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3 Reasons Not to Fear Retirement

Tom Sightings

Many people are scared of retirement and worry about what life will be like without a paycheck. Preparing for retirement can at times seem like a daunting task. But there is nothing mysterious about saving for the future. If you've managed to find and keep a job, get married and raise a couple of kids or buy and maintain a house for 40 years, then retirement should not seem like the impossible goal that some people believe it is. Here are three reasons you shouldn't be afraid of retirement:

[See: 10 Ways to Celebrate Your Retirement.]

You may have more money than you think. You may have read that private pensions are being phased out and most people aren't saving enough to make up the difference. While these reports may cause some concern, they do not necessarily mean we are all headed for poverty in retirement. Many current retirees in their 70s and 80s enjoy some kind of pension plan. And even a small pension plan can be worth a lot over the course of your retirement. A pension of just $20,000 per year is roughly equivalent to half a million dollars over 25 years of retirement.

However, many younger workers will need to save enough to retire without a pension. The good news is they still have time to accumulate a respectable retirement account balance. I recall a colleague who was celebrating his youngest daughter's graduation from college a few years ago. We joked about how rich he would be now that he was no longer paying college tuition. He laughed and said, "Yeah, now I can finally start saving for retirement." Like my colleague, younger workers have time to catch up on savings, especially when they hit their prime earning years in their 50s.

[Read: 6 Social Security Calculators That Can Help You Decide When to Claim.]

Social Security and Medicare are more solvent than people say. The Social Security system has resources to pay full benefits until the year 2034, according to the latest trustee report That gives politicians almost 20 years to make the necessary adjustments. But even if nothing changes, Social Security will still be able to pay about 75 percent of its obligations. Nobody wants to take a 25 percent pay cut, but that's not the same as going broke. Meanwhile, the average benefit for a retired worker is $1,364 per month. That's not a lot to live on, but it's a start.

Over half of retirees rely on Social Security for more than half of their income, according to government reports. However, these estimates may undercount some of the money that is available to seniors. For example, the government does not count as income the money people take out of their pension as a lump sum, and may not fully count 401(k) and IRA withdrawals.

[See: 10 Tips for Finding a Great Place to Retire.]

You have plenty of options. Most of us have resources above and beyond what we may have in our IRA or 401(k) account, and we also have a great deal of control over our standard of living as we shed responsibilities, shift priorities and change our lifestyles. A retiree can decide to take a part-time job or turn a hobby into an income producing activity. A retired couple could buy a new house in Florida for less money and lower taxes than the similar house they owned in the Northeast. As one early retiree told me a few years ago, he was making half as much money, but he was twice as happy. His kids were grown and his house was paid off, so he didn't need the money. What mattered was that he no longer had to commute, no longer had to answer to a boss, no longer had too much stress and could now focus on his health and well-being.

By many measures, worries about retirement are overblown. However, that doesn't mean you should be complacent. It's true that private pensions are not as plentiful as they once were. Social Security alone does not provide a luxurious lifestyle. But we have plenty of other resources to help us out in retirement, from the support of friends and family to our own capacity to change our lifestyles. Still, don't forget to sock away a little extra money for your later years. It's better to be safe than sorry.

Tom Sightings is the author of "You Only Retire Once" and blogs at Sightings at 60.

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