With baby boomers either retired or heading down the retirement path, retirement fears tend to creep in. Some retirees or soon-to-be retirees have nothing to fear about retirement, but others’ fears may be well-founded.
Do you have realistic retirement fears? If your retirement situation is unstable, your fears may be justified. And if these fears are justified, you need to resolve the underlying problems.
Are you worried about any of the following issues?
Dealing with these retirement fears head-on goes a long way toward squashing the fears.
Do you have enough money to retire? First, find out if you will have enough money for retirement with a retirement calculator. That will help you better understand whether your fears are realistic or not. If it looks like you may fall short of cash, you need to deal with it now.
Here are some strategies for dealing with five common retirement fears:
1. Saving fears. Super-saving squashes retirement fears at the core. Ways to boost your nest egg include maxing out your 401(k), cutting back on support for adult children and taking on additional work.
According to an October 2013 Associated Press-NORC Center for Public Affairs Research survey, 82 percent of respondents age 50 and older, who are working but not yet retired, said it is “likely” or “very likely” that they will do some work for pay during retirement. By planning on working in retirement, you minimize the fear and reality of running out of money. Working in retirement has an added benefit. Not only does it boost your income, but it keeps your body and mind active and sharp.
2. Housing fears. If you don’t have an affordable place to live, consider moving. Be creative. Most parts of the country have pockets of affordable housing. If you want to stay near family, consider moving to a smaller, less expensive place. If you are more mobile, there are regions of the country, such as Arizona and Florida, with great weather and a low cost of living. I know moving is frightening, but so is lack of financial resources.
3. Health care fears. There’s reason to be optimistic for your future health care costs. The Affordable Care Act, now in effect, provides medical help for seniors. Health care for seniors will be more affordable and easier to access than in the past. Under the ACA, Medicare benefits are expanded and preventative and wellness visits are free.
It’s estimated that Medicare beneficiaries will save an average of $4,200 over the coming 10 years due to lower drug costs, free preventive services and reduced medical costs. In fact, since ACA passed in 2010, more than 7 million Medicare recipients saved close to $9 billion on prescription drugs. The Medicare Part B premiums have also been lowered, as have prescription drug costs.
Still worried about medical costs in retirement? Prescription drug costs will be lowered, and those who fall in the coverage gap will automatically receive discounted prescription drugs. By 2020, the coverage gap will be eliminated. The ACA also has plans to reduce fraud, waste and abuse, which will ultimately save seniors money. These changes should help reduce overall medical costs in retirement.
4. Regular paycheck fears. Retirement means leaving the traditional work force. It’s natural to be fearful of giving up a regular paycheck. And for two-income families, eliminating two regular paychecks can be quite scary. This is where the planning comes in. Visit the Social Security Administration website and calculate how much you expect to receive.
Tally up your other assets and consider purchasing an annuity. This is a financial product that offers a stream of payments for a predetermined period of time. There are many different varieties of annuities with different payout programs. If you decide to purchase an annuity, be aware that there are different fee structures for these products. Make sure to investigate the fees and understand the product fully before you purchase.
5. Long-term care fears. It is quite understandable to be worried about an inability to afford long-term care. With adults living longer than ever, there is a possibility that you will need medical or rehabilitative care in your retirement years. After a stroke, my dad contracted Alzheimer’s and spent five years in a full-service retirement home. It was at that point that my husband and I decided to purchase long-term care insurance.
This is one of the more expensive types of insurance. Although, if you purchase long-term care insurance when you are in your 50s, the cost will be much lower than if you wait. Squash your retirement fears with planning and action. Start now and be proactive. Retirement ultimately hits everyone, and those who are well-prepared tend to fare the best.
Barbara Friedberg, MBA, M.S., is a portfolio manager, consultant, website CEO and author of “How to Get Rich; Wealth Building Guide for the Financially Illiterate.” Learn more about investing and retirement at Barbara Friedberg Personal Finance.