5 Retirement Fears and How to Conquer Them

How to Conquer It

Connect with your passions. “People have a pent-up demand for leisure activities coming into retirement, but relaxing is so much sweeter when you’re relaxing from something. You still want to feel like you’re accomplishing things, like you’ve earned that bit of fun,” says Christine Benz, director of personal finance and retirement planning for Morningstar and author of How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement. What you choose to tackle doesn’t need to be something huge, it just needs to be fulfilling and challenging enough to bring joy. “Sometimes people have purpose paralysis,” Benz says. “They feel they need to be starting a foundation or going on a global trek, but it can be much smaller, like rediscovering a childhood hobby.”

Keep working. While we often think of retirement as the end of our working days, it doesn’t have to be so black-and-white. About 20 percent of retirees hold full- or part-time jobs, and another 7 percent are looking for employment, according to a recent T. Rowe Price study. Many shift to part-time work, freelance or consulting gigs, or a role in another field because of the social and emotional benefits, like mental stimulation and professional fulfillment, that work offers.

Volunteer. Giving back can provide retirees with a meaningful way to share their passions, talents and experiences with their community. Those who volunteer in retirement report being happier than those who don’t, and are more likely to describe themselves as purposeful, according to a survey by Age Wave and Edward Jones. Visit VolunteerMatch.org to search for opportunities in your area that match your passion, like animals or arts and culture.

3. Fear you won’t have sufficient health care coverage

For retirees and those above age 60, health care costs beat running out of money and inflation as the top retirement concern, according to a survey from eHealth and Retirable. But only about a third of people specifically save for health care costs they may face in retirement, making the Medicare plan you choose to enroll in even more important for ensuring you can afford your medical expenses.

However, 65 percent of users find the program confusing and hard to understand.

How to Conquer It

Learn the Medicare alphabet. When you turn 65, you can enroll in Medicare. Don’t dawdle — if you fail to sign up for a Medicare plan during your seven-month initial enrollment period, you could face penalty fees when you do join. For Part A, this fee could increase your monthly premium costs by 10 percent for twice the number of years you waited to sign up. For Part B, the fee amounts to an additional 10 percent for each year you delay. This means you have an immediate big decision to make between original Medicare and the private insurance-managed alternative, Medicare Advantage.

Original Medicare consists of Part A (hospital insurance) and Part B (medical insurance, which covers things like doctor visits and medical equipment), although many people choose to add on Part D, Medicare drug coverage, to help with prescription costs as well. Medicare Advantage, or Part C, combines Part A, Part B and typically Part D into one plan offered by private companies. With original Medicare, you can use any doctor or hospital that accepts Medicare, usually without first needing a referral, says Michael Cooper, a private wealth adviser with Siena Wealth Advisory Group at Ameriprise Financial in New York City. Medicare Advantage limits coverage to its in-network providers but commonly has lower out-of-pocket costs and can offer limited vision and dental benefits that original Medicare doesn’t. “You’re trading narrow access for lower premiums,” Cooper says.

To determine which option best serves you, request a copy of the government’s free Medicare & You 2025 handbook, or contact your State Health Insurance Assistance Program (SHIP), which provides free, unbiased Medicare assistance. If you’re ready to enroll in a Medicare Advantage plan, Part D drug plan or Medigap policy, use the government’s Medicare plan finder tool to compare options and see premium costs and the plan’s rating.

Create a health care rainy-day fund. Those enrolled in high-deductible health plans can stash money for medical expenses in a triple-tax-advantaged account known as a health savings account, or HSA. The money you put in reduces your taxable income, withdrawals for qualified medical costs are tax-free, and any interest or investment earnings gained are not taxable either. Those 55 and older can add $1,000 more on top of the current maximum contribution amount of $8,300 for family coverage or $4,150 for self-only coverage. You can tap your HSA for any qualified medical expense incurred after setting up the account. That means costs you pay out of pocket today can be claimed back whenever you’re short on cash. And after age 65, you can use your HSA for nonmedical expenses without paying the 20 percent tax penalty, though you’ll owe income tax.

