Retirement can be a daunting prospect on many levels, and it's natural to have concerns about it, especially as that milestone approaches. The good news, however, is that there are steps you can take to alleviate some of those worries as you enter that new, exciting stage of life. Here are baby boomers' top retirement fear, according to a recent Transamerica survey -- and what to do about them.
1. Outliving savings
For 45% of baby boomers, outliving their savings is a major concern. But you can address that in a couple of ways. First, stay invested in stocks during retirement. While you should shift a substantial chunk of your retirement portfolio to bonds to minimize your personal investment risk, you shouldn't dump your stocks completely, because you'll need them to fuel your portfolio's growth even while you're in the process of taking withdrawals against it.
Additionally, be sure to ramp up your retirement savings as that milestone nears. It's easy to grow complacent when you're in the last leg of your career, but the truth is that even a few extra thousand dollars in your IRA or 401(k) could really go a long way. Adults 50 and over can currently contribute up to $7,000 a year to an IRA, or up to $26,000 a year to a 401(k), and the closer you get to hitting these limits during the latter part of your career, the less likely you'll be to deplete your savings in your lifetime.
2. Social Security cuts
A good 46% of baby boomers fear Social Security will be reduced or cease to exist in the future. The good news is that the latter won't happen. Social Security gets the bulk of its revenue from payroll taxes, so as long as there's a workforce, it can continue to exist. And while benefit cuts may be on the table in roughly 15 years, that's not set in stone, either.
Still, it pays to protect yourself in the face of what could be a lower monthly retirement benefit, and a good way to do so is to have a backup income stream. That could come in the form of boosted retirement savings, a part-time job or business, or a property you own that you monetize.
3. Declining health requiring long-term care
For 41% of baby boomers, the idea of needing long-term care is troubling, and understandably so. It now costs close to $50,000 a year, on average, to reside in an assisted living facility, while a private room in a nursing home averages upward of $100,000 a year. The best way to protect yourself from catastrophic long-term care costs is to invest in long-term care insurance ahead of retirement. That way, you'll have a policy in place to defray that expense should you need to use it.
The best time to apply for long-term care insurance is during your mid-50s. At that point, you're not signing up to pay those premiums too soon, but you're also more likely to get approved for a policy at an affordable premium rate. But if you're already past your mid-50s, don't assume you can't apply. You may get approved for a policy well into your 60s, especially if your health is in decent shape.
Retirement can be a period ridden with financial unknowns. While it's natural to have concerns going into it, taking steps to address those fears will put you in a much better position to enjoy your senior years without worry.