Not to be a Debbie Downer here, but if there's one thing I would suggest all soon-to-be retirees do before claiming Social Security, it's to plan for the worst.
Although the motivational speaker Dale Carnegie has been dead for 70 years, several years ago, someone suggested I pick up his book How to Stop Worrying and Start Living. It might have been published in 1948, but the book contains a great deal of advice that feels more valuable today than ever.
It's advice I've used to devise a plan for all the "what-ifs" that swirl around my brain as I prepare for retirement.
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Imagine the worst
Carnegie's advice to readers involves a three-step process.
Step 1: Ask yourself, "What's the worst that can happen?"
While it may not seem logical to consider the worst-case scenario when you're a naturally anxious person, it's essential. By asking yourself, "What's the worst that can happen?" you remove the uncertainty that worry feeds on. Once you think of the worst possible outcome, you have named your fear and can confront it.
Example
Let's say you were the primary breadwinner during your working years, and now, you're prepared to file for Social Security. Your spouse is filing for spousal benefits. You'll receive a monthly check of $3,000, and your spouse will receive $1,500.
As you budget for your golden years, you fear that you may be able to get by on withdrawals from your 401(k) and both Social Security checks, but you don't know what will happen when one of you dies and you're down to a single Social Security check.
Step 2: Accept the worst
Now that you've imagined the worst-case scenario, Carnegie suggests preparing for the reality that it might happen. Once you accept that one of you will likely outlive the other and that whoever lives the longest will have to get by with 401(k) funds and a single Social Security check, you can plan for it.
Example
In addition to the $4,500 a month you and your spouse expect in Social Security benefits, you plan to withdraw enough from your 401(k) to give you an extra $2,000 each month. You have a post-retirement budget based on a total monthly income of $6,500.
However, since you've accepted that one of you is likely to outlive the other, it's time to prepare for the reality.
Step 3: Improve on the worst
According to Carnegie, the final step is to take action to improve upon a worst-case scenario. Just because you've accepted it doesn't mean you must sit back and wait for it to happen.
You may not be able to control when you or your spouse die, but you can concentrate on the things within your control.
Example
Once either of you passes, the lower of the two Social Security payments goes away. In this scenario, the remaining spouse will be left with $5,000 monthly (a $3,000 Social Security check and $2,000 from your retirement account). Decide how you can plan for that reality.
Brainstorm ideas. For example, you might create a budget that allows you -- from Day One (while you're both still alive) -- to spend no more than $5,000 per month on necessities like housing, groceries, healthcare, transportation, utilities, and planned miscellaneous expenses. That leaves the $1,500 spousal benefit to pay for non-essentials or to save.
You may even spend half of the spousal benefit on having fun and save the other half. The point is, it's up to you. Once you identify what's worrying you, you can work on improving the situation.
It could be anything
Perhaps your worst-case scenario has nothing to do with what's going to happen when one of you dies. Maybe you're concerned about covering the cost of long-term care if you ever need it, or wonder how you'll deal with inflation if cost-of-living adjustments (COLAs) aren't enough to keep pace.
Maybe you're afraid that taxes will eat you alive in retirement, or you aren't sure you've chosen the right beneficiaries for your estate.
Whatever your situation, the time to address it is before you file for your first Social Security check. That's when you still have room to make adjustments, like paying off debt or working a few more years.
Planning for retirement is like planning an extended camping trip. You may never see a bear in the woods, but as long as you have bear spray with you, it will (probably) be OK.
