In theory, retirement is exciting, like a vacation or break – albeit a permanent one. For many, while retirement does bring a strong feeling of anticipation, it also brings apprehension and even dread.
You may ask yourself why anyone would be fearful of retirement. We spend a lot of time working with pre-retirees, helping them get ready for retirement, and would like to share some of the fears that have been discussed with us.
Fear of Being Financially Ready
This is the most common fear that is shared with us. This makes sense, as we are a wealth-management firm. Clients are used to sharing their financial dreams, goals and fears with us, and so it is no surprise that they readily share their financial concerns as it pertains to retirement. But there is also a bigger and deeper trend fueling this fear: in the past, more people relied on retirement income from defined benefit pension plans (employer-sponsored pensions with defined consistent income payments where the plan sponsor takes on the risk of ensuring payments are made). Today, retirement income has shifted to a much greater dependency on portfolios and investment markets. With recent market volatility, it would be naïve to think that when markets correct, retirement plans may not be at risk. The other trend stoking this fear is our longer lifespan. It is not unreasonable to assume retirement income may be needed until age of 95. This is because there is real increased probability of living to age 95. With longevity, comes the natural fear of running out of money before passing away.
The fear of being financially ready is real. However, there are steps that can be taken to alleviate this stress and to prepare:
- The earlier you start planning for retirement, the easier it is to adjust plans along the way.
- Being flexible in terms of a retirement start date really helps. Just like starting to save early can help a retirement plan, postponing drawing income from a retirement pool early can also be very helpful in ensuring more funds are available for all of your retirement.
- Consider pushing out receipt of government pensions like OAS and CPP to benefit from guaranteed increases for doing so.
- Budgeting in retirement is extremely important. Knowing what expenses are basic, discretionary and luxury can allow for adjustments as needed based on different portfolio experiences. For example, if markets correct strongly, it may be a good idea to cut out luxury expenses for a year or two until the portfolio has the ability to recover.
- Retire debt free. When planning for clients, we like to consider their homes as being an emergency asset they can tap into should they ever need it. Debt in a low interest rate environment can be easily absorbed by some in their budgets; however, increasing interest rates can be deeply detrimental to retirement plans as retirees are challenged to increase their income without taking more out of their portfolios.
- Having a tool that maintains a constant pulse on the health of your retirement situation, portfolio and income, allows you to answer the single most important question retirees want answered: “Am I ok?”. This is what Tall Oak Private Wealth’s proprietary Retirement VIEW approach strives to do.
Other Fears
Retirees can face many other fears such as the fear of identity loss. This is particularly true for those who have defined their working lives through their careers. They might find that transitioning from a workplace, where they are needed for their expertise, to retirement life can leave a void that is difficult to fill.
Fear of loss of companionship and being alone is another often shared concern. While this fear is obvious, the opposite fear, fear of companionship, can also be present. I remember speaking to someone who refused to retire because as she said, “I would rather work and hang out with my work mates than be stuck at home taking care of my already-retired husband”. While this is an extreme example, finding (or renewing) companionship with your partner may take work and can be a source of stress.
Some pre-retirees fear boredom – especially for those transitioning from very busy work lives. Some retirees minimize this fear by transitioning to part-time work, joining boards or taking on volunteer engagements. Others realize they enjoy the change in pace and may even find that their retirement lives are as busy, if not busier, than when they worked. Finally, some realize that they miss work too much and return for a period of time. The key to successfully transitioning to retirement is to afford the luxury of options and to be able to remain flexible and open-minded.
Finally, fear of degrading health (physical or mental) is another major preoccupying fear for many. There is a tremendous amount of literature on how to age well in retirement, with concrete action plans on how to keep both mind and body healthy through physical exercise, mental exercises, good diet and social circles.
While fear of retirement is a real thing, there are many steps that can be taken to minimize the stress and to allow those approaching retirement to truly focus on the joy and excitement of embarking on this wonderful next adventure.
At Tall Oak Private Wealth, we help many clients plan for, and enjoy, retirement. The first step we take in our proprietary Retirement VIEW approach is working with our clients to explore their unique definition of retirement. We also help retirees reduce their financial stress and answer the most important question they will face throughout that chapter: “Am I ok?”
If you would like to hear more about our Retirement VIEW, please click here to schedule a complimentary discovery call.
Information in this article is from sources believed to be reliable; however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the authors, Tall Oak Private Wealth, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Securities-related products and services are offered through Raymond James Ltd., member – Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a member – Canadian Investor Protection Fund.
The views expressed in this commentary are those of Tall Oak Capital Advisors as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Statistics, factual data and other information are from sources Tall Oak believes to be reliable but their accuracy cannot be guaranteed. This commentary is intended for distribution only in those jurisdictions where Tall Oak Capital Advisors are registered. Securities-related products and services are offered through Raymond James Correspondent Services Ltd., member Canadian Investor Protection Fund. Insurance products and services are offered through Gryphin Advantage Inc., which is not a member-Canadian Investor Protection Fund. This commentary may provide links to other Internet sites for the convenience of users. Tall Oak Capital Advisors is not responsible for the availability or content of these external sites, nor does Tall Oak Capital Advisors endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same Privacy Policy which Tall Oak Capital Advisors adheres to.
