Financial Fears in Retirement

Will I have enough money to last the rest of my life? The number one fear facing retirees is whether they are going to have enough money in retirement. Ironically, that fear exists regardless of one’s actual worth. In fact, people who report assets of $10 million are more conce
ed about having enough money than people who have $500 thousand in assets. In fact, it is only when people report having in excess of $100 million do they relax about their financial future.

How could that be? The easy answer is Americans of all income levels spend more than they make. As your wealth increase so does your expectation of your minimal standard of living. What’s the point of having $10 million in the bank, you ask, if you can’t enjoy it?

To answer the question of whether or not you will have enough money to last the rest of your life, you need to explore where the fear comes from. Is the fear base on an assessment of your financial situation or is it a psychological issue?

In order to understand the fear of not having enough money, you need to look at two things. The first is to assess your actual financial situation. The second is to explore the fear itself for psychological conce
s.

The best way to minimize your fear about not having enough money to last the rest of your life is to spend less than you make. If you are retired and have income from investments, are you able to live only off the interest? (Financial advisors recommend not taking more than five percent of you portfolio every year. It’s assumed that the bad years and the good years will balance out, at that rate of withdrawal and you’ll have enough to last through your lifetime.) Do you need to tap into the principle on a regular basis? Ideally, you want to leave the principle alone and have it grow some every year.

If you’re going into do debt to pay for the lifestyle you want now, you have some legitimate conce
s. If you aren’t willing or can’t cut back on your expenses, explore ways you can increase your income, by either working or starting a business. You may and may find that working fills time you would have otherwise used spending money.

Compile a budget so you know how much is coming in every month and how much is going out. The most important aspect of the budget is to explore your fixed and discretionary expenses. Your fixed expenses are what you spend every month on housing and any outstanding loans. Most everything else is discretionary.

Review your discretionary spending. Look at how much you eat out and unnecessary shopping. Many people, especially women, shop when they are bored. If your are bored and shop to occupy your time, explore other activities that would engage your time. You might volunteer to shop for shut-ins. (Spend their money, not yours.)

Many financial conce
s are based on paying for healthcare and other old expenditures in the future. Based on your income, you may want to purchase additional medical and long term care insurance. It’s important to find a financial professional who can advise you on your current and projected financial situation and the best way to plan for your future as you age.

If you have done everything you can do to prepare for your future by seeking professional advice, understanding your financial situation. Cutting expenses and/or increasing your income, and you still have anxiety about money, you may want to explore it from a psychological perspective. Psychological money issues mean you use money to fix emotional needs. Examine your beliefs about money and possessions. Are you conce
ed about maintaining a certain lifestyle to impress friends or family? Do you believe you need to give your children money when they ask for it? Do you believe you need to be able to buy what you want when you want to have a sense of self-worth? Do you use money worries as a way to manipulate your significant other?

Another challenge facing retired adults is learning to live without earning money by working. Remember when you were child and asked your parents to buy you a toy. They responded with, “If you want the yo-yo, you’re going to have to earn the money to buy it.” Much of the identity of Americans comes from us being earners and providers. This is especially true for men. “If I’m no longer a provider, what value do I have?” It’s a different mindset to let your money work for you.

The transition to not working is a huge shift. Understanding the varied dynamics of your relationship with money will help determine the peace of mind you have in your later years.nn(This article is not intended to provide financial advice, but only offer information to help you explore your economic situation.)