Why So Many People Have Anxiety Before Retirement

Worrying about retirement usually isn’t about money alone. It’s usually about uncertainty and losing control. In this video, we’ll explain why people who’ve saved a lot of money can still feel like they don’t have enough. The goal is to turn retirement from a scary question mark to a plan that you can actually manage.

Resources:

- Alliance of Comprehensive Planners: https://www.acplanners.org

- John's firm website: https://www.trinfin.com

- Find us on Facebook: https://www.facebook.com/friendstalkfinancialplanning

TRANSCRIPT:

Bridget: Hi, we've got Chris Pollard with us today, and we're going to be talking about retirement anxiety, which especially hits people before they retire. And when they first retire, they're just really anxious about this whole process. So, Chris, why don't you tell us what this is like, and then we can end up talking about what you might be able to do about it. Okay, Chris, go for it.

Chris: Sure. I see retirement anxiety taking a couple of forms. One is, and this is usually about 10 years out from retirement, a person will say something like, “I'll never retire.” Because they see retirement almost as this big black hole that they're going to fall into and it's going to swallow them up.

So there's the I'm never going to retire person is one way that'll manifest a little further out, usually. And then when you start getting closer, you'll see what I call the rolling retirement, which is, I'm going to retire in five years. I'm going to retire in five years. I'm going to retire in five years. And 10 years later, it's still like five years out.

John: Yeah.

Chris: So it's like this rolling target that just keeps moving, away from you, and you're kind of moving the goalpost on it. Those are two of the common ways. And sometimes people won't be confronting the specific thing that's making them either not want to retire or keep moving it out. They won't ever say, “Well, what's going on with the delay?” You said you're about five years out, five years ago. What's going on now? What are we thinking about?

Bridget: There’s another type, too, and that is something that John and I explored in another episode. People think they're going to retire at 65, but the actual age of retirement is 62.  And so, a lot of people are kind of forced to retire, or they get laid off at their job, but that whole job-hunting game doesn't have the appeal it used to have.

John: Yes.

Bridget: So it's not necessarily anxiety. But then once they start, they're just kind of shocked. They haven't able to be that proactive about it. But, okay, I'm retired now. I guess that's what's happening. So I'm interested in that.

Chris: Yeah, that's the other one. It's when you're on it. A thing that usually forces that is a career change, in that you were laid off or downsized. Something like that is super common. And finding a new job is difficult or can be challenging depending on the field you're in and the expectations for salary and pay and what you want to be doing with your life at the time.

Bridget: It takes a lot of work. It’s not easy.

Chris: Yeah. Finding a new job's hard. There's that aspect of it.

Bridget: Yeah.

Chris: And then there's also the medical and health. Some of these retirement things can be very sudden and a little bit more like jumping out of an airplane than people really think. And that could end up in a time of disorientation, which we don't necessarily prepare clients for. I think it's on the planner to say, “Hey, sometimes when people jump out of this airplane, their parachute’s a little twisted and they need to know how to untangle it so that they don't crash.”

And telling clients there is a period of disorientation that is very normal. Here's what you're likely to see. So I think engaging with the client is super important in those situations. And addressing the anxiety as it happens, because sometimes clients will not be anxious about it, then suddenly they're doing it, and all the anxieties just pop out of nowhere.

John: Chris, you mentioned “as it happens,” but in my experience, it’s more like “before it happens.” Knowing this is a possibility and talking about it is super important. And as you were describing jumping out of the plane, I'm starting to get the heebie jeebies, thinking, “Oh, man, that would suck. Is that what people feel like when they retire?” We know it's going to be okay, but putting yourself in that spot feels different. That was a really great analogy. And then it was the idea of being proactive.

Hey, this can be disorienting. When you jump out, you might bang up against the side or your chute might get tangled, but it's better knowing that that's one of the things and it's going to be okay. Then when it happens, it's not a surprise. So as you described, hey, these are things that can happen, and when it happens, don't worry, we got you. We've planned. And then when it happens, it's less panic time. Oh right, you said this was going to happen. It's still scary as heck, but not quite as shockingly scary, perhaps.

