I have seen the looks on their faces. With thousands of hours of client meetings, workshops, and public educational events, I have seen the troubled countenances and guarded expressions of wonderful hard working Americans who are plagued with what I call the Pre-Retirement Jitters. With the prospects of living in retirement for 30+ years, the decisions being made at this time of life are most consequential. My grandfather will turn 104 this year. Who would have ever thought he would live in retirement for 40 years!
With over 11,000 baby boomers retiring in American each day our workplaces and neighborhoods are full of individuals and couples who are facing a mirage of decisions and choices that have them paralyzed from moving forward in their lives. Call it what you like, but it can be an emotional traffic jam of pressing decisions and choices that have good, very successful people locked up in what I call “the paralysis of analysis.”
In the end, many are stuck and not able to progress. It could even be considered a type of intellectual constipation, a complete overload of information, often harvested from second rate online sources or from well-meaning friends or so-called professionals, trying to offer insight on how to navigate their pre-retirement lives. Unfortunately, the input often causes more confusion than clarity. What is needed is not good, but great decision. Regrettably, what often results are less than optimal results stemming from poor decisions.
Are you in this midst of this environment? If you are a pre-retiree you are likely wrestling with many issues and decisions. It can be overwhelming and can feel like an emotional struggle and maybe even akin to a frustrating game of “Where’s Waldo.” Finding reliable, coherent, competent, objective advice from a trusted source can be difficult. The issues facing pre-retirees are unique and require a unique perspective and approach. A financial professional who is willing to slow down, use non-financial language, listen intently and have the heart of a teacher are just a few of the attributes critical at this juncture, not to mention extensive experience in Retirement Income and Life Planning.
Let’s dive a little deeper to better understand the nature of the problem. This is essential to chart a better course. To understand its magnitude, consider the vast range of concerns, dilemmas and pressures and that face pre-retirees in the 5-10 years prior to retirement.
See the table below:
The complexity of issues facing pre-retirees can, not only be intellectually, but emotional draining to address. Consider simply the issue of retirement timing. Just selecting a date can be overwhelming. It’s common for someone to have worked at the same job or profession for more than 20-30 years. The workplace often represents someone’s social circle. Separating from this environment, associates and friends, especially if they do not have extended family or a civic or church community, can be traumatic. And remember the timing discussion is multiplied by two if a spouse is facing retirement as well.
Family concerns can be pressing as well. Family members, both immediate and extended are never short on expressing their opinions and advice on all thing in pre-retirement. These parties can create more pressure and confusion. To create more complexity, some pre-retirees may still be supporting children in college, raising grandchildren or even caring for a loved one who is receiving care.
The financial aspects of a pre-retiree’s life is central to the pre-retirement jitters. Although this is obvious for those entering retirement short, it is even more true for those who have accumulated what would appear to be a large nest egg, because more assets often results in more complexity. Questions of, “Will I have enough?” and “Will it last?” can weigh heavy on one’s mind no matter the asset level. Couples can often collect numerous qualified and non-qualified investment accounts including IRA’s, both traditional and Roth’s, as well as Defined Contribution Plans (401k, 403b, 457, etc..) all of which must be kept separate, by partner. There may be Defined Benefit Pension Plans with their associated survivorship elections and peculiarities.
One’s pre-retirement financial life is compounded with the question of how to convert assets to income. Of course, the objective of maximizing withdrawal rates, without running out of money later in life, is essential to this analysis. Conflicts between leaving assets in market-based accounts or transferring assets to safer financial instruments with guarantees heighten the debate. Typically, the earlier these strategies can be put in place, preferably years prior to retirement, the more favorable the outcomes.
The range and enormity of interconnected issues facing current day pre-retirees are immense. Are you facing any of these concerns, dilemmas or considerations? Unfortunately, here are 4 additional influences that can make this journey even more challenging. Consider the cacophony of voices, that although may be well-meaning, can serve to disrupt your pre-retirement journey even more.
