About a year ago when we first brought you this story about retirement fears, we began with the question, “What are you afraid of?” Who could have guessed that today we would be facing a worldwide pandemic that has brought the economy to its knees, decimated retirement savings, and created a level of uncertainty that we could hardly have envisioned?
Today the issue of retirement fears is even more pertinent than it has ever been. With that in mind, as we revisit a topic that we wrote about in mid-2019 here at AgingOptions, we still agree with what we said then. The number one retirement fear, rightly or wrongly, remains running out of money.
Retirement Fears Occur When People Lose the Power of the Paycheck
That’s the conclusion from this article published last May on the Forbes website. Written by financial planner and Forbes contributor Joel Johnson, the article makes a predictable point but in a persuasive way. “As people enter retirement, they lose the power of earning a paycheck and the reality of 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.”
There’s nothing basically wrong with Johnson’s point, as far as it goes. Financial planning is important, which is why we strongly recommend that people sit down with a good objective planner and develop a financial dashboard to help you evaluate your finances and adjust as required. However, as Rajiv reminds us, financial planning and retirement planning are not the same thing. We’ll explain – and provide the solution to your retirement fears – in a moment.
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. (Remember, this was at a time when the coronavirus pandemic could scarcely be imagined.) Fidelity surveyed more than 1,400 adults ages 25 to 74 to measure their attitudes about their financial health, and their confidence – or lack of it – in their retirement future.
The survey found that 62 percent of respondents expressed confidence about their present financial health, but 75 percent either expressed no confidence or only a little in how well they would one day fare financially in retirement. Fidelity’s answer to this crisis of confidence sounds identical to Joel Johnson’s observation in his Forbes article: “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.” Fidelity says people often fail to plan because they either don’t think they need to, or else they feel they’re too far behind for a plan to make any 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. 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 comprehensive approach to health care planning is the only reliable answer, something a LifePlan addresses but a financial plan alone 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 and the Forbes article listed similar fears. 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 both lists.
Retirement Fears Replaced by Optimism – with a LifePlan
As we said, focusing all your retirement planning on finances is shortsighted. Even if you’re certain that your financial needs will be met, 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 reassuring news: all these components are part of an AgingOptions LifePlan.
According to Fidelity, 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 to experience that degree of confidence?
Two Important Retirement-Planning Announcements from AgingOptions
At AgingOptions our chief desire is to help you prepare for the kind of retirement you’ve always dreamed of having. Toward that end, we want to share two important announcements that are designed to facilitate your LifePlanning process even during this period when most of us are required to avoid gathering in groups.
First, Rajiv Nagaich has scheduled several of his popular, free LifePlanning Seminars in the form of webinars that you can watch conveniently at home. Simply visit our Events Page and register for the webinar of your choice.
Our second announcement: in cooperation with our partners at LifePoint Law, we are excited to launch a ground-breaking new service called the LifePoint Law Emergency Legal Kit. Without leaving your home, you can now consult with a LifePoint Law attorney who will work with you to prepare and sign a complete set of vitally important legal documents including both Financial and Healthcare Powers of Attorney, a Living Will/Advance Directive, a Will or Trust, and much more. Click on the link or call us at AgingOptions and we’ll explain this excellent service to you.
Reliable information has never been more important – and that’s our promise to you at AgingOptions and LifePoint Law. Age on!
(originally reported at www.forbes.com)