Worries of Running Out of Money in Retirement

[retire@40]

The bulk of this worrying is probably due to poor planning and budgeting. I'm worried too, but I've done my homework and at least I have a roadmap to to help me ease those worries.

Americans worry about funding a long retirement

By EILEEN ALT POWELL, AP Business Writer

Americans worry that inflation and the rising cost of health care are increasing the risk that they will run out of money in retirement, according to a study released Monday.
The survey by the Society of Actuaries found that people already retired were most worried about inflation and affording long-term care. Pre-retirees, meanwhile, ranked affordable health care as their top concern, followed by inflation and long-term care coverage.
Overall, pre-retirees showed greater worries than those already in retirement, the study found.

Print Story: Americans worry about funding a long retirement on Yahoo! News

[Rich_by_the_Bay]

Quote:

Originally Posted by retire@40 Overall, pre-retirees showed greater worries than those already in retirement, the study found.

That's an interesting observation considering that the pre-retirees retain the "advantage" of choosing to work a bit longer to reduce at least some financial uncertainties.

Fear of the unknown? Acceptance of reality by retirees? Certainty of the decision, timing, etc.?

But in the end, I suspect I'll be more at ease with retirement at the end of my first year than I'll be at the beginning.

[Midpack]

Quote:

Originally Posted by Rich_in_Tampa But in the end, I suspect I'll be more at ease with retirement at the end of my first year than I'll be at the beginning.

I don't think I'll be more at ease until I've weathered my first downturn/recession in retirement and I see my portfolio recovering...but I won't know until I get there.

[REWahoo]

Quote:

Originally Posted by Rich_in_Tampa But in the end, I suspect I'll be more at ease with retirement at the end of my first year than I'll be at the beginning.

While I'd agree that's the normal progression, I'd also wager a major market downturn during the first year might cause you to reconsider your ease...

[Rich_by_the_Bay]

Quote:

Originally Posted by REWahoo While I'd agree that's the normal progression, I'd also wager a major market downturn during the first year might cause you to reconsider your ease...

I remember you mentioned that life was less fun last Dec and Jan, for example. But even that would pale in comparison to one of those vicious 2002 deals.

One reason I am grateful for having learned about and watched the market over the last 6 years or so is that I have a better appreciation for its cyclical nature and the need to be patient with it. At least that's the theory... I'm not a worrier by nature (drives my worrisome DW crazy), but time will tell.

[retire@40]

I tend to think that the worries would ease a bit after being fully retired, but then again, I'm not fully retired yet, so I'll have to let you know after that happens. Would be an interesting poll.

[rocketdog]

Well, I FIREd in Jan, this year, at age 52. So I have first hand experience about whether I worried more before or after I retired. Of course I'm worried now about the poor economy, what the future might bring, inflation, even global warming! But, I really think I worried way more about retiring before I did it. In fact, I was rather obsessed. I checked the growth of our investments weekly or more, I lurked here for hours each week, and ran all the financial calculators I could get my hands on. But, once I took the plunge, a lot of the obsessiveness went away. I do have four years of living expenses in a CD ladder (5%!) and another 4 years is pretty safe. So if it all goes bad, at least I'll see it coming--it will be a slow motion train wreck--and honestly, being retired is so fantastic that I will do whatever it takes to never have to w*rk again!
rocketdog

[SteveR]

I just passed my one year ER anniversary (Sunday).

Our nest egg is a bit smaller this year than it was this time last year. A lot has been spent on various things that won't be a normal expense like major house remodels and buying motor homes. The second half might be a better indicator for us once we get the move behind us.

The market has not been kind to us over the past 6-8 months but it was expected and we are just riding it out. Our cash reserves should hold us for a while...hopefully long enough for some of our equities to gain some ground before we have to liquidate some of our after tax bucket to refill the cash bucket.

Once we make it to 59.5 we will start to take out of one of the IRAs to live on if the other stuff is used up. Otherwise we will cash it out as we go and then start with the IRAs. We want to spend one of them down to keep it from getting too big as the RMDs would create a big tax bite. We would rather take the smaller bites now than a much bigger one in later life when we have little or no deductions.

I can't say we are worried as much as we are cautiously optimistic about dying with our last dollar clenched in our hand. Energy inflation could be a real killer for many in the years to come. But that is another whole topic.

[lazygood4nothinbum]

my initial reaction to the worry in retirement thread was negative but this one i found myself completely positive.

i'm confident that i don't need what i have to live comfortably. i'm single and childless and responsible for no one but me. i've already enjoyed a full life of swim clubs and boating and waterfront living and i don't need in my life most of the things that require money outside of simple shelter and some good food. i can downsize to a cheaper areas of florida, to cheaper areas of the country, to cheaper areas of the world.

as much as i might worry about today, generally, i'm an optimist in the long run.

[donheff]

Quote:

Originally Posted by retire@40 Overall, pre-retirees showed greater worries than those already in retirement, the study found.

Quote:

Originally Posted by Rich_in_Tampa That's an interesting observation considering that the pre-retirees retain the "advantage" of choosing to work a bit longer to reduce at least some financial uncertainties.

There are a number of reasons that result might occur. Pre-retirees might simply be less prepared on average than retirees, thus their worries reflect their reality. Also, I read a book about brain/mind function recently that mentioned that once a decision is made our minds fill in support for what we chose. So maybe the pre-retirees are more troubled because they still have to decide.

[Spanky]

Why worry about something, such as the economy, when we have absolutely no control? Just enjoy your life and be detached from worldly possessions or concerns.

[Notmuchlonger]

Quote:

Originally Posted by Spanky Why worry about something, such as the economy, when we have absolutely no control? Just enjoy your life and be detached from worldly possessions or concerns.

Really good way to view it Spanky

[youbet]

Quote:

Originally Posted by SteveR Our cash reserves should hold us for a while...hopefully long enough for some of our equities to gain some ground before we have to liquidate some of our after tax bucket to refill the cash bucket.

I've pushed the numbers around regarding liquidating equitities at non-peak periods and don't find it as harmful as some are suggesting. For example, if I needed a new car right now and I hadn't planned for it, I wouldn't hesitate to sell $20k of equities via a rebalancing action. Yep, certainly not at a peak compared to last autumn. But compared to a few years ago, my equities are up nicely. Unless we hit a protracted and deep trough, I think folks carrying large portions (10% - 30%) of their portfolios in cash may be in more danger of losing to inflation that 5% cash types are of having to do substantial equitity liquidation in severely down markets.......

Quote:

Energy inflation could be a real killer for many in the years to come.

DW and I share the feeling that if we live another 20 - 30 years, we'll see skyrocketing costs for commodities, energy and food. There just don't seem to be good reasons for prices to back down from today's levels and lots of reasons (as in billions of people) for them to continue upward.

We vote for enjoying life now with portfolio preservation as a secondary consideration. Of course, we didn't RE until 58. Folks pulling the plug significantly before then may want to plan more defensively.

[kcowan]

I think the survey is just collecting fear of the unknown. Anytime a change is made to our lives, there is apprehension. When we were pregnant the first time, joy was mixed with apprehension.

But we are an adaptable bunch here and we will roll with whatever punches get thrown our way.