My wife says we can’t afford to retire, so I vetoed her $8,000 trip to Italy. We have $4 million saved. Do I keep working?
“I worry about healthcare, long-term care, inflation, a long bear market and living to 95.”
The concern about affording retirement despite having a substantial nest egg is a common one, especially given the rising costs of healthcare and long-term care. With $4 million in savings, it may seem like a comfortable cushion, but the anxiety about outliving one's assets is valid. The individual in this scenario is worried about several key risks: healthcare expenses, long-term care costs, inflation, market downturns, and longevity.
These concerns are not unfounded. Healthcare costs, in particular, can be a significant expense in retirement, and the risk of needing long-term care, such as assisted living or nursing home care, can be a major financial burden. Inflation can also erode the purchasing power of savings over time, while a prolonged bear market can reduce the value of investments. Longevity risk, or the risk of outliving one's assets, is also a pressing concern, especially given increasing life expectancies.
To determine whether it's necessary to continue working, it's essential to create a comprehensive retirement plan that takes into account these risks. This plan should include a detailed analysis of expenses, income sources, and asset allocation. It's also crucial to consider potential sources of retirement income, such as Social Security, pensions, or annuities, as well as strategies for managing healthcare and long-term care costs. What to watch next: The individual should consider consulting a financial advisor to run some scenarios and determine a sustainable withdrawal rate from their $4 million in savings.
Originally reported by marketwatch.com. FundingWire adds analysis for finance & markets readers.