I’m 51 with enough to retire – am I being overcautious by worrying about million-dollar liabilities and my kids’ futures?

It’s not all too uncommon for retirees, especially younger early retirees embracing the FIRE (an acronym for financial independence, retire early), to start catastrophizing before or shortly after making the transition to retirement. Undoubtedly, costly, unexpected disasters can happen, and they should be prepared for by having an added cushion for your nest egg.

Whether that entails having more cash than your original FIRE number target or reducing one’s withdrawal rate drastically (let’s say lowering it from the more traditional 4% to 2-3%), there are ways to ensure none of these costly liabilities crack open your nest egg, leaving you with few options other than heading back to work at a time when it may be even tougher to land a job with the salary you left before you hit the retirement button.

Indeed, catastrophizing can certainly rob you of much of the joy experienced in one’s earlier retirement years (the so-called go-go years, which are much lower for early retirees). But there are ways to gain greater peace of mind without having to return to the workforce. 

An anxious prospective retiree worries about hefty liabilities that could happen

In this piece, we’ll have a closer look at the case of a Reddit user, 51, who’s ready financially to retire but seems mentally unready, with three young adult children (heading off to college, which in itself is quite expensive) and the dread of something going horribly wrong amid retirement.

Notably, they’re worried, perhaps overly so, about potential liabilities that aren’t covered by insurance. Whether we’re talking about health issues or things like car accidents, there are definitely certain items that could absolutely crush a nest egg if the insurance coverage doesn’t cut it.

Undoubtedly, the occurrence of such liabilities would weigh heavily on the individual’s ability to keep supporting their children, and the ultimate fear is that they won’t be able to return to work (a realistic fear, in my view, especially with the longer-term rise of AI automation) so that they can rebuild the nest egg should it ever be cracked or completely demolished.

Indeed, these are fears shared by many retirees. And while it may seem like such anxieties are excessive, I do think an abundance of caution is never a bad thing. The risk of such nightmare scenarios can be mitigated in a number of ways.

Better insurance coverage can help ease some of the fears

Notably, increased insurance coverage (let’s say well more than $1 million for car insurance) is just one way to put one’s catastrophic fears to rest. Undoubtedly, the higher premiums can be well worth the peace of mind one will get, especially for a well-off early retiree such as our 51-year-old Reddit user.

Additionally, upgrading one’s health insurance plan could be another way to feel secure about their financial future. Though, health insurance rejections have been a hot topic in recent months, fuelling fears that even well-covered individuals may still be slapped with hefty out-of-pocket expenses for a future health issue.

In any case, a more padded emergency fund seems like the only way to guarantee complete peace of mind, given the uncertainties that lie in the future.

The bottom line

Though it’s tough to stomp out catastrophic fears in retirement completely, it does help to take steps to reduce them. In the case of this Reddit user, investigating better insurance solutions and being more frugal in retirement could help shore up extra cash to be reinvested for growth or added to the emergency cushion. Of course, the prospective retiree also has ample time to delay their retirement as they seek out a fatter nest egg that can better withstand the heftier risks.

Indeed, such low-probability, high-impact costs are still worth thinking about, especially with three adult children considered.

As always, anyone in a similar spot should speak to a financial planner, not just for tips on how to cut risks down with insurance but for how to deal with emotional concerns one may have amid retirement, whether or not they’re justified. 

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