The Big 3 Retirement Worries as You Near the Big Day

Our financial plans, saving and investing strategies, and ability to bear risk all change over time. So, too, do our retirement worries. Last year, we covered four key financial matters that keep investors up at night. For each of those fears, we included a reason to rest easier.

For those nearing retirement, though, the fears are often quite different—and more urgent. So let’s revisit the topic, this time with an emphasis on concerns you may face as you near retirement.

The Big 4 concerns for all retirees are:

• Will I have enough money to retire?

• Will healthcare costs in retirement eat away at my savings?

• Will I be able to maintain my standard of living when I retire?

• Will my kids’ education costs cripple me?

For those nearing retirement, though, the fears often narrow in scope but worsen in intensity. These are the Big 3 for near-retirees:

Will my standard of living take a big hit when I retire?

It’s easy to see why this would be a holdover concern. All the estimations and calculations you make can’t fully prepare you for what post-retirement living costs are going to be like. Why? Because you won’t know until you’re truly retired whether you’re perfectly comfortable taking things at a slower pace now that your career has wound down, whether you’ll suddenly start splurging on hobbies and travel, and many other variables that will directly impact your expenses and your standard of living. While some costs will increase, others will decrease. Estimates show that you should plan to replace about 80% of your income for when you retire, but the actual amount will differ. By how much? Only time and experience will tell.

Sleep easier:

We mentioned lifestyle calculators in the previous column, and we stand by that recommendation. But let’s take this opportunity to promote retirement resources and communities, where you can virtually meet people from all walks of life who share your concern, and many of whom successfully navigated it during their first few years of retirement. It always helps to consider the experience of others. Another way for physicians to combat this fear is to work longer and keep building that nest egg. That may not be ideal; you may have had your heart set on hanging up the coat by a certain age. But you may end up enjoying your retirement more if you wait until you feel more financially secure.

Will I stay in good health through my golden years?

No matter your family health history or current health, you know from your interactions with your own patients that good health can be fleeting. And you know that costs aren’t going to start going down. So how can you prepare to meet this fear head on?

Sleep easier:

Long-term care insurance is a must-have as you near retirement. For most, the sweet spot for seeking out an LTC policy is your early 50’s, when you’re still likely to be in good health. Premiums will be lower then, and you’ll give yourself a longer savings window. Long-term care insurance has the double benefit of giving you peace of mind about health care and being able to take care of your heirs, as funds you don’t spend on your own healthcare will be available for those you love.

How much will taxes eat into my nest egg?

Protecting your assets is a significant concern for physicians, who (hopefully) have set aside a pretty substantial nest egg in tax-protected investments. But as you know if this is your fear, tax-protected doesn’t mean tax-free. Uncle Sam gets his eventually. In the coming weeks, we’ll do a full run-down on the tax implications of the many different types of retirement investments you have, but for now…

Sleep easier:

There are many tax strategies that, while they won’t eliminate your tax burden, can reduce it significantly. Annuities, for example, can provide income that doesn’t count toward the formula that calculates how much tax you should pay on Social Security income. Also, any Roth IRA investments you maintain have already been taxed at the Federal level and are not subject to additional federal tax.

When it comes to taxes, the key is to estimate closely what you’ll be taxed for and when. Knowing in advance how much of your retirement “income” you’ll actually see is an absolutely critical piece of information to have.