Ditch the Fear: A Guide to Embracing Retirement Preparedness

2 6 minutes read

Ditch the Fear: A Guide to Embracing Retirement Preparedness

There’s an old Jerry Seinfeld bit about how speaking in public is scarier to most people than death.

“This means to the average person, if you have to be at a funeral, you would rather be in the casket than doing the eulogy,” he jokes.

Add finances to the list of things people fear. Most Americans (64%) say they worry more about running out of money than death, according to the 2025 Annual Retirement Study* from Allianz Life Insurance Company of North America.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.

Profit and prosper with the best of expert advice – straight to your e-mail.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

It’s understandable to worry about your money lasting your lifetime. For most of our lives, we are socking money away to save for our retirement. It can be unsettling to think about withdrawing from those savings for two or three decades in retirement.

The most common factors contributing to this fear, according to the study:

High inflation
Social Security not providing as much financial support as retirees might need
High taxes

There’s no simple trick to alleviate the fear of running out of money — like imagining the audience in their underwear when speaking in public.

The good news is you are not powerless over these risks to your retirement security. With a strong financial strategy, you can help mitigate these risks.

Risk No. 1: Help keep pace with inflation

Inflation can eat away at your retirement savings, both while you are saving and after you retire.

While you’re working and saving for retirement, you want to ensure that your money is working for you. Savings for long-term financial goals like retirement need to be invested or held in financial products that can help offset the depreciation from inflation.

Don’t keep your retirement savings in a regular low- or no-interest checking account!

If inflation is around 2.5%, prices will double over the course of a 30-year retirement. That means the purchasing power of your dollars could be cut in half!

In recent years, we’ve experienced high inflation, with prices rising 8% in 2022, for example. You want your purchasing power to keep up through your retirement, so you don’t have to lower your standard of living.

Long-term strategies can be essential to help shield your retirement from inflation. Financial professionals can provide guidance on incorporating protective measures into portfolios to safeguard retirement plans against long-term inflation risks.

Financial vehicles could include things like dividend-paying stocks, U.S. Treasury inflation-protected securities (TIPS) and I-bonds.

The first thing to know is that you have some control over what your Social Security benefit will be for the rest of your life. This guaranteed lifetime income payment is calculated using factors such as work history, benefit start date, full retirement age, taxes and other income sources.

When you start claiming Social Security is an important decision that determines how much your payments will be.

Although you can claim benefits at age 62, this results in significantly reduced payments compared with waiting until your full retirement age. Delaying benefits can lead to larger payments, but it requires financial planning to cover expenses during the interim if you retire before claiming Social Security.

While there is a “breakeven point” between claiming options, that isn’t the only factor to consider. It’s important to weigh your options about when to claim.

If you are married, you will want to consider your strategy for Social Security as a couple. If one spouse is a higher earner and will receive a larger Social Security check, you may want to prioritize enhancing that benefit — meaning claiming it later, rather than sooner.

Social Security is a valuable part of a retirement strategy, since it provides a guaranteed lifetime benefit, with tax advantages.

One retirement income strategy is to have enough reliable income to cover your essential expenses. If Social Security is not enough to cover your essential expenses, then you can consider adding another source of guaranteed income, such as an annuity.

Annuities offer a dependable income stream** and can help mitigate the fear of depleting funds during retirement.

Risk No. 3: Always keep taxes in mind

Understanding the potential tax implications of your retirement strategy can contribute to your long-term financial success.

If the bulk of your retirement savings are in a tax-deferred account like an IRA or an employer-sponsored 401(k), you will need to figure out how much you’ll have to withdraw in order to meet your desired income after taxes.

While you are saving for retirement, it often makes sense to save in a Roth-style account with after-tax dollars so that money can be withdrawn tax-free in retirement.

Converting pre-tax retirement savings to a Roth IRA can provide flexibility and reduce tax burdens later. Although taxes are paid at the time of conversion, Roth IRAs offer tax-free withdrawals if rules are followed.***

Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.

Conversions can be spread over multiple years to avoid higher tax brackets, but they may affect Social Security taxes and Medicare premiums. Consulting a tax adviser is recommended.

You can also use health savings accounts (HSAs) to prepare for retirement. HSAs provide tax benefits and help cover increasing health care expenses in retirement. They allow pre-tax contributions, tax-free earnings, and income-tax-free distributions for medical expenses.

However, contributions cease once enrolled in Social Security or Medicare at 65. Those struggling to save for retirement might use HSAs for current medical expenses and save in other retirement accounts.

The bottom line: Be brave

While the fear of running out of money in retirement is a common concern, it is one that can be managed with careful planning and strategic decision-making.

By addressing inflation risks, enhancing Social Security benefits, and understanding tax implications, retirees can create a financial strategy designed to support their desired lifestyle. With effective strategies in place, you can work toward a secure retirement.

* Allianz Life conducted an online survey, the 2025 Annual Retirement Study in January/February 2025 with a nationally representative sample of 1,000 respondents age 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k+.

**Guarantees are backed solely by the financial strength and claims-paying ability of the issuing insurance company. Registered index-linked annuity guarantees do not apply to the performance of the variable subaccount(s), which will fluctuate with market conditions.

***Converting a traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences, including (but not limited to) a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, factor into Medicare surtax calculation, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax adviser before making any decisions regarding your IRA. It is generally preferable that you have funds to pay the taxes due upon conversion from funds outside of your IRA. If you elect to take a distribution from your IRA to pay the conversion taxes, please keep in mind the potential consequences, such as an assessment of product surrender charges or additional Internal Revenue Service penalties for premature distributions.

This content is for general educational purposes only. It is not intended to provide fiduciary, tax or legal advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please note that Allianz Life Insurance Company of North America, its affiliated companies, and their representatives and employees do not give fiduciary, tax or legal advice or advice related to Social Security or Medicare. Clients are encouraged to consult their tax adviser or attorney or Social Security Administration (SSA) office for their particular situation.

Products are issued by Allianz Life Insurance Company of North America. Registered index-linked annuities are distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.542.5427 www.allianzlife.com Only Allianz Life Insurance Company of New York is authorized to offer annuities in the state of New York.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Source link