Even if you’ve actually managed to pay off your mortgage and all other non-mortgage debts, and you’re quite happy to embrace a more frugal lifestyle, it can still be a little daunting when the time comes to pull the early retirement trigger. In fact, due to the current financial environment we find ourselves in, it isn’t only a daunting prospect for those of us who want to take early retirement, but also for those of us who want to stop working once we reach the retirement age.
A recent article, published by CNBC reported that while the richest 1% of families living in the United States had managed to save $1.08 million for retirement by the end of 2013, the average American family had only managed to save $5.000. This means that for the majority, retirement is a financial burden and not the well-earned rest we’ve dreamed of. Furthermore, apart from the lack of retirement savings, other stressful financial concerns that plague pre-retirees include the following.
Fear of the unexpected
When the car breaks down, the roof starts leaking, or a family member needs urgent medical care, our monthly paycheck keeps us above the water. However, the thought of having to deal with unforeseen expenses without the safety net of a regular monthly income is enough to keep most of us out of retirement forever.
The thing is that we can never be fully prepared for every eventuality in life, no matter how diligent we are with our savings and how carefully we’ve planned our retirement. Sometimes the thought of the unexpected is actually worse than the reality. One way of slipping gracefully into retirement without living in constant fear of what’s lurking around the corner, is to find ways of cutting back on daily expenses. If we can reduce our monthly payments by moving into a smaller living space, selling the car and spending less at the supermarket, we might actually reduce the pressure we feel as a result of our new financial reality.
Rising health care costs
Health insurance is expensive. There’s no getting around it. As we get older, premiums increase. What is more, proposals like the recent Republican health care bill would have raised premiums for older Americans by more than 750%. Our bodies also tend to be less reliable. Falls among the aging community are common, as too are chronic diseases like diabetes and osteoporosis.
All of this means more medical care, more bills and more financial stress. Of all the things you can choose to cutback on, health is not one of them. Buying a supermarket’s own brand of bread is one thing. Not having health insurance to cover you when needing hospital care is a whole other story.
The disappointing reality of Social Security
For the Baby Boomer generation, Social Security was dubbed an entitlement; an assured benefit that all retirees would simply be guaranteed when the time came to give up work. Today, we know all too well that Social Security is on the financial endangered species list. Most people approaching the end of their working years can’t depend on Social Security, and can instead only really rely on funds they’ve saved and assets they’ve accumulated to see them through the next 18 years or so. As we already know that our retirement funds aren’t going to give us the financial support we need, the absence of the promised Social Security makes it even more difficult to take the plunge and retire completely.
The pressures of inflation and rising living costs
Inflation isn’t helping the situation either. The Social Security’s annual cost-of-living adjustment (COLA) is an increased benefit which is offered to Americans on a monthly basis. There was no COLA for 2015 and only a 0.3 percent increase for 2016. The result? Anyone on Social Security over the past two years has been simply left to battle against the difficulties of inflation on their own. Inflation is making life particularly difficult for retired Americans, with as many as three out of five middle-class retirees outliving their funds when trying to maintain their pre-retirement lifestyles.
Essentially, having cold feet about retirement, early or otherwise, is normal right now, but we must try to avoid allowing our fears from holding us back. Being aware of the instability of our economic environment, our first port of call must be to make adjustments to our lifestyle choices.
This Article is a contribution to Leisure Freak from the talented freelance writer Jackie Edwards.
Now working as a full-time freelance writer, Jackie Edwards is also a busy mum of two small children. In any free time she has (which isn’t much) she likes to volunteer and do charity work and take the family greyhound Bertie for long walks.