Chris: Yeah. And then, how can we identify behaviors that are likely to increase the length of time that that disorientation is happening for? Is there a way to truncate it?

Bridget: Right.

Chris: And there's a couple of things I found. One is, know what you’re retiring to, not what you’re retiring from. Are you running towards retirement or running away from your job? Or were you kind of pushed out the door? There're those. Okay, we thought we were doing one thing, now we're doing something else. Okay, pause for a second, do some reflection. And if you want to listen to prior episode about, what are the people, the places, the activities, the things and the inner workings and the mental aspect of retirement that we should focus on.

Writing some of those things out can be really helpful. What would an ideal retirement look like? Ideal doesn't have to mean perfect, but what would be meaningful and purposeful for me? Write out those things and then we can say, “Okay, now that I know what I'm going to do, how do we make the finances support it?” Okay, I have a focus point, which is living a good life, whatever that means for the individual. And then we can align finances and try to set up things on autopilot with the finances, so it feels consistent.

I don't know if you want me to talk a little bit about bridging that gap between I had income and now I have no income. One of the ways that I find client anxiety can be reduced is you send the client a paycheck every month from their investments or their savings, and you actually have a physical transfer going from one account that's automatic. One of the issues with clients saying, “Oh, just put all my spending for the year in one account,” or “Just send me a chunk of money, and I'll spend it down” is it tends to make people feel more frightened because they see the money going down each month.

And they say, “Okay, I started with $30,000, now I'm at $20,000, now I'm at $10,000. Oh, now I got to ask for a refill from my advisor.” Instead, just send the client each month exactly what they need to spend for normal, everyday expenses. And then it feels like there's still a paycheck coming in. And then when the clients see, after a while, okay, I get a consistent check for my portfolio. And if the market's doing okay and doing its average thing, generally my investments are staying the same or growing still as I'm pulling money out.

Wow, this thing works. But it takes a good year for clients to get used to that. I'd say a short disorientation period for retirement would be six to 12 months. I find it's often one to two years before the client really relaxes. You can see that the demeanor’s different in meetings. They're just used to it. But to help bridge that gap is critical. Okay, maybe we need a little bigger emergency fund than normal.

Maybe we're going to start this automatic transfer so that you don't even need to think about it. So let's simplify finances so we don't have as much to manage. What are the things that we can do to just make things really easy during that transition and get used to it? And then if we want to do things that are a little bit more off the beaten path, then we can transition to those later.

But focus on that transition time and build supports around yourself so that you can bridge that gap that occurs until you're used to it. And you actually believe that your retirement money isn't fake money. Because when it's in an investment account that you're not supposed to touch for your whole life and now you're supposed to touch it, that's a really hard transition for many people.

John: I'll tell people, Chris, that you don't necessarily think we're lying to you, but until you go through it, it’s hard to believe. Like you described, hey, the portfolio actually does go up over time, typically. It doesn't seem realistic at first. And then eventually you kind of start to believe what we say. And I've got a long-time client, and he’ll say to me, “I guess I kind of believe you now after 10 years of doing this.”

You start to see it. We see it all the time on our end of things, but it's really hard to believe it and to have that faith, kind of like jumping out of the airplane thing. You got to have that faith that it works. A lot of this has to do with that expectation. Hey, it might be two years before I'm comfortable with this. I just talked to a friend recently. She just retired, and six weeks in, she's feeling a little discombobulated. That’s to be expected. And so, it was surprising to her, but maybe if she'd been prepared for a year of it, it would be a little less anxiety inducing for her.

Chris: Right, exactly.

John: That's great. Well, I think that's a great place to wrap things up. Thanks so much for sharing. Our guest today is Chris Pollard. Chris practices in New York State, just outside of New York City. He also wrote a book recently that was recently published called Untangling the Golden Knot. We'll put a link in the show notes.

A lot of the great things Chris shared is in that book. And both Chris and Bridget and myself are members of the Alliance of Comprehensive Planners. So if you like what you hear on our show and the things that Chris shared, we're all taking on new clients. But you can also check out acplanners.org to find an advisor that thinks like us who lives in your area.

Bridget: And don't forget to subscribe.

At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation.  We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.