The fear of running out of money in retirement is overblown

One of my biggest concerns about early retirement was running out of money. What if there was another massive correction in the stock market? What if my rental properties went vacant for an extended period of time? What if Financial Samurai died? What if I accrued unexpected medical expenses? What if I underestimated how much I needed to be happy?

Such worrisome thoughts can paralyze even the best of us.

Whether you decide to retire in your 60s or in your 30s, I'm here to say the fear of running out of money in retirement is overblown. The media, money managers, and government officials, most of whom are still working, have fear mongered the general population long enough!

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As someone who left the working world in 2012 at the age of 34, let me explain why your retirement life will probably be just fine.

1) You'll need less than you think

My biggest surprise since retiring has been how much less I need to live a comfortable retirement life. Like any good retiree, we plan for multiple scenarios over an extended period of time before making a decision. I spoke with at least three dozen retirees about retirement spending and they all said they are spending much less than they anticipated. For myself, on average, I'm spending 30 percent less than projected.

It costs nothing to play tennis at a public park. There are plenty of cheaper food alternatives once you no longer have to work in an expensive downtown area. You can read all the latest magazines at your local library, surf the web, and enrich your mind with classic literature for free. Take one look online and you'll find a plethora of free activities.

2) You don't need to save for retirement once you're retired

What many retirees "forget" is that, once they reach retirement, they no longer need to save for retirement. It's not so much forgetting but being so accustomed to saving for so many years that you just can't stop! For example, if you've spent a lifetime maxing out your 401k, you've suddenly got $18,500 a year more in gross disposable income.

For the life of me, I cannot stop trying to save at least 50 percent of my after-tax income, while also contributing as much as possible to my Solo 401k, even though I'm supposed to live it up more in retirement. After aggressively saving since your first paycheck, saving just becomes part of your DNA due to an unknown future.

3) You will adapt to different income levels

For the first two years after I left my job, my annual income decreased by 70-80 percent. Yet, looking back, there were minimal lifestyle changes. I still lived in the same house that I had been living in for seven years prior. I still stayed in the same house in Hawaii for the past 30 years every time I visited my parents. I also drove the same paid off car for a couple years until I bought a new compact car because my old car could no longer pass the smog exam.

Yes, I had to cut back on eating steak for a couple years. But I replaced $50 dry-aged steaks with $2.50 In-N-Out cheeseburgers. Yum! Instead of eating sashimi, I ate marinated tilapia. Still quite tasty.

Just like the lifestyle of a 1 percenter is not much different from the lifestyle of a middle income person, as long as you have the basics covered, the lifestyle of a lower-income person isn't much different from a middle-income person, either. The lower-income person has a harder time saving for retirement, which ironically gels well with a retiree who doesn't need to save for retirement.

As long as I have food, shelter, clothing, dental floss, companionship and internet access, I'm 85 percent of the way there. For most of you, it's going to be the same thing. The joy of doing anything you want, whenever you want, more than makes up for a lower income.

4) You'll be in a lower-income tax bracket

The great thing about making less money is that you'll be in a lower income tax bracket. Therefore, you'll have a relatively higher amount of disposable income for each dollar earned. In 2018, not only has federal marginal income taxes been lowered, corporate tax rates and small business pass-through income tax has fallen to 21 percent.

2018 Federal Income Tax Rates

It felt wonderful going from a 39.6, 35, or 33 percent marginal income tax bracket (depending on my deductions and bonus) to a more reasonable 25 percent tax rate for a couple years. Just imagine killing yourself at work for 70 hours a week to give over 50 percent of some of your income to a fiscally irresponsible government. No, thank you.

The double benefit of no longer having to work and paying less taxes will make you much happier. You'll actually start feeling like you're getting your money's worth.

5) You'll find many ways to make money

Lower your price from P1 to P2 and demand for your labor increases from Q1 to Q2

If you retire with only part of your living expenses covered, logically you'll need to come up with a solution to cover the "income gap" required by your desired lifestyle. Throughout our entire careers, we are always asking for more. Thus, in retirement it's often hard to accept less. But once we learn to control our egos, a bevy of new income earning opportunities materialize.

Since retiring, I've done consulting with four financial technology startup companies at an hourly rate 60-80 percent less than what I used to earn at my full-time job. Initially, it felt odd making so much less. But I soon got over it because the experience was fun and I was learning something new. I even let some people who had no idea what they were doing tell me what to do!

Then I really squashed my ego and spent time driving for Uber for $25-$35 net an hour. One time I picked up an ex-client at his place in Pacific Heights. Perfect. I wanted to see if making a living driving was possible. It's hard, but doable. The experience was good and driving added about $5,000 more gravy to my plate in 2015 and 2016 before I decided it wasn't worth it anymore.

"On average, I'm spending 30 percent less than projected."

If you don't have a car, not to worry. Recently, I hired some "Taskers" from TaskRabbit to help transport some furniture from a buddy's place to my house this past weekend. After paying a 35 percent (!) commission to TaskRabbit, the Taskers still made $54 an hour. You can be a dog walker or a pet sitter on Rover.

If you're allergic to all animals, don't worry. You can always sign up to be a greeter at Walmart or flip burgers at McDonald's while also eating free food. You're not too proud to work a minimum wage job, are you?

If you are willing to swallow your pride and make much less than you once did, you'll have no problem making up the income gap between your covered expenses and your desired lifestyle.

