Whether you’ve just started your retirement planning in Libertyville, IL, or have been retired for a while, running out of money might be one of your worries. You may have an established financial plan and plenty of money saved already, but the anxiety may be (at least occasionally) still there.
In fact, quite a large percentage of Americans are concerned about not having enough money to last for their entire retirement. So it’s not unusual anxiety! That fact itself can be reassuring. So can the fact that many people with comfortable incomes can live in retirement without drastic drawdowns of their nest egg.
But if you really want to stop worrying about running out of money, here are some tips about how to alleviate anxiety.
1. Plan for multiple scenarios
It may be a good idea to work with a CERTIFIED FINANCIAL PLANNER™ Professional in the Libertyville, IL area on a comprehensive financial plan. Financial planners are able to show you multiple scenarios and how you might be able to plan for them. Knowing worst-case scenarios can be a recipe to relax, once you know you’ll be fine if they occur!
Let’s say that your fears center around longevity. Maybe certain tables, like those the government uses for required minimum distributions (RMDs), indicate that you will live to 85. But you can’t help thinking, “well, what happens if I live to 95 or 100?” As a matter of fact, the average American lifespan has increased significantly since the 1930s, so these questions are very good ones.
Your financial advisor can run multiple scenarios for you. One could estimate your income through the age of 85, a second could forecast income through the age of 95, and a third the age of 100. In each, you’ll see the income available, and can reassure yourself that it’s enough.
The same can be done for any aspect of retirement. You can have a financial advisor run scenarios for spending on extensive travel, moderate travel, and minimal travel, for example.
2. Have a comfortable relationship with your portfolios
The next solution is to know how much involvement with your asset portfolio makes you the most comfortable. Some people like to follow every move of the stock market, every day. Other folks are very comfortable with a yearly check-in with their financial advisor (and may do that only for due diligence!).
Knowing how much is in your portfolio and the percentage you draw down every year can alleviate worry for people who like to follow their accounts. After all, it’s there in black and white that you have enough money.
For others, your financial advisor can advise you monthly, quarterly, and annually, reassuring you that you have enough.
3. Understand the relationship between your expenses and assets
Retirement can kick off worries about running out of money later in life partly because it can herald the beginning of a new stage – not earning money. You may be operating with a mindset of “save for retirement” as part of steady earnings from a salary or business. But in full retirement, your “earnings” may actually be stemming from your nest egg.
As a result, your anxiety may center around spending too much based on your asset level, even if you’re comfortable financially. People in early retirement may also spend more than they have been, on travel or new hobbies now that they have more time.
A CERTIFIED FINANCIAL PLANNER™ Professional may work with you on cash management so that your income and expenses track together and leave you with a comfortable amount of disposable income. That doesn’t change in retirement!
But if you’re concerned about spending too much in retirement, you may want to talk to a financial advisor about your retirement plans. Knowing firmly what your new expenses are projected to be vis-à-vis your income can set your mind at rest.
4. Consider strategies that increase your feeling of security
Your CERTIFIED FINANCIAL PLANNER™ Professional can also discuss specific strategies that may be able to increase a retiree’s sense of financial security.
One strategy, for instance, could be placing money in Roth 401(k)s or Individual Retirement Accounts (IRAs) for use in case of emergencies or as funds for later retirement, when you may need things like in-home care or assisted living.
If all your funds are in traditional 401(k)s, depending on your age, you will need to start taking RMDs or suffer tax penalties.
But Roth funds are never subject to RMDs. The choice of when to access them is therefore entirely up to you.
A second strategy might be to convert some assets to annuities. Annuities produce reliable and steady income. But annuities are not for everyone. A CERTIFIED FINANCIAL PLANNER™ Professional can let you know if they’ll work for you.
A third strategy? Working or starting a business. Working part-time in retirement is becoming increasingly common. You may not need to work financially, but may want to. Or, you may have always wanted to run a business and now have the time to do so.
Working can alleviate the anxiety of running out of money simply because it provides steady income – as well as the reassurance that you can still bring in money rather than simply draw it down.
5. Know what you financially can do and what you can’t
It’s also smart to know what your financial limits are in retirement, even if you are financially comfortable.
It’s increasingly common, for example, for grandparents to help grandchildren with higher education expenses. You may feel that your retirement funds should be used for this kind of help – or for charitable causes.
If you are financially able to help others and want to, that’s great. But the fact is, some forms of help (like financing a four-year college education) are very high-ticket items, even for folks with plenty of money.
In brief: knowing your financial limits can alleviate worrying about running out of money.
Whatever you do, try not to let your worries about money impact your retirement. With proper guidance and planning, retirement should be a time to enjoy life!
At Prism Planning Partners, we are CERTIFIED FINANCIAL PLANNER™️ Professionals committed to facilitating important questions so that we can help you explore all of your opportunities. We offer a broad array of financial planning and consulting services for our clients-including retirement, investment, and estate planning.
Contact us today and let us illuminate your possibilities!