Ever since I started blogging about personal finance, I was not shy about letting others know that my long-term goal was to achieve financial independence (FI) as early as I can. Once I have achieved FI, I’ll have the option to choose how I will be spending my time for the rest of my life.
It’s Okay To Have Retirement Fears
From time to time, the topic of retirement would surface during my conversations when I talk about finance with others. When I mentioned that I have a plan to retire more than 15 years before the traditional age of 65, I get a variety of reactions. Some people were impressed with my goal, some were skeptical, some were curious, but I saw that many had retirement fears in their expressions.
How do I know that many people have retirement fears? This comes from the questions that they asked me and their attitude towards retirement during our conversations. If you have retirement fears, don’t panic because I have it too even though I have a plan to achieve financial independence and retire early. It’s okay to be uncomfortable with your retirement plan because there are a lot of unknowns and uncertainties ahead of us.
Acknowledge Your Retirement Fears
The first step to address the retirement fears within you is to acknowledge their existence. The next step is to list out all your retirement fears and try to address them as best as you can. In this post, I will list all the retirement fears that I have come across and will provide insights into how I will address them.
Don’t Know How Much Money Is Enough
If I tell you that I know exactly how much money I need for retirement, I’d be lying because I honestly don’t know (and I don’t think anyone else knows it either). I am just making an educated guess based on my estimated annual spending and the desired income that I can live off of during my retired years. I want my net worth to generate an income that I can comfortably cover my expenses.
I think that my family can live comfortably if our income is between $80K to $100K before taxes per year. If I work backward and have my net worth generate about 4% to 5% return a year, which is quite doable for me. As a result, 4% to 5% of $2M is exactly $80K to $100K. Hence, the $2M net worth has become the magic number that’ll set me free.
I Will Never Be Able To Save Enough
Some people’s attitude is that saving for retirement is not possible and they gave up before they started. Their excuses are either they have too much debt, or they don’t earn enough money, or living pay cheque to pay cheque, or they don’t see themselves not working.
The way that I see it, this is all about your mindset. I think that we are all capable of achieving our financial goals if we set our minds to it. If we start off with the mindset that we will never be able to save enough to retire, then we’ll condition and convince ourselves that we will never be able to achieve our goals. Ever.
Instead, change your attitude and tell yourself that you can and will save enough. Let’s say that you set a goal to save $500K and you only achieved 70% of it. Well, guess what? You still have somewhat succeeded as you now have $350K saved compared to not trying at all and have nothing saved. Just remember, saving for retirement is not an all or nothing endeavour. Having something saved is better than nothing.
You Could Die Early If You Retire Early
According to a post on the Huffington Post, some researchers suggest that if you retire earlier, your chances of dying increases. I am not a searcher, but one question that I want to ask is, “how many of those retirees that died early, retired on their own terms?” I think that this fear is total nonsense. Nothing is going to keep me from enjoying my freedom if I have the financial capability to do so.
It’s such a waste of time to worry about things that you cannot control (this is probably one of the reasons why people died early). If I were to retire right now, the only thing that I should be worrying about is how to keep my body and mind in tip-top shape.
The Lack Of Meaning In Life
I must admit, I sometimes struggle to find meaning in my life as I believe that I should have achieved more. I don’t think that I have made many differences in my community yet. Hence, once I retire, I may struggle with this retirement fear.
On the other hand, I can attribute my lack of achievement to my busy life and the lack of time to volunteer. Once I retired, I definitely plan to do more volunteer work and give back to my community. Hopefully, by contributing to the community and giving back, I will find more meaning in my life.
Too Much Free Time Leads To Boredom
If you have too much time and don’t know what to do, email me. I can definitely hook you up with something to do. For me, I think that this is a great problem to have if I have too much time and don’t know what to do. Here is a list of suggestions:
- Learn how to play a musical instrument that you’ve never played before and wanted to play that instrument
- Find a hobby. This can be cooking, gardening, carpentry, reading, photography or bird watching. Heck, try blogging if you want to
- Volunteer at a charity that resonates with your passion
- Try to make a difference in another person’s life like being a mentor or a big brother/sister
- Go to school. Yes, I am not joking. You’re never too old to go to school and learn.
- Write a biography. I am serious about this too. Document all your accomplishments and be proud of it.
Run Out Of Money
This is one of the worst retirement fears of any retirees – out-living your savings. The last thing you want to happen is to be broke before you expire. This is also one of my retirement fears too as an aspiring early retiree. However, there are a couple things to alleviate this fear.
If you have been living in Canada for most of your adult life, like 40 years out of 47 between the age of 18 to 65, then you qualify for the full amount of Old Age Security (OAS). The government will pay you about $589/month (2017 numbers), which equates to about $7,068/year and it’s indexed to inflation.
Assuming that you also worked and paid some taxes if you have lived in Canada for that long. You’ll also qualify for the Canadian Pension Plan (CPP) payments. CPP payments depend on the number of years that you worked and your salary during those years. At the beginning of 2016, the maximum CPP payment was about $1,092.50/month. Let’s assume that you qualify for about half of that, which is approximately $600/month. This is another $7,200/year.
Based on the OAS and CPP payments, you’ll have about $14,000/year of income from the government. If you are married, then your family will have about $28,000. Hence, you won’t be broke. So, even if you run out of money, you’ll still have some income to get you by.
