As Americans contemplate their retirements and envision their golden years, it is only natural for a cascade of serious concerns and anxieties to accompany these thoughts. The realm of retirement planning is riddled with weighty financial decisions, and it’s common for individuals to grapple with these uncertainties.
According to a recent survey conducted by GOBankingRates, a significant 59% of Americans fear the possibility of running out of money in retirement, while 51% are anxious about unexpected major health expenses. Claiming the third spot on the list of America’s top three retirement worries, 46% of respondents express concerns about the fate of their Social Security benefits, worrying they might be reduced or even eliminated.
In light of these prevalent concerns that transcend general boundaries, let’s take a closer look at what people are stressed about and how to enjoy a financially secure future.
The Primary Concern — Running Out of Money
The fear of depleting retirement funds prematurely is a legitimate concern, especially for retirees who may encounter unforeseen medical expenses, leaving them physically unable to rejoin the workforce. As revealed by the GBR survey, 59% of Americans share this anxiety. Notably, this concern is most prevalent among those ages 35 to 44, with 67% expressing this worry. As age advances, this fear tends to recede, with only 41% of those over 65 harboring this concern.
“Put a financial plan in place,” said Deanna LaRue, CFP and founder at TimeWise Financial. “You are never too young or too old to start this. Get clear on how much you will actually need by creating budget buckets including living expenses, travel (for how many years?), gifts, healthcare, college, etc. This is obviously an unknown to predict exactly how much you will need, but you have to start somewhere. Just starting this conversation is often a reality check for people that they need to be saving more.”
Streamlining Contributions With Automation
Automating retirement contributions is a game-changer for individuals serious about securing their financial future. This approach eliminates reliance on willpower alone and ensures consistent savings.
“Automate your bill payments, savings, and/or investments, for people who find that they struggle with spending for example, they may prefer to set up direct deposit so that a portion of their paycheck goes directly to savings, removing the temptation to spend the money instead,” said Kendall Meade, CFP and financial planner at SoFi.
The Dread of Unexpected Health Expenses
The cost of long-term care can be staggering, and it’s crucial for everyone to plan for the potential need for such care, as it may be the most substantial expense in retirement. This survey indicates that 51% of Americans worry about facing unexpected major health expenses during retirement. This concern is most pronounced among younger adults, with 59% of those ages 18 to 24 expressing anxiety, whereas only 45% of Americans over 65 share the same worry.
“Medicare coverage is good at covering normal expenses but does not cover long-term care,” said Jey Zigmont, CFP, PhD and founder at Childfree Wealth. “Medicaid pays for long-term care but only kicks in after you have spent nearly all of your money. On average you will spend $108k per year for a single room in a skilled nursing facility. Men will spend 2.2 years in care, and women 3.7 years. When you add up that cost and realize it is going up by approximately 5% each year, it is reasonable to worry about it.”
Attaining Peace of Mind Through Comprehensive Planning
Planning is essential to alleviate anxiety about medical expenses and long-term care.
“With my clients, my goal is to have a plan in place for long-term care by their mid-40s,” Zigmont said. “You can pay for long-term care either out of pocket or via a long-term care insurance policy, but the bottom line is that you need to have a plan. The reason why I recommend creating a plan in your mid-40s is that it tends to be the ‘sweet spot’ for long-term care insurance prices. It is still not cheap, but putting an LTC policy in place is one way to get rid of the fear.”
Apprehensions Over Social Security Cuts
The potential for changes to Social Security benefits can be unsettling for those nearing retirement. The survey indicates that 46% of Americans worry about Social Security being reduced or eliminated entirely, affecting their retirement finances. This concern is most pronounced among individuals ages 55 to 64, with 52% sharing this apprehension, while only 34% of those ages 18 to 24 expressing similar worries.
“There are various options the government can use to keep this program in place,” LaRue said, “These government options include increasing payroll taxes, adjusting the benefit formula to account for longevity, raising the full retirement age, and reducing the cost-of-living adjustments. I’m not saying that any of these would be fun adjustments, but they are options to eliminate any funding shortfalls vs. the fear of it just being eliminated. These changes would affect more of the younger generations who have more time on their side to plan.”
Diversify Your Retirement Portfolio
To safeguard against potential Social Security cuts, it’s essential to diversify your retirement income sources. Utilizing retirement savings accounts like 401(k) plans and IRAs can create a well-rounded retirement income plan, minimizing the impact of potential Social Security adjustments.
Methodology: GOBankingRates surveyed 1,037 Americans aged 18 and older from across the country between September 5 and September 7, 2023, asking fifteen different questions: (1) How much money do you currently have saved for retirement?; (2) How much money do you think you’ll need in retirement?; (3) How much do you spend or expect to spend monthly during your retirement?; (4) If you aren’t yet retired, how much do you expect to get from Social Security during your retirement?; (5) How much of your retirement do you plan to fund with Social Security?; (6) At what age did you or do you plan to claim Social Security benefits?; (7) Did you or do you think you will have to move to afford your retirement?; (8) Which of the following proposed Social Security solutions do you think would work best to prevent the trust fund from being depleted?; (9) What sources of income will you have in retirement? (Select all that apply); (10) How confident are you that you will have saved enough to afford retirement?; (11) If you retired early, at what age did you retire?; (12) Are you counting on help from your family (financial, housing, long-term care, etc.) to afford retirement?; (13) Do you think retiring around age 65 is financially possible for most Americans?; (14) What worries you financially about retirement? (Select all that apply); and (15) If you got a stimulus check in the last two years, how much of the money did you save for retirement?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
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