4. Fear you’ll feel lonely

As we get older, our social circle tends to shrink. Leaving our jobs for retirement often compounds this as we miss out on the small daily interactions we once shared with coworkers. Indeed, nearly a third of retirees admit to feeling lonely at times because they’ve retired, a MassMutual survey found.

How to Conquer It

Build your circle. “You need to make investments during your working years into your personal relationships,” Finke says, “so that you can draw upon those in retirement.” Happier retirees tend to spend their free time doing lots of activities, but the most prevalent is spending time with loved ones. Developing solid relationships with friends and family members before you retire can help you avoid a socially isolating experience in your later years.

Choose your retirement spot carefully. “A place that sounds appealing to escape to when working full time is different when that is your life,” Finke says. “People overestimate the satisfaction they’ll get from retiring to a vacation environment if it isolates them from the people they know.” But living near old friends or in an environment that provides frequent social interactions can have a positive impact on how happy we are in retirement, Finke adds.

5. Fear you won’t be able to afford long-term care

Over half of us will require some form of long-term care during our lifetime. But paying for home health aides, assisted living facilities, nursing home care or other health services can be a costly endeavor, totaling $290,000 on average, according to research conducted by Vanguard. While about half of us will encounter no such expenses, 20 percent can expect to pay $100,000 or less, and 18 percent of people will pay more than $250,000 for long-term care.

How to Conquer It

Consider insurance. You can purchase long-term care insurance to help mitigate the costs of any future care you may need. Fewer insurance companies still offer the traditional long-term care plans your parents might have used, instead selling hybrid products that combine long-term care coverage with another benefit, usually life insurance or an annuity, according to the Congressional Research Service. Under these plans, your heirs will receive some amount of life insurance if you never use your long-term care coverage, meaning “whether you need the care or not, you’ll have some benefit in the end,” Benz says.

But there are tradeoffs. Long-term care insurance policies tend to be expensive, and most plans “have benefit caps that may reduce their usefulness in the most severe scenarios,” a Vanguard study concluded. For instance, a 55-year-old looking to buy a long-term care policy today with benefits equal to $165,000 can expect to pay about $950 a year if male, or $1,500 if female. To have those benefits grow by between 2 and 5 percent a year to keep pace with inflation, annual premiums jump to between $1,750 and $3,690 for men or between $2,800 and $6,400 for women, according to the American Association for Long-Term Care Insurance.

Line up help from a family member. Relatives who step in to assist with long-term care duties can potentially get paid through Medicaid or other government-funded programs. Most states offer those on Medicaid access to consumer-directed personal assistance programs in which a family member or friend assumes the paid work a home care agency typically provides. Veterans may be able to pay relatives for caregiving through the payments they receive from the Veteran-Directed Care program or the Aid & Attendance Benefit program. A few states have paid family leave laws that mandate you receive all or a portion of your pay if you must miss work to care for a seriously ill family member.

Look into Medicaid programs. Though Medicare will not cover nonmedical long-term care costs, Medicaid does. Qualifying for Medicaid-covered care can be challenging, however, as you must meet specific income and asset limits as well as a level of care requirement. The exact criteria vary by state, but generally you must earn $2,829 or less a month as a single person and have less than $2,000 in assets, according to the American Council on Aging.

Create your own safety net. For many families, making a worst-case plan can be the best financial move should long-term care costs come. This might mean setting aside funds each year specifically for medical costs in an investment account separate from other retirement savings. “Rather than letting an insurance company invest your money, you can do it yourself,” says certified financial planner David Haas, president of Cereus Financial Advisors in Franklin Lakes, New Jersey. Others may need to review their assets and decide which could potentially be sold to cover long-term care costs, like a property or stock holding.