The following is adapted from Income for Life.
“When it comes to retirement planning, I’m just hoping it all works out.”
This statement was made to us recently by a client, and it reflects so much of the widespread mindset we see in people facing retirement. Many of our clients come to us with a host of questions that reveal a lack of confidence in their ability to maintain the strong self-reliance ingrained into them by their Depression-raised, WWII-forged parents.
The reality is most of what we learned about money, we learned from our parents. For our generation, a lot of those words of wisdom will no longer apply to a retirement that looks vastly different than it did just one generation ago. On top of that, personal financial education is basically non-existent.
Without that basic foundation, it’s no wonder that many retirement-age Americans feel deeply unsettled, and even afraid, of what comes next. And without the context of financial literacy, it’s nearly impossible to have the confidence to make the myriad of decisions you’re faced with as you approach retirement.
In the face of fear, soon-to-be retirees have three options: they can fight, take flight, or freeze. The choice they make—even if it’s inaction—has an immense impact on their financial futures.
Retirement is too important to simply “hope for the best.” Choose to “fight” instead of take flight or freeze, and prepare yourself for a future, not of uncertainty, but of opportunity and abundance.
Two Methods that Don’t Work: Flight and Freeze
The woman in the example above actually repeated her statement three times during our meeting with her: “I’m just hoping for the best.” She had no concrete goals; she knew that retirement had to happen at some point, but she felt stalled by fear and lack of knowledge, and had decided to forgo doing any real planning. In doing so, she was unprepared for the road ahead. She froze.
Just “hoping for the best” isn’t a plan. Neither is simply planning not to retire, which is another surprisingly common “plan” we hear. No matter how hard you try, you can’t take flight from retirement and opt out altogether. After all, sooner or later in their lives, everyone will need to stop working, and when that time comes, they’ll need money put aside to cover their basic needs, at the very least.
Fear is at the heart of these two decisions. But ignoring the situation or running away won’t alleviate your fear; it compounds it. While a problem is being avoided, it’s only growing larger. The stakes grow higher, and the time in which the problem can be effectively addressed shrinks.
People fail to set retirement goals as a direct result of their lack of confidence or knowledge regarding personal finance. This is not unusual. In fact, we see it all the time. Lack of a clear understanding around where retirement income will come from or how much will be available means they don’t have the baseline necessary to even begin thinking about realistic retirement goals. They lack a clear vision of what life will look like once they leave the workforce.
What “Fighting” Looks Like
Recently, we worked with a client who was very resistant to setting retirement goals. In the course of our conversation, it became clear that she was afraid she didn’t have enough money to retire. Her solution was to put off thinking about retirement at all and, instead, bury herself in continuing to work. She was in full-on “flight” mode.
Thankfully, we were able to convince her that it was much better to fight: to set clear retirement goals and pragmatically work through a budgeting process. Basically, “fighting” means developing a plan and tackling retirement head-on, which tends to increase people’s feelings of control, clarity, direction, and confidence.
Running through the process with our client in black-and-white terms demonstrated that, not only did she have enough money to retire, but she could retire as early as she felt comfortable. Seeing her goals on paper made retirement real for our client and, within a year, she was happily retired. Not only was she meeting her basic needs, but she also recently closed on a beautiful vacation property in South Carolina while remaining well within her retirement budget.
Sometimes the planning doesn’t work exactly the way you expect and goals can’t be reached in the timeframe you wanted. But just through the act of planning itself, you put yourself in the driver’s seat, knowing what steps you will need to take today in order to arrive at your desired destination in the future.
Getting a Realistic Vision of Retirement
In popular culture and business alike, there’s a lot of talk about setting goals. However, in practice, less than 80 percent of the population has written goals in any area of their life, much less constructive retirement goals. But when you write down clear goals and figure out the steps that you need to take to achieve them, you become exponentially better-informed, better-prepared, and hopeful. Most importantly, you put yourself in a stronger position to make informed choices that will have a positive impact on your future.
When you plan, at least you’ll have an understanding of what to realistically expect in retirement. Even if it’s not as successful a future as you had hoped, you’re relieved of the burden of imagining an even worse future. A realistic sense of the retirement income you need provides the information necessary to establish appropriate goals and alleviates the fear of the unknown.
The retirement income planning process can be complex. There’s no way around that fact. But the most successful retirees are those who are open to the idea that they don’t know everything, and seek help from qualified experts—legal, accounting, financial, insurance, and more—to help develop an overall retirement plan.
Stand Your Ground
In reality, planning for retirement is never as daunting as it looks. But when someone facing an uncertain future sticks their head in the sand and avoids that uncertainty, they are making it harder to achieve success.
In committing to education and planning, you may not always get the answer you’re looking for, but there is nearly always a way to reach the goals you set if you remain adaptable and willing to learn.
Don’t let your fear tempt you into freezing or running away. Stand your ground and face your fears head-on. In the end, you might discover that they’re not that scary after all.
For more advice on retirement planning, you can find Income for Life on Amazon.
Joseph DiSalvo, ChFC, AIF and Marie L. Madarasz, AIF of Quest Capital & Risk Management, Inc. are committed to bringing their clients the clarity that will promote and enhance confidence in the future. For more than two decades they have used a proven process that helps clients think through how best to structure and manage their resources in order to produce a growing stream of retirement income for life. As experts specializing in all aspects of Retirement Income Planning, they are passionate about the coordination and integration of their clients’ income, investment, and tax planning strategies in order to help clients live the life they’ve worked hard for. Joseph and Marie are strong advocates of financial education, seeking to teach others how to achieve sustained success and lifelong prosperity.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.