Marketers – Amidst your pondering, you are being marketed to by a range of outside companies, vendors, financial institutions, and salespeople via email, voicemail, snail mail, billboards, television, newspaper, etc.. all largely trying to sell you stuff. This may range from financial and healthcare products, Medicare supplement insurance, pharmaceutical products, subscriptions, burial/final expense policies, 55+ retirement communities, long-term care protection and on and on and on. These inputs can make this process even more challenging. Beware! What can often result is what I call a pre-retiree financial junk drawer.
Financial Entertainers – There are a category of “Financial Entertainers” who peddle their information on the airwaves, both radio, and television. To be frank these individuals don’t know you or your situation. They bloviate rigorously regarding their financial advice and the course you should be taking. Certainly, some of this is valuable, but much in my opinion can be considered misguided in terms of how it specifically relates to you and to your life.
Financial Professionals – Unfortunately, some financial professionals should cause you to pause as well. Many focus on the accumulation of assets on the way up the retirement mountain but have little expertise on how to transition assets to income on the way down. In addition, since some are compensated on a percentage of managed assets, many are reluctant to recommend moving assets because they may not ultimately control them. This is a classic conflict of ethical interest that plagues our industry. Finding someone with a moral center is imperative! Therefore, finding a firm who is well versed in both fixed (insurance based) and variable (investment based) instruments and strategy is essential to achieving your desired outcomes. I call this the power of integration.
Further, speaking to your CPA or attorney can either be a blessing or a curse. Because I started my career with Ernst & Young, a national public accounting firm, I can poke fun at my former colleagues. CPA’s and attorneys focus on tax and legal advice and are generally not competent in the financial planning space. I just had a lunch this past week with a partner of a well-respected regional CPA firm in my area. As a firm, they are partnering with us to help their clients. The partner shared, “my clients think we understand the financial planning discipline, but we do not!” We all had a chuckle because it is common among CPA’s that this is not their area of expertise.
To be fair, there are some CPA firms who have incorporated competent planning professionals into their practice to serve their clients. These firms are out there, but they are rare.
Well-Meaning Family Members, Friends & Associates – Well-meaning family and friends can be just that, “well-meaning.” They love you, but rarely do they have the expertise necessary to provide good counsel on all things pre-retirement. Their experience is valuable, but take it in its limited context. Remain centered, independent and balanced in your judgment and you will make better decisions.
I had a senior client recently say, “My granddaughter works for Microsoft in Seattle and she’s really sharp, so I want to ask her opinion.” This well-meaning family member took this elderly client on a rollercoaster ride of rumor, opinion, and hearsay and in the end derailed the senior from developing the best financial strategy she needed. It was not a good outcome.
May I suggest, if you have a person whose opinions you respect, then have them included in all of your planning meetings so they can understand the full context of what you are facing, your goals and objectives and the magnitude of your decisions. Any advisor or professional with the heart of a teacher should welcome their involvement to help you and they come to the best conclusions.
The issues facing pre-retirees are probably some of the most consequential life decisions made. Since we all work with limited resources making the best decisions is critical to experiencing financial peace, so we can focus our lives in retirement on what matters most. These later years can be a great time of life, a wonderful time of transitions, new experiences, joys and a gateway to new memories, but getting there might seem like a minefield.
Rest assured there is a method to the madness, meaning there is a path to figuring all this out and creating great outcomes. We specialize in this area and enjoy helping the jitters melt away. To be successful you must engage 4 important truths:
- First, you must accept that the rules, risks, tools, and strategies in the accumulation phase are vastly different than the distribution phase of life. This new frontier will likely require a very different approach than much of what you may have found successful in your working life.
- Second, because of this paradigm shift, you need to decide to put your learning cap on. This is new frontier and you need to make education job #1. There is much you don’t know, so don’t do anything you don’t understand. You need to learn to think differently as you look through a new lens. This can seem intimidating, but you will be fine.
- Third, calm down and recognize this is a process, not an event. It’s going to take some time to work this through, especially if you and your spouse are both employed and facing these jitters together. Competing time frames can compound the jitters but understanding that this is a process will help calm the nerves.
- Fourth, to be successful it is highly advantageous to align yourself with a financial professional who can function as a coach and/or mentor to help you through this experience. There is a very specific checklist to consider in making this choice, but at least recognize the importance of collaborating with someone in this regard.
Happy trails and good luck on calming your Retirement Jitters.