Though retirement is an exciting milestone to anticipate, for many workers, it's a worrisome prospect. If you're concerned about what life will look like for you in retirement, you may be inclined to stay at your job indefinitely.
The reality, though, is that retirement doesn't have to be daunting, and if you prepare appropriately, you can eliminate much of the stress so many seniors wind up facing. Here are a few reasons why the thought of retirement might scare you -- and how to work around them.
1. You don't have enough savings
Although IRA and 401(k) balances are actually at an all-time high, many workers still have much catching up to do. The good news, however, is that if you're simultaneously willing to ramp up your contributions from this point forward and extend your career a bit, there's a good chance you'll boost your savings to a healthy level.
Beginning in 2019, savers under 50 will get the option to contribute up to $19,000 a year to a 401(k) and $6,000 a year to an IRA. Those 50 and over, meanwhile, will get to put up to $25,000 a year into a 401(k) and $7,000 into an IRA. Therefore, if you're behind on savings but are willing to make lifestyle changes that enable you to free up more cash to fund a retirement account, there's a good chance you'll end up with an adequate IRA or 401(k) balance by the time you retire.
Imagine, in fact, that you're 50 with no savings. If, beginning in 2019, you max out your 401(k) for a 20-year period, and your investments deliver an average annual 7% return during that time -- which is more than doable with a stock-focused investment strategy -- you'll end up with just over $1 million in time for retirement. Of course, socking away $25,000 a year is easier said than done, but if you're amenable to making sacrifices in the short term, it'll pay off in the long term.
2. You think Social Security is on the verge of bankruptcy
Millions of seniors rely on Social Security to pay the bills in retirement, but if that program is really on the path to going broke like so many folks say it is, it clearly won't be of any use to you once it's your turn to collect benefits. The good news, however, is that Social Security isn't on the verge of bankruptcy. The greatest threat to future beneficiaries right now is the program's dwindling trust funds. If they run out in 2034, as projected, Social Security may be forced to cut benefits by as much as 21%.
Clearly, that's not ideal. But it's not nearly as bad as having no benefits to look forward to at all. Therefore, if you're ready to write off Social Security, know this: The program is primarily funded by payroll taxes, so as long as we have a workforce, Social Security will collect revenue and manage to pay benefits in some shape or form. And that means you will have some income from the program to look forward to in retirement.
3. You're convinced you'll be bored
There's a reason retirees are 40% more likely to be diagnosed with depression than working folks -- having too much free time on their hands can easily lead to feelings of frustration and worthlessness. If you're worried you'll be bored in retirement, know that it's a very valid concern. That said, there are steps you can take to keep yourself engaged in retirement to avoid the negative repercussions associated with feeling like you have little to do.
For one thing, you can always start a business in retirement. It doesn't have to be a huge moneymaker -- in fact, you might decide that you don't actually care how well that venture does, as long as you enjoy running it.
Another option? Volunteer. Sign up with an organization that's important to you and give your time to people in need. You also can take classes at a local community college, pick up some new hobbies, or even consult part-time in your former field if you find that you need something to do.
No matter how you choose to fill your days in retirement, going in with a plan is a good way to avoid the boredom you might be anticipating at present. Additionally, if possible, aim to retire at a time when you know you'll have company. For example, if your peers are all planning to retire a couple of years after your target age, postponing your own retirement might make sense.
There are risks involved in retiring -- emotional and financial ones. At the same time, you shouldn't let your fears stop you from retiring if it's something you've always wanted to do. If you save wisely, take a realistic approach to Social Security, and go in with a plan as to how you'll spend your days, you'll avoid some of the major problems so many of today's retirees fall victim to.