6) You have more to offer than you think

When I left finance, I thought I 'd be done for good because I didn't think I had any transferable skills like a software engineer or electrician. When you're used to doing one thing for a large portion of your life, you begin to doubt your versatility. Every colleague I spoke to felt the same way, which is why so few ever leave.

Having transferable skills is overrated. All you really need is to be: 1) likable, 2) trustworthy, and 3) consistent. To make life easier, build a higher EQ. Anything technical can be learned on the job. Think about how much you remember from high school and college. Not much! The CEOs earning $25 million a year aren't coding or rewiring your house. All they're doing is managing people, building business relationships and being a good ambassador of the firm.

Given you're close to or already retired, what you've got more than most is experience. Experience cannot be taught or bought. Acquiring it takes time. Your experience is extremely valuable. I never anticipated companies approaching me for online marketing consulting work. But at least eight firms have done so because, over the last nine years, with little budgeted, I've organically built my own platform into something significant. For any start up that wants to build its brand online, this is valuable experience.

7) Your existing assets have upsides

You might have a business that invites couples into your home to learn how to cook. Why not expand and shoot videos of the cooking sessions to sell online?

You might have rental property that hasn't been spruced up in a while. Perhaps if you did some minor remodeling, you could get a much higher rent.

Your investments might not be properly allocated based on the current state of the economy. Perhaps instead of having 50 percent of your assets in a Treasury bond yielding 3 percent in a bull market, you could double your money by allocating more to blue chip dividend stocks that pay more than a 2.8 percent yield and provide stronger capital appreciation. Or perhaps instead of having 100 percent of your net worth in public equities, you should be more diversified in order to not get pummeled during the next downturn.

I'm currently bullish on real estate in the heartland of America between 2017-2025. As a result, I've been aggressively investing in real estate crowdfunding projects in Texas, Nebraska, Colorado, and Utah through RealtyShares, one of the largest real estate crowdfunding companies today. With lower valuations and higher rental yields, I strongly believe the trend is for more workers to work out of lower cost of living cities thanks to technology. I'm shooting for a 8-15 percent return on my investments as real estate is my favorite asset class to build long-term wealth.

It's rare that all of our assets are fully optimized. We can probably all do some fine-tuning to make our existing assets generate more income. It's just a matter of taking the time and expending the energy to make it happen. Don't let a steady paycheck make you comfortably numb!

8) You can always tap your pre-tax retirement accounts early

If you so happen to retire before the age of 59.5, you can follow Rule 72(t) and withdraw money from your pre-tax retirement accounts penalty free provided that the holder take at least five "substantially equal periodic payments" (SEPPs) or until age 59.5, whichever is longer — e.g., someone retiring at age 50 would have to take 10 SEPPs.

According to the IRS, the maximum you can borrow from your pre-tax retirement account such as a 401k is (1) the greater of $10,000 or 50 percent of your vested account balance, or (2) $50,000, whichever is less. For example, if a participant has an account balance of $40,000, the maximum amount that he or she can borrow from the account is $20,000.

Finally, you could simply pay a 10 percent early withdrawal penalty if you were absolutely desperate. Luckily, if you incur unreimbursed medical expenses that are greater than 10 percent of your adjusted gross income in that year, you are able to pay for them out of an IRA without incurring a penalty.

9) You can create your own destiny

Let's say nobody at McDonald's is willing to hire you. Why not be your own boss? Start-up costs are extremely low nowadays. All you've got to do is throw up a site for less than five bucks a month and you're literally in business.

After retiring, I wanted to take Financial Samurai more seriously. So I committed to writing at least three posts a week by spending 2-4 hours each morning before tennis. I didn't know exactly how I was going to build the business, but I knew that if I kept on writing, opportunities would arise. After a full year of sticking to my plan and publishing my severance negotiation book, the traffic on this site grew, as did its income.

My story is a classic case of "do what you love to do, and the money will follow." To maximize profits, I should spend more time optimizing this site. But why bother when this site's income is already a bonus? I'm having too much fun to go back to a stressful work mindset.

The key is to just start your own site / business endeavor. You don't need to have all the variables pre-mapped because as you tinker, your variables will change. Overanalyzing a situation will make you do nothing.

10) Plenty of safety nets

Let's say even with the use of free financial tools online to manage your net worth and forecast your retirement cash flow, you miscalculated how much you need in retirement. For whatever reason, you're also unable to generate the required extra income to make up the shortfall. Your savings are depleted, your passive income streams dry up, your business ideas all suck, and nobody likes you. Not to worry! You've still got family, insurance, and the government to help out.

If you just can't make it on your own, there may be a family member who can lend a helping hand. If your parents are no longer living, perhaps you have a sister, brother, nephew, or niece who will provide shelter until you find work again. I know if anybody in my extended family needed help, I'd do so without question.

Finally, if you've just got nobody, the government has programs that can help you with food, employment and shelter. Yes, Obamacare is coming under assault, but as someone who has paid $700/month/person for his own healthcare since 2013, I can't imagine healthcare costing much more under Trump's plan. It is extremely unlikely you will plunge from being able to retire to becoming homeless with all this planning and support.


If you've been able to entertain legitimately the idea of retiring early, then you probably also have the intelligence, courage, and game plan to adapt to any unexpected changes that happen after retirement.

Change is scary. But the fear in your head is almost always greater than the reality. Just make sure you have something you enjoy doing once you pull the ripcord. You might have so much free time you won't know what to do with yourself!

Sam Dogen is the founder of, a leading personal finance site established in 2009 that teaches people how to achieve financial freedom sooner, rather than later.

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This article originally appeared on Financial Samurai.