5 ways to proactively face your retirement fears
A couple months ago, I ran into a friend at church who was back in town for a visit. He and his wife moved out east to be near family after retirement several years ago. I asked him how retirement was going, and he said that the financial side was working out great for them. “But no one prepared me for the psychological challenges,” he said. “It’s a lot harder than I expected!”
I hear similar stories from clients who worked their entire careers so they could retire in comfort. The things they were worried about before the big transition—like having enough money to cover expenses or surviving market volatility—don’t end up being the things they stress about after. At Sound Stewardship, we help our clients live with faith, not fear. We don’t want you to worry before or during retirement! To that end, here are the five pieces of advice I give clients to face retirement fears head on, so they can go into the next phase of life with confidence and contentment:
Get diversified.
Let’s start with the financial worries that take up the most space in retirement fears lists. Many clients are indeed afraid market fluctuations will hurt their portfolios. The instinct is to take a more conservative investment approach than when they were in their working years. I remind them that, yes, they are retiring, but their investment horizon is still to the end of retirement: 20 to 30 years—or more! We use a three-bucket approach (long-term investments, a high-interest savings account, and a checking account) to provide cash flow while keeping returns coming in from a well-diversified portfolio.
A similar risk to retirement portfolios is inflation. Due to inflation’s daily presence this year—we notice it every time we go shopping—and with the amount of news coverage it’s been getting, retirees are becoming more aware of its potential impact on their reserves. In fact, 25 percent of Americans now list inflation as their greatest retirement worry.1 Fortunately, we intentionally balance our clients’ portfolios so they can weather inflation upticks like the one we’re seeing. With a diverse portfolio, you should be able to face periods of post-retirement inflation without concern—as long as you’re also watching your expenses. Which brings us to…
Get budgeting.
According to the most recent Consumer Expenditure Survey, American retirees’ expenditures outpace income by almost $2,000/year.2 That’s a problem! Right before retirement, many experience the highest-income years of their lives, and they might head into retirement without keeping track of expenses. It’s easy to continue in a high-consumptive lifestyle that will eat away at retirement savings faster than expected. I encourage clients to start budgeting now, so they have that muscle built up by the time they retire. (If you need help with budgeting—either getting started or fine-tuning your process—here are some helpful tips and apps.)
But like my friend told me at church, the biggest challenges in retirement may not be financial at all. My clients are sometimes overly worried about the financial side of things as well. I remind them that we have a solid plan in place, and pass on advice I’ve learned from my clients on the other side of the retirement line, which is…
Get moving.
Clients are surprised when they ask for retirement advice, and I tell them to hire a personal trainer! But having some kind of consistent physical practice can make a world of difference when it comes to staying active, mobile and mentally sharp as we age. I encourage clients to start an exercise habit now. It will help boost your quality of life in the present and the future. It’s easy to assume activities like this will begin once they have time in retirement. The reality is that you’re unlikely to start. In fact, there are many indicators that activity levels usually decrease in retirement.
Get connected.
Retiring increases the probability of clinical depression by 40%. The quality of our social connections makes much more of an impact on our well-being than the balance of our bank accounts. We can feel cut off and disconnected when the daily social inputs we get from work disappear. Just like with exercise, I advise my clients to be proactive with their social lives. As we’ve pointed out elsewhere, close relationships are the single best predictor of life expectancy.
Think through what existing relationships and communities you need to nurture and where you might look for new ones. You might need to do extra work building your real-life social network if you are planning on moving for family or climate. Family is important and sunshine is nice, but we all need friends, too.
Get a purpose.
In our culture, it’s common to identify closely with our professions. Retirement can be destabilizing because it forces us to ask: Who am I if I’m not what I do? I encourage my clients to spend time ahead of retirement pondering that question. When people ask what you do…and you can’t respond with a job…what do you say?
What gets you up every morning? What are you passionate about? Having an idea of that answer—or at least being excited to find out—will make for a smoother retirement transition.
These five simple actions (diversifying your portfolio, budgeting, exercising, being socially proactive, and developing your purpose) can help banish retirement fears and get you ready for the best years of your life.
Want help preparing for retirement with confidence? Schedule a call with one of our advisors to develop a personalized plan that fits your life and values.
- “Rising inflation seen as biggest risk to Americans’ retirement plans in 2022,” AllianzLife.com, 13 December 2021. Accessed on 8 March 2022.
- “Table 1904. Occupation of reference person: Annual expenditure means, shares, standard errors, and coefficients of variation,” Consumer Expenditure Surveys, Bureau of Labor Statistics, 2020. Accessed on 8 March 2022.
