Is worry a secret of successful retirement planning?

A new report from the Society of Actuaries points out an interesting difference between retirees and pre-retirees. The latter, it seems, are bigger worriers.

For example, 63 percent of pre-retirees “expressed significant concern” about inflation, while 57 percent of retirees did. Similarly, 63 percent of pre-retirees were concerned about affording long-term care, as opposed to 52 percent of retirees. And so on, down the list.

Several reasons for this disparity suggest themselves. For one, the retirees may simply be more content with their lot in life. Or perhaps pre-retirees really do have more to fret about, due to the shaky job market, the disappearance of traditional, defined-benefit pensions, etc., etc.

Of course it’s possible that a little worry is good for us pre-retirees if it motivates us to invest more and plan better (and doesn’t paralyze us into doing nothing). Heaven knows the financial-services industry is doing everything it can to fuel our fears.

What do you think? Please let us know, below. Or join the discussions at our online retirement forum. —Greg Daugherty

Greg writes the “Retirement Guy” column each month for the Consumer Reports Money Adviser newsletter.

Comments

[Ken Hawkins]

First, there is the fear of the unknown. Retirees have first hand experience about living in retirement. Having greater familiarity and understanding of the issues reduces their concerns. Second, some retirees face their concerns head on and change their financial behavior. If they have a concern about running out of money, they cut back their spending. If they believe inflation is a big concern, they make changes to their investment strategy.

In all the studies about retirement preparedness, they will always conclude that people are concerned about having enough money for retirement. Guess what, people are always concerned about having enough money throughout their lives, not just at retirement. In a study done in Canada they found that people that are retireed have less strees about money than any other age group.

[jedelfelt]

The media and organizations in the “retirement business” — mutual funds, insurance companies, real estate developers, and the like — have instilled in consumers the idea that retirement is going to cost a bundle. This is because they are marketing a "dream retirement" that few will actually be able to afford.

The ultra-high standards of living that people achieve today using credit cards and other types of credit are based on the assumption that they will have an unlimited future during which they’ll tighten their belts and pay all the borrowed money back. Unfortunately, people can't carry this lifestyle into retirement unless they become rich, and that’s unlikely.

One of the biggest misconceptions about retirement that pre-retirees have is that they assume they’ll be much wealthier in retirement than they are now. They have this notion that in order to retire they must wait for the day until they have millions of dollars and no money worries. But, where do they get this idea? Who said you need millions?

The fact is that most retirees in America don’t have a million dollars. The Social Security Administration estimates that Social Security is currently the major source of income for almost two-thirds of America’s retirees. For one-third of retirees, it is in effect the only source of income.

The reason that retirees worry less than pre-retiree may in part be due to the fact that retirees have realized that they don't need the millions and that the "dream retirement" currently being marketed is just that: a dream. Instead they have found a retirement lifestyle that fits their budget and are content with what they have achieved.

Jonathan Edelfelt
Author of Who Said You Need Millions? Retirement Strategies for the Rest of Us
www.WhoSaidYouNeedMillions.com