Key Points
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The idea of running out of money is terrifying.
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A lack of structure may not be the best thing for my mental health.
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Long-term care costs can be a beast.
When I imagine retirement, a lot of amazing things come to mind — having more time for hobbies and living in an area that’s more quiet than my current neighborhood. But there are certain elements of retirement that, if I’m being honest, scare the heck out of me. Here are three big ones — and how to cope with them
1. Running out of money
I’m trying very hard to build up a large retirement nest egg. My spouse and I both max out our 401(k) plans, and we try to invest outside of our 401(k)s as well.
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Still, no matter how much money you end up with, you could blow it too soon if you aren’t careful. The solution? Have a solid withdrawal strategy.
It’s too soon for me to know what mine might look like, since I’m not yet retired and am not planning to stop working anytime soon. But I know I’ll need to look at my portfolio composition, as well as what interest rates are like in general, to figure out what withdrawal rate makes sense for me.
A lot of people rely on the 4% rule to manage a retirement nest egg. But that strategy backfire.
A 4% withdrawal rate may not hold up well over time for a conservative portfolio. And while mine isn’t particularly conservative right now, I don’t know if my risk tolerance will change. So while I may end up using a 4% withdrawal rate, I’m not going to simply rely on that number because it’s what experts have long recommended.
2. Being bored
I have a very busy schedule — almost too busy. I get up around 6:00 in the morning daily (yes, weekends included) and try to start my workday as early as possible.
During the week, I hammer away through mid-afternoon, and from there, it’s a juggle between work, after-school activities for my kids, dinner prep, dog walks, and more work. On weekends, I’m pretty much working when I’m not shutting a kid to some travel sports game.
All told, I get a truly minimal amount of downtime. But I’m worried that in retirement, the opposite might happen — that I’ll have too much free time and not enough to do.
That’s why my plan is to work in retirement. I’d love to continue writing, but I’m open to other ideas, or to having multiple jobs.
One thing I know I would want out of a job in retirement is a flexible schedule. But I think the evolution of the gig economy makes that more than possible for a lot of people. And incidentally, working in retirement can help address the whole fear of running out of money thing, so that’s a plus, too.
3. Long-term care costs
Many people end up needing some type of long-term care in their lifetime. And last I checked, the costs there are downright astronomical.
Genworth and CareScout put the average annual cost of assisted living at $70,800. The average yearly cost of a nursing home, meanwhile, is $111,325 for a shared room and $127,750 for a private room.
These are, indeed, scary numbers. But one thing I have on my radar is long-term care insurance. I feel I’m a bit young to buy it now, but I plan to research it and hope to put a policy in place for protection.
There’s no single age that’s optimal for buying long-term care insurance. Some financial advisors suggested purchasing coverage around age 55. Others might say early 50s are better. But it’s generally a good idea to look into getting a policy before age 60, especially since the above costs could easily keep rising.
Clearly, there are certain elements of retirement that have me spooked. But I’m taking steps to work around them, and you can, too.
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