What Are Your Top Retirement Concerns?

Do you have retirement concerns?  If you’re like most Americans, the answer is yes. 85% of Americans have financial anxiety, according to this study from Northwestern Mutual.   We all have concerns.  It’s natural, and an expected part of our mental make up.  Concerns can escalate as folks approach retirement, and that’s ok, too.  What’s important is to think about those things that worry you the most, and determine if there are steps you can take to reduce your anxiety.

Today’s article will highlight the top retirement concerns, and share some ideas to reduce your anxiety.  One thing is clear, most of us need to reduce our anxiety:

Northwestern Mutual just published a fascinating study, based on 2,646 individuals surveyed earlier this year. That study forms the basis of this article.  Anxiety Is Increasing according to the study, with 36% saying anxiety has gone up in the last 3 years.  That’s long after the last “market crash” in 2008, so something else is going on.  Demographics are shifting older, and folks are starting to worry more.

The Negative Impact Of Anxiety

This increasing anxiety is impacting folk’s well-being, as demonstrated by these responses from the study:

Stop for a minute and re-read that list, slowly.

Moods  –  Happiness  –  Ability to Pursue Dreams  –  Health  –  Home Life  –   Social Life  –  Career.

All negatively impacted by financial anxiety.

Aren’t those the things that life is about?

Moods  –  Happiness  –  Ability to Pursue Dreams  –  Health  –  Home Life  –   Social Life  –  Career.

How concerning should it be that 2 out of every 3 Americans feel their anxiety is negatively impacting so many areas of their LIFE?  Those are fundamental cornerstones of a well rounded and enjoyable life.  It should be concerning, but folks just don’t seem to talk about it.  I’m concerned about it, so I’ve decided to do something about it.

The Top Retirement Concerns

I’ve decide to write about something that folks seem hesitant to talk about, and will use this article to write about the Top Retirement Concerns that many of us have.  It’s a topic we should all talk about.  We should work together to share ideas and approaches to these common problem areas.  Along with each concern, I’ll share a few ideas on steps you can take now to minimize the anxiety.

This article will talk about the things folks aren't talking about - your financial anxieties. Click To Tweet

Here, then, are the top retirement concerns from the previously mentioned Northwestern study:

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The Top 5 Concerns Folks Have About Retirement, & What You Can Do About Them. Click To Tweet

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The Top 5 Retirement Concerns

1. Fear Of The Unexpected

Having an unexpected medical expense, or other financial emergencies, is a common retirement concern among ~35% of respondents.   Major unplanned expenses can be devastating to your financial situation, and folks worry about it. The reality is that there is no way to know the future, and the uncertainty of retirement spending is one of the things that makes it so difficult.

To Minimize The Anxiety:  Prioritize the building of your Emergency Savings, with a target to build 6 months of living expenses in a safe, liquid account.  If you’re already in retirement, increase your Emergency Savings to 12-36 months of spending, depending on your risk tolerance. I know you’ve heard that before, but have you done anything about it?

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2. Insufficient Savings For Retirement

The second highest response was worry about saving for retirement, with 32% of respondents citing this retirement conern.  I’m surprised it’s not higher, to be transparent.  Any and all working Americans should be focused on saving for retirement.  It’s a huge challenge, and it must be taken seriously.

To Minimize The Anxiety:  Don’t just worry about it, do something about it.  Increase your automated savings into a retirement account by 1% this month.  If you don’t have an automated savings structure in place, then set one up this month.  Increase the amount of your automated savings by 80% of your next raise.  Do it for the next three years. Make it a priority to save, while you still have time.

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3. Outliving My Retirement Savings

None of us know how long we will live (“longevity risk“).  This makes the anxiety of “Outliving My Retirement Savings” an entirely reasonable retirement concern.   None of us want to run out of money before we run out of life, but how can we know for sure?  In reality, we can’t.  There are, however, logical steps we can take to minimize this risk.

To Minimize The Anxiety:  For starters, use a conservative “Withdrawal Rate”.  (note to self – write a future article on withdrawal strategies).  In our retirement planning, we’re targeting a 3% withdrawal rate, which is down from the “historically” safe 4% rate.  I’m concerned with today’s low interest rates (I think they’ll be here a while), and I’m also a bit bearish on my outlook for investment returns.  If outliving your money is a major concern of yours, consider a longevity annuity (give an insurance company money now, in return for guaranteed income later).  Study them fully before investing, but they are a tool that could reduce your anxiety in this area.  (Note:  if I were to begin investing in longevity annuities, I’d likely stagger the investments over the next 5-10 years given the low current interest rates, which reduce future payout guarantees.)

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4. Becoming A Financial Burden

None of us want to become a burden to our children.  In my view, a “failed retirement” is one in which a person had a lifetime to prepare for retirement, but chose to ignore their responsibility and ended up being a burden to their children.  I’m compassionate, and realize some folks simply have no choice.  However, I also suspect if you’re reading these words, you’re part of the population that wants to do the right thing.  Take the steps you must take now, and make the necessary sacrifices to prioritize your retirement savings.

To Minimize The Anxiety:  Prioritize your retirement savings over college savings for your children.  While your children can take loans to pay for college, you can’t take out a loan for retirement.  It’s a difficult trade-off, but you’re ultimately giving your children a gift if you’re able to avoid becoming a financial burden.  If you’re coming up short on retirement savings, plan to work longer.  Just realize, there’s a 60% chance you Will Be Forced To Retire Early, so don’t use that as an excuse to avoid taking the steps you should be taking today.

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5.  An Inability To Afford Healthcare

A justifiable concern, as I noted in Obamacare Is Falling Apart.  18% of respondents cited this retirement concern, and I suspect more folks would be concerned if they knew the realities of the private insurance industry.  This is among the highest concerns my wife and I have as we plan for retirement.  The current rate of insurance premium increases is clearly unsustainable, and no one really knows what’s going to happen.  One thing is for sure, costs are going to go up, and they’re already extremely expensive.

To Minimize The Anxiety:  If you have access to an Health Savings Account (HSA), consider maxing out your annual contributions and paying for your current health expenses “out of pocket”.  This will allow you to build a tax-free buffer to pay for future health care expenses.  Beyond that, make sure your retirement planning has realistic projections about health care cost inflation, and reduce your other spending as necessary to cover this critical element of retirement. Bottom Line:  you need to save more, and spend less in other areas.

Conclusion

My goal with this article is to educate you on the retirement concerns most of us have, and provide a few steps to reduce some of your personal anxiety.  Life is too short to allow financial concerns to reduce the enjoyment you get during the brief time you have on this marble we call Earth.  It’s time that we begin talking more openly about our concerns, and begin taking actions now to reduce the risks and concerns.

What About You?

Do you relate to the concerns outlined above?  Are there other concerns you have?  What are you doing about it? What’s the best advice you’ve received on how we should handle our concerns?  Let’s talk – I look forward to your comments.