Common fears among individuals run the gamut from public speaking to an extreme fear of heights to claustrophobia and the list goes on and on. You can ask any psychologist or psychiatrist and they will most likely tell you they are currently helping or have helped someone work through a genuine fear or phobia. 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.
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, thus changing their behavior. According to the National Retirement Planning Coalition, a Boomer Expectations for Retirement 2016 Study, only 24 percent of Baby Boomers are confident that they will have enough savings to last throughout retirement. However, encouraging news from the same study found that more than 8 in 10 Boomers who have worked with a financial professional feel they are better prepared for retirement as a result of their working relationship. Some of the common fears facing adults as they approach retirement:
- Investment Loss
Some people worry about the market going down and therefore, may put their savings in too safe investment options earning little interest. I’ve seen that this can be a huge mistake. It is important to talk to someone like a financial advisor who can calm your fears and suggest a reasonable balance of investment options based upon your needs and wants.
- Running out of money
The number one subject that comes up – will I have enough money to live on for the rest of my life? I recommend everyone having a financial plan. If you don’t have one, unfortunately, the uncertainty could cloud your judgment and I have witnessed individuals not always acting in their best interest regarding financial decisions.
- Unprepared for a major health event
Healthcare is a major concern amongst individuals heading into retirement. The U.S. Centers for Medicare and Medicaid Services reported the U.S. spends close to $3.5 trillion a year on healthcare. Insurance premiums go up every year and those who have Medicare have learned that unfortunately not all expenses are covered including long term care. The Insured Retirement Institute conducted a survey in 2017 amongst consumers ages 50 to 75 and found 58 percent believe they are only somewhat or not very prepared for a major health event. Based upon these fears, I would recommend setting aside a reserve account to cover healthcare expenses, especially those unforeseen at the moment.
- Effect of inflation
As many people have been living way into their 90’s, I think it’s likely that those who are in their 60’s could live 30+ years requiring more money to live on. Inflation is defined as a general increase in prices and fall in the purchasing value of money. Over time, the U.S. dollar buys fewer goods and services and therefore, I always suggest to my clients to account for this in their retirement planning.
Having a well thought out financial plan is a good way to help alleviate some of the common fears plaguing individuals nearing retirement. And, although even the most well analyzed and detailed plan may not alleviate all of your fears, it certainly could go a long way in diminishing some of those uneasy and stressful feelings you may have.