4 Financial Fears About Retirement, And How to Overcome Them
President of Pure Financial Advisors Inc., Joe Anderson was recently featured in a U.S. News & World Report online article regarding how to overcome common financial fears about retirement. Joe provides insight for three of the four financial fears covered in the article – running out of money, Social Security cuts and forced retirement.
Running Out of Money
To give the reader a better idea of how they can retire comfortably, Anderson recommends calculating how much money one will have in retirement. He provides a hypothetical situation to determine how much fixed income to expect: an investor has $100,000 in a 401(k), receives $20,000 annually from Social Security, plus another $10,000 from a pension. If they take 4 percent out of the 401(k) each year, they’ll have an annual budget of $34,000. If the investor can live on that, it’s likely they won’t run out of money. If they can’t, they will need to do some additional planning to cover the shortfall.
The article goes on to explain that nearly 20 percent of people fear that they will be forced into early retirement, according to a Transamerica survey, while 46 percent of workers leave earlier than planned, due in large part to health concerns or layoffs (Employee Benefit Research Institute). While Joe argues that it’s important to maximize your 401(k) contribution and take advantage of your company match, he points out that even then, jumping out of the workforce unexpectedly at the age of 60 can quickly diminish savings accounts, if stuck withdrawing from a 401(k) early. He goes on to explain:
“To avoid this, determine the yearly expectations for when in retirement. Even if finding a full-time job isn’t in the cards, having part-time work that covers the amount will allow a saver to avoid tapping the retirement accounts until they’re needed.”
Having a back-up plan and being fully prepared for the twists and turns of retirement is something every pre-retiree should be mindful of.
Social Security Cuts
Also in the article, Joe clarifies how Social Security changes could affect retirees now and in the future. By 2035, taxes will cover only 75 percent of the planned benefits, according to the Office of Retirement and Disability Policy. Solutions will need to be made for those born after 1960. The younger generation will have to save more themselves.
Article written by Ryan Derousseau (Twitter: @ryanderous)
Source: U.S. News & World Report, January 20, 2017