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 retirement is within reach, but the anxiety about outliving one's assets is valid. The individual in this story is worried about several key risks, including inflation, market downturns, and the potential for an extended lifespan.
These concerns are not unfounded, as inflation can erode purchasing power, and a prolonged bear market can significantly reduce the value of a portfolio. Additionally, the increasing costs of healthcare and long-term care can be a significant expense in retirement. According to industry experts, a common rule of thumb is to plan for healthcare expenses to increase by 5-7% annually in retirement. This can add up quickly, especially if one requires long-term care.
To watch next: it's essential to assess whether the individual's retirement plan is comprehensive and takes into account these potential risks. This might involve reviewing their asset allocation, considering annuities or other guaranteed income sources, and exploring long-term care insurance options. It's also crucial to determine a sustainable withdrawal rate from their portfolio to ensure their assets last throughout retirement. By addressing these concerns and creating a solid plan, the individual may be able to feel more confident about retiring, even if it means forgoing trips to Italy for now.
Originally reported by marketwatch.com. FundNews adds analysis for finance & markets readers.