that long, try to avoid tapping your Social Security benefits before reaching your full retirement age (currently between 66 and 67, depending on your year of birth), when you are entitled to 100 percent of your benefits. Depending on how early you start collecting Social Security, your benefits could be reduced by 25 to 30 percent.
Play catch-up with retirement savings. Workers age 50 and older can invest more than younger savers in their tax-advantaged retirement accounts each year. Currently, the IRS permits annual catch-up contributions worth an extra $7,500 in 401(k), 403(b), SARSEP, and governmental 457(b) retirement plans. An additional $3,500 can be put in SIMPLE IRA or 401(k) accounts, while an extra $1,000 can go to traditional IRAs or Roth IRAs.
Do a test run. When you get within three years of your expected retirement date, financial planner Paul Caylor recommends “living on your expected retirement income as a trial for three months to ensure you can adjust to the lifestyle you are planning for, to see if it’s realistic.” He adds: “Most people’s spending habits from their working years don’t change much in retirement.”
2. Fear you’ll lose purpose
Our careers define much of our lives, providing a sense of identity, routine, and community connection. Losing that as we transition to retirement can be so challenging for some people that almost a quarter of retirees struggle with finding purpose in their lives, and some even struggle with depression.
How to Conquer It
Connect with your passions. “People have a pent-up demand for leisure activities coming into retirement, but relaxing is so much sweeter when you’re relaxing from something. You still want to feel like you’re accomplishing things, like you’ve earned that bit of fun,” says Christine Benz, director of personal finance and retirement planning for Morningstar. What you choose to tackle doesn’t need to be something huge, it just needs to be fulfilling and challenging enough to bring joy. “Sometimes people have purpose paralysis,” Benz says. “They feel they need to be starting a foundation or going on a global trek, but it can be much smaller, like rediscovering a childhood hobby.”
Keep working. While we often think of retirement as the end of our working days, it doesn’t have to be so black-and-white. About 20 percent of retirees hold full- or part-time jobs, and another 7 percent are looking for employment, according to a recent study. Many shift to part-time work, freelance, or consulting gigs, or a role in another field because of the social and emotional benefits that work offers.
Volunteer. Giving back can provide retirees with a meaningful way to share their passions, talents, and experiences with their community. Those who volunteer in retirement report being happier than those who don’t, and are more likely to describe themselves as purposeful.
3. Fear you won’t have sufficient health care coverage
For retirees and those above age 60, health care costs beat running out of money and inflation as the top retirement concern. But only about a third of people specifically save for health care costs they may face in retirement, making the Medicare plan you choose to enroll in even more important for ensuring you can afford your medical expenses.
How to Conquer It
Learn the Medicare alphabet. When you turn 65, you can enroll in Medicare. Don’t dawdle—if you fail to sign up for a Medicare plan during your seven-month initial enrollment period, you could face penalty fees when you do join. For Part A, this fee could increase your monthly premium costs by 10 percent for twice the number of years you waited to sign up. For Part B, the fee amounts to an additional 10 percent for each year you delay. This means you have an immediate big decision to make between original Medicare and the private insurance-managed alternative, Medicare Advantage.
Original Medicare consists of Part A (hospital insurance) and Part B (medical insurance), although many people choose to add on Part D, Medicare drug coverage, to help with prescription costs as well. Medicare Advantage, or Part C, combines Part A, Part B, and typically Part D into one plan offered by private companies. With original Medicare, you can use any doctor or hospital that accepts Medicare, usually without first needing a referral. Medicare Advantage limits coverage to its in-network providers but commonly has lower out-of-pocket costs and can offer limited vision and dental benefits that original Medicare doesn’t.
4. Fear you’ll feel lonely
As we get older, our social circle tends to shrink. Leaving our jobs for retirement often compounds this as we miss out on the small daily interactions we once shared with coworkers. Indeed, nearly a third of retirees admit to feeling lonely at times because they’ve retired.
How to Conquer It
Build your circle. “You need to make investments during your working years into your personal relationships,” says Finke, “so that you can draw upon those in retirement.” Happier retirees tend to spend their free time doing lots of activities, but the most prevalent is spending time with loved ones. Developing solid relationships with friends and family members before you retire can help you avoid a socially isolating experience in your later years.
Choose your retirement spot carefully. “A place that sounds appealing to escape to when working full time is different when that is your life,” Finke says. “People overestimate the satisfaction they’ll get from retiring to a vacation environment if it isolates them from the people they know.” But living near old friends or in an environment that provides frequent social interactions can have a positive impact on how happy we are in retirement.
5. Fear you won’t be able to afford long-term care
Over half of us will require some form of long-term care during our lifetime. But paying for home health aides, assisted living facilities, nursing home care, or other health services can be a costly endeavor, totaling $290,000 on average. While about half of us will encounter no such expenses, 20 percent can expect to pay $100,000 or less, and 18 percent of people will pay more than $250,000 for long-term care.
How to Conquer It
Consider insurance. You can purchase long-term care insurance to help mitigate the costs of any future care you may need. Fewer insurance companies still offer the traditional long-term care plans your parents might have used, instead selling hybrid products that combine long-term care coverage with another benefit, usually life insurance or an annuity. Under these plans, your heirs will receive some amount of life insurance if you never use your long-term care coverage, meaning “whether you need the care or not, you’ll have some benefit in the end.”
But there are tradeoffs. Long-term care insurance policies tend to be expensive, and most plans “have benefit caps that may reduce their usefulness in the most severe scenarios.” For instance, a 55-year-old looking to buy a long-term care policy today with benefits equal to $165,000 can expect to pay about $950 a year if male, or $1,500 if female.
Look into Medicaid programs. Though Medicare will not cover nonmedical long-term care costs, Medicaid does. Qualifying for Medicaid-covered care can be challenging, however, as you must meet specific income and asset limits as well as a level of care requirement. The exact criteria vary by state, but generally you must earn $2,829 or less a month as a single person and have less than $2,000 in assets.
Create your own safety net. For many families, making a worst-case plan can be the best financial move should long-term care costs come. This might mean setting aside funds each year specifically for medical costs in an investment account separate from other retirement savings. “Rather than letting an insurance company invest your money, you can do it yourself,” says certified financial planner David Haas. Others may need to review their assets and decide which could potentially be sold to cover long-term care costs, like a property or stock holding.
These strategies can help quell your worries and set you up for success, ensuring a bright and fulfilling retirement.
Lawrence Toppman is embracing the sweetness of doing nothing in retirement.
