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Thayer Partners Blog

What are the Biggest Retirement Fears Americans Face?

[fa icon="calendar"] Oct 19, 2015 11:30:00 AM / by Chris Wilmerding

Chris Wilmerding

retirement_ahead_warning_signRetirement is an enormous life change for most Americans. Like any major transition, retirement can be confusing or even intimidating for some. There is no shame in having fears about retirement.

In fact, millions of Americans worry about retirement. What are the biggest retirement fears Americans have, and how can they be dealt with?

Here are a few of the biggest retirement fears that I’ve come across when working with people nearing retirement age or while researching the subject:

Fear #1: Running Out of Money in Retirement

As lifespans grow longer, the amount of time people spend in retirement increases as well. This often means that retirees have to make the money that they’ve set aside for retirement last longer as well.

Just how long might you have to make your income in retirement stretch out?

According to the 2008 Valuation Basic tables, there is a 50% chance that one member of a healthy 65-year-old couple will live to age 93. This means that the average retiring couple needs to make their money last 28 years!

A statistic from an Allianz Life study cited in an article by retire.areavoices.com states that “77% of all age groups worry about living too long. So much so a shocking 61% feared outliving their assets more than they feared death.”

This is a legitimate concern, especially for those who may not have made a plan for their retirement and keep spending money as if they still had the income their job used to provide.

Dealing with this fear is difficult, as it is a real risk that even the best-prepared retirees might encounter. There are any number of events that can happen which could devastate your retirement income streams or massively increase your monthly expenses, such as a stock market crash devaluing your portfolio or a sudden illness that requires expensive treatment.

While no plan will ever be 100% perfect, working with a retirement advisor who specializes in Retirement Income Planning and setting up extra, independent sources of income in retirement beyond your investment portfolio can help mitigate your risk of running out of money in retirement.

Fear #2: Health Care

US News wrote a compelling article about the biggest fears of the baby boomer generation as revealed by an AARP survey of 1,000 adults aged 50 or older. In the article, it was stated that “health care issues including the cost of care and the ability to stay healthy were also most often listed as the top retirement challenge.”

Why is health care such a large concern?

One reason is that medical care in America is so expensive that a single emergency could conceivably wipe out an individual’s life savings. According to the US News article, “Estimates of how much a 65-year-old couple will need to pay for out-of-pocket health care costs throughout retirement range from $197,000 (Center for Retirement Research at Boston College) to $250,000 (Fidelity Investments) to $271,000 (Employee Benefit Research Institute).”

The actual costs that a couple incurs for health care can vary widely from these estimates based on the nature of any illnesses or injuries they experience in retirement and how much medication/treatment is needed.

There are a few ways that people try to control financial risks from health care needs in retirement. One popular method is to purchase some form of extra insurance—often called Long Term Care—that can cover the cost of extended hospital stays, home care, and/or assisted living.

3: Loss of Independence/Home

As stated in the US News article, “Remaining self-sufficient is a major retirement goal for most baby boomers… Many Americans over 50 (41 percent) are focused on staying in their own residence as long as possible.”

In other words, Americans facing retirement want to be able to live independently in their own home for as long as they can without the need for assisted living. However, this can be difficult as the aging process diminishes physical and mental health or limited finances make maintaining an expensive home impractical.

One way that some retirees can alleviate their worries about being able to stay in a home they own is to move to an area of the country with a lower cost of living, or even to an ex-pat community such as Panama or Costa Rica. Such measures help to make maintaining a home, and thus a sense of independence, easier.

It is also very important to consider the availability and cost of high quality medical care when moving to a new community in retirement, just in case of necessity.

These are just a few of the biggest retirement fears that Americans face. Hopefully, reading this will help you in your efforts to prepare for retirement by giving you a few ideas to think about. Before you reach retirement age, however, we recommend that you consult with a retirement planning specialist to help you be better prepared for the transition to retirement.

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Chris Wilmerding

Written by Chris Wilmerding

Chris Wilmerding is Principal of Thayer Partners, an independent investment management firm located in Westwood, MA providing financial planning and wealth management counsel to individuals and their families.

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