Americans are fairly worried about what life will look like throughout their retirement.
This is unfortunate, since your later years should be a time to enjoy the fruits of a lifetime of labor. Still, the fears that most people share are often well-founded, even if there are ways to overcome them.
A recent Goldman Sachs survey revealed the three top concerns shared by many older people across the U.S. Here's what they are.
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1. Healthcare costs
According to Goldman Sachs, 44% of retirees indicated they had concerns about future healthcare needs. This is unsurprising, given the whopping cost of medical care late in life. One recent Fidelity survey found a senior couple could expect to spend around $300,000 out of pocket throughout their retirement on medical services, beyond what Medicare pays for.
Preparing for such a large expense should ideally start early, and current workers who are eligible for a health savings account (HSA) should strongly consider saving in it for their future care needs. HSAs offer the opportunity for tax-deductible contributions, tax-free growth, and tax-free withdrawals as long as the money is used for qualifying medical expenses.
For seniors already in retirement without a hefty HSA balance or other money earmarked for medical care, finding the right Medicare coverage will be absolutely essential to help keep costs down.
2. A possible Social Security benefits reduction
Worries about Social Security came in a close second to concern about retirement costs. A total of 43% of retirees reported they were afraid their monthly benefit would fall in the future.
It's also understandable that many people would have these fears, especially given that the most recent Social Security Trustees Report indicated the program's trust fund could run dry by 2034. While that wouldn't end benefits, as money from current workers would still come in, it could result in an automatic 22% reduction.
The good news, though, is the political reality suggests lawmakers will step in to prevent retirees from losing a good chunk of their income. Social Security is a popular program, and past attempts to reform it have either failed or been phased in over decades so no current seniors or people close to retirement were affected.
3. The consequences of inflation
Finally, inflation was also a big issue for retirees, with 42% reporting to Goldman Sachs they were worried about the effects of rising prices on the remainder of their retirement. This concern is especially justified given the current soaring inflation across the U.S.
Inflation can reduce the buying power of Social Security benefits despite cost of living adjustments (COLAs), as they haven't proved to keep pace with inflation. And it can diminish the spending power of your savings as well.
The best way to be prepared for high inflation is to invest wisely so your money grows faster than prices increase; to have more saved than you think you'll need so you can increase your spending if prices rise more than expected; and to try to maximize Social Security income, which at least provides some protection against inflation even if COLAs have been too small.
For current retirees, making budget cuts may be essential, as it's too late to increase savings substantially or to change a Social Security strategy. This can mean taking advantage of senior discounts, using substitute products when certain items become very expensive, or even moving to an area with a lower cost of living if inflation is persistent and severe and you worry about running short of funds.
By planning ahead for these three worries, future retirees can enjoy their senior years with fewer concerns. And those who have already left the workforce can ensure they remain as comfortable as possible for the rest of their lives.