Leaving Too Much Money Behind
As much as I don’t want to admit, I do want to leave something for my kids when I am gone. Enough to make a difference in their financial life, but not enough for them to do nothing. So if you do leave lots of money for the people that you left behind, it’s a good thing. Be happy that you are capable of that. There is nothing to fear because you can’t take your wealth with you when you expire.
My Two Cents
Some retirement fears are valid, while others are overblown and we are better off by worrying about something else that we can control. The important thing to remember about retirement is not stopping work and the lack of income after you stop working. It’s about the freedom to chose what you want to do with the rest of your life. Let’s face it, we will only live once and let’s make the most of our time here.
So readers, are you afraid to retire? Do you have any retirement fears that I had not covered? If you are a retiree, what are your major fears and how do you deal with them?
About Leo
Hey Leo its Dave, I really like this post, asks a lot of honest questions people should think about.
How much really is enough? That’s probably different for everyone because retirement can be so different for so many people.
Great article.
@Dave, thanks for dropping by. That question is very hard to define. Honestly, even if I have a pretty solid number that I think that is enough, the number can change as time goes by. It’s a moving target. The good news is, if you have a plan to achieve your number, I am pretty sure that you can modify your plan to achieve another one.
Good post. None of us knows what tomorrow will bring. We could work hard to save then not live long enough to enjoy it. Or we could retire early and live longer than expected, causing us to run out of money. This is what financial planning should be an ongoing process rather than a single event. People need to be flexible and adjust to changes over time to assure their financial futures.
@Brad, when I talk to people about money, very often I get a sense that people avoid financial planning because of the uncertainties and fears. My view is that there uncertainty and fear will always be there and very often, it not under our control. Hence, I just acknowledge those fears and uncertainties, and I work on what I can control. It’s much easier.
Hey Leo
I don’t know my exact number either. I’m actually a little scared to find out because I know that I personally enjoy some finer things in life so it will require higher income. Either way, I do my best to preserve wealth for the future!
My fear is actually not retirement… it’s about what I should be doing with my life right now lol… If I’m able to find work that I can enjoy for the rest of my life (and still earn plus save AND spend), I’m totally fine with that. If I can do that, I don’t think I’d be worried about retirement at all. For me, it’s about finding the right balance. Something that I’m working on………
Overall, great post!
What a lovely article, I will share it with some of my relatives. Thankfully now I’m only worried about uni life!
Generating 4-5% a year seems very daunting to me! I have a finance account manager who manages my money in the stock market, but otherwise I don’t know how to make that kind of return. Any suggestions?
My husband and I have been saving for retirement. He has a really good plan at work, but it is harder for me since I am self employed. It is really important to think about though
I love the fact that you suggested volunteering. I think that sometimes people retire and don’t do anything. Then they live for themselves and die. There is more to life than living for yourself. Great suggestions for retirement.
This is a very interesting topic that is rarely discussed. Thanks for bringing it up. I guess in my case I never think about it because I don’t know if having an own business will ever allow me to fully retire. 🙂
I’m a little way from retirement however the idea of retiring early has always been appealing! After reading this post I feel it is something I need to start thinking about.. Great post, thank you for sharing
I have never thought this far ahead but it makes sense that others have these fears about retirement. MY mum retired early to join my dad, they see it as, why shouldnt they enjoy their retirement now while they are still young enough to get about!
What a great post. I never really thought about retirement fears but this totally makes sense.
Xo, Sondra
Cuisineandtravel.com
I think that almost everyone develops retirement fears and the best way to curb that is by starting to save up as early as possible so that in the long run, as much as one won’t have saved up “enough”, the money will be there to keep one going, in one way or another; while still being there for the kids, right?
Very informative. I also found your bio and career very interesting and impressive. We can certainly learn from you:) The meaning of life is king of how beauty is described “in the eye of the beholder” ? There seems to be meaning in this very post and how you intend to encourage and help people with it:) volunteering is nice, however the meaning of life can be seen in your heart to share and encourage with your perspective. And your successful perspective, I might add:)
Very interesting topic. I’m not at retirement age yet but i’m ready to retire so it was a great read.
This is such a great topic. Most people don’t realize they need to think about what they will do with their time when they retire. I recently quit my job to be a stay at home mom and even with having kids to take care of, I didn’t know what to do with myself. And so I am now a blogger and a stay at home mom!
This is such a great, but very relevant topic! What a coincidence, I have quite a few family members who are considering retiring soon and these are ideas we’ve talked about.
Hi Leo,
This is a great topic as most of the people who are trying to save money and following this kind of blogs are looking as last goal to become financial independent ( I really don’t like the word “early retirement”).
Definitely, getting to a point where you can decide what to do without the pressure of earning money will give you freedom.
Also, we have to understand that in order to have a fulfilled life you need goals, achievements, challenges, physical activities and some stress (I know what people believe but a good stress is beneficial for your overall being).
Regarding the net worth, are you thinking to 2 mill including your living house or not?
Going to pass this on to my parents. Retirement is a pretty big decision and this article has some pretty solid information that can help.
While I won’t be retiring any time soon, it’s never too early to start thinking about this. I’m hoping to retire early.
This is good to think about. But I really need to start thinking about retirement. And its never too early to start thinking about it.
Never started really thinking about this before, I’ m self employed, but I should! It’ s an important decision to think about…!
This is an amazing read and truly an eye opener. I haven’t really thought too much into retirement yet, but I probably should. Thanks so much for your insight.
XOXO
Elizabeth Keene
http://www.akeenesenseofstyle.com
You give great advice about not succumbing to fears about retirement. It is important to not be intimidated and be hopeful about the future.