What are you afraid of? Are there things that keep you awake nights or cause your knees to tremble just thinking about them? If you search online for most people’s Top Ten Fears, you’ll find a predictable list: public speaking, flying, snakes, heights, spiders, going to the dentist, and so on. But based on a pair of recent articles we’ve discovered here at AgingOptions, we think a more honest answer to the question, “What are you afraid of?” might be “Running out of money in retirement.”
Retirement Fears Occur When People Lose the Power of the Paycheck
That’s the conclusion we drew as we read this article published very recently on the Forbes website. Written by financial planner and Forbes contributor Joel Johnson, the article makes a predictable point but in a persuasive way. “Common fears among individuals run the gamut from public speaking to an extreme fear of heights to claustrophobia,” Johnson writes. But as people enter retirement, they lose the power of earning a paycheck, and the reality sets in that “what they have saved will be what they live on for the rest of their life. This causes some individuals to be overwhelmed with fear.” The key, the article suggests, is good advice. “Financial advisors, like psychologists and psychiatrists, can be instrumental in helping pre-retirees and retirees face their financial fears head on and provide confidence as they enter a new and exciting phase of their life.”
Let us state at the outset that there’s nothing basically wrong with Johnson’s advice – as far as it goes. Financial planning is an important part of comprehensive retirement planning, which is why we often recommend that people sit down with a good objective planner and develop what we refer to as a retirement dashboard, giving you the ability to gauge your financial health at every stage of retirement and make adjustments as required. However, if we’ve said it once, we’ve said it a hundred times: financial planning and retirement planning are not the same thing. In just a moment we’ll explain how a good financial plan becomes a vital component of a comprehensive retirement plan called a LifePlan. If your real goal is to allay your fears and enjoy a secure and fruitful retirement, a LifePlan is the answer.
Retirement Fears Common to Three-Fourths of U.S. Adults
To get a deeper picture of the financial fears facing retirees and pre-retirees, we took a look at the 2019 edition of Fidelity Investments’ Retirement Mindset Study. Fidelity surveyed more than 1,400 adults ages 25 to 74 to measure their attitudes about their financial health today, and their confidence – or lack of it – in their retirement future. The survey found that 62 percent of respondents feel confident about their present financial health, but 75 percent either have no confidence or only a little about how well they’ll fare financially in retirement. Fidelity’s answer to this crisis of confidence sounds just like Joel Johnson’s observation in his Forbes article: “With all this confidence about their current financial health, why all this uncertainty about retirement?” asks Fidelity. “The answer may be a lack of planning.” Less than one adult in five, according to the survey, has a written financial plan in place for retirement. The biggest reasons why people don’t plan, says Fidelity: they didn’t think they needed one; they didn’t know where to start; and they felt like they were so far behind in preparing for retirement that a plan would make little difference.
Retirement Fears: Four Big Financial Phobias
Revisiting the Forbes article, Joel Johnson lists what he calls the four most common financial fears people have as they peer into their retirement future. Naturally each of these – according to Johnson – can best be dealt with by meeting with a financial planner. The Forbes list of retirement money worries:
- Investment Loss. Retirees need to balance the need for security with the need to generate a reasonable return on investment. Too much caution can be just as risky as being too reckless.
- Running Out of Money. Johnson calls this “the number one subject that comes up – will I have enough money to live on for the rest of my life?”
- Fear of a Major Health Event. Johnson quotes a 2017 survey by the Insured Retirement Institute in which nearly 60 percent of adults ages 50 to 75 feel ill-prepared for a major health event. His advice, which we found simplistic for most middle-income retirees, is to set aside a reserve account to cover healthcare expenses. We think a more comprehensive approach to health care planning is the only reliable answer, something a LifePlan addresses but a financial plan does not.
- The Effect of Inflation. Inflation happens as prices rise and purchasing power declines, and it’s a legitimate worry for those on fixed income – especially today when retirement can last 30 years or more. Whatever else you do, make certain you are taking inflation into account in your retirement planning.
The Fidelity survey showed a similar list of retirement worries. Costs of health care and long-term care topped the Worry List, followed by fears about Social Security, concerns about outliving assets, and worries about living on a fixed income. Inflation also made the list.
Retirement Fears Replaced by Optimism – with a LifePlan
Like we said at the outset, focusing all your retirement planning exclusively on finances is foolish. What’s needed is an overarching plan, especially as you approach retirement. Even if you’re certain that your financial needs will be met over the coming twenty, thirty, or more years, there’s more to the retirement picture. For example, do you have adequate legal protection in place, which is far more than a simple will? Is your family fully aware of your hopes and desires as you age and will they be there for you? Have you considered your best options for medical coverage and your best housing plan, so you’re prepared for whatever the future may hold? If this seems like a lot to accomplish, we have terrific news: all these components are part of an AgingOptions LifePlan, a uniquely comprehensive, robust retirement planning strategy. Only AgingOptions offers it.
According to the Fidelity report we cited above, people with a retirement plan in place say they feel “in control,” that they “feel good about themselves,” and that they feel “relieved.” Nine out of ten feel confident about the future. Why not make it your goal this year to experience that degree of confidence? Find out more by attending a free LifePlanning Seminar with Rajiv Nagaich. Let Rajiv show you the process and answer all your questions in a lively, information-packed session – then the next steps will be up to you, with no obligation and no pressure. Visit our Live Events page for a current calendar of seminars, and then register for the date of your choice. Let’s make this the year you really begin the journey toward the retirement you’ve always dreamed of enjoying. Age on!
(originally reported at www.forbes.com)