{"id":21751,"date":"2023-09-24T11:35:25","date_gmt":"2023-09-24T11:35:25","guid":{"rendered":"https:\/\/microloannexus.com\/personal-finance\/overcoming-the-retirement-cycle-of-fear\/"},"modified":"2023-09-24T11:35:26","modified_gmt":"2023-09-24T11:35:26","slug":"overcoming-the-retirement-cycle-of-fear","status":"publish","type":"post","link":"https:\/\/microloannexus.com\/?p=21751","title":{"rendered":"Overcoming The Retirement Cycle Of Fear"},"content":{"rendered":"
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\u201cI know what the numbers say,\u201d more than one client has told me after looking at a positive statistical analysis suggesting they\u2019ll not likely run out of money, \u201cbut I just don\u2019t know how to be comfortable spending in retirement.\u201d<\/p>\n

And who could blame them? Half of the financial world focuses on how woefully underprepared most Americans are for retirement and the other half fixates on a 3%, 4%, or 5% \u201csafe\u201d withdrawal rate\u2014designed to help retirees leave this earth with as much money as they saved for retirement. It\u2019s no wonder they\u2019re scared.<\/p>\n

Yet I think there\u2019s another factor in play here that doesn\u2019t bear any numbers or percentages, and that is the intensity of anxiety that grips many newly retired who\u2019ve crossed a threshold from accumulation to decumulation, and that is the power of disempowerment.<\/p>\n

The Power Of Disempowerment<\/h2>\n

It makes total sense. Someone who has been working for 30, 40, or even 50 years\u2014a genuinely productive member of society\u2014steps away from what is likely the height of their career accomplishments, peak earnings, and maximum saving years.<\/p>\n

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Despite being in the highest marginal tax bracket they\u2019ve ever been in, their varied income streams, tax-preferential savings mechanisms, and charitable giving provided flexibility at tax time.<\/p>\n

Sure, they\u2019d made plenty of financial missteps and investment snafus throughout their working years, but they had the time, income, and savings to make up for their indiscretions.<\/p>\n

Now it\u2019s no more high fives or pats on the back, no more W-2 income, much less (perceived) flexibility with taxes, subject to the whims of the market, and an abundance of free time to fret over it. Little to no control.<\/p>\n

Let\u2019s face it: Despite the blissful vision of retirement cast by the big financial companies\u2019 commercials featuring an endless cycle of golf courses, grandkids, sailboats, and marine mammals, retirement can be surprisingly disempowering.<\/p>\n

\u201cLifetime habits of discipline and prudence aren\u2019t easily dismissed just because you reach what you\u2019re told is a different \u2018stage\u2019 of life,\u201d Dr. Brian Portnoy, founder of Shaping Wealth, an advisory consultancy, told me. \u201cHabits are part of our identity, and each of us defends our identity fiercely.\u201d<\/p>\n

How, then, can current or soon-to-be retirees take these steps with confidence? How can they take the proverbial power back?<\/p>\n

Take The Power Back<\/h2>\n

The road to confidence in retirement is going to be different for each individual and family, but here are a few ways that anyone can remain empowered in retirement:<\/p>\n

1) Phase into retirement. <\/strong><\/p>\n

From a mental, physical, and financial perspective, there is a strong case for phasing into retirement. Financially, the benefits are many. Instead of flipping a switch from accumulation to decumulation, maybe you stop contributing to your retirement accounts but let them grow in this first phase before turning the income spigot on. Perhaps you delay taking Social Security retirement benefits a bit longer, increasing what is likely the only source of fixed income most have with an automatic inflation-adjusted increase.<\/p>\n

Physically, you\u2019re more active for longer, and mentally, your identity shift becomes more of a journey than a cliff dive.<\/p>\n

2) Never stop \u201cworking.\u201d<\/strong><\/p>\n

Part of this first phase in retirement might even be taking on a role for lesser pay that feels more closely related to your true identity rather than the utilitarian approach to work that maximizes pay for time. I have clients who\u2019ve used this retirement phase to teach at the college level, write a book, tend a farm, and start or partner with a non-profit that serves a near-and-dear cause.<\/p>\n

Even if you choose or are forced to give up a job<\/em>, some form of work<\/em> may still be the key to a healthy retirement. This is why I encourage all, and especially retired clients, to stay active in annual goal setting. Even if the goals are to visit each of the grandchildren at college, craft a vacation for the extended family, or lead a study at church or synagogue\u2014it\u2019s less important what<\/em> these goals are than why<\/em> you pursue them.<\/p>\n

3) Build an investment portfolio designed for retirement.<\/strong><\/p>\n

Your portfolio in retirement serves several different personal needs, but most walk into this phase of life with a singular approach to their investments. It\u2019s one of the reasons some people struggle to stick with a standard 60\/40 or 50\/50 or whatever ratio portfolio\u2014it is not clearly connected to their actual goals in retirement. And, from this singular portfolio approach, retirees are often asked to abide by a single number\u2014a percentage of their portfolio that is statistically tested to (hopefully) preserve their assets throughout retirement.<\/p>\n

The generally accepted number is 4%. That is, if you draw only 4% of your retirement portfolio annually, you will likely leave this earth with as much or more than you entered retirement with. My colleague and co-founder of SignatureFD, Doug Liptak, calls it \u201cThe 96% Problem,\u201d suggesting that the myopic focus on a sustainable withdrawal rate ignores the purpose of the money in the first place.<\/p>\n

\u201cThe stark reality of the 96% problem isn\u2019t just about unused wealth,\u201d Liptak says. \u201cIt\u2019s about unlived lives. It\u2019s about the moments we didn\u2019t seize, the hands we didn\u2019t hold, the places we didn\u2019t go, and the changes we didn\u2019t make. It\u2019s about looking back and wondering, \u2018Did I truly live?\u2019\u201d<\/p>\n

It\u2019s one of the reasons I advocate for investing in the language of life\u2014especially in retirement. Through a goals-based approach to investing, we can address more of the felt needs of investors in this phase of life by filling the following four \u201cbuckets\u201d:<\/p>\n