Making Cents: Retirement Phobia
By John P. Napolitano, CFP®, CPA, PFS, MST
I’m not sure that there is such a word, but it’s clear that many experienced workers entering their 60’s begin contemplating retirement. Whether it’s brought on by the social security clock ticking, retirement rules where you work or just the desire to see what life could look like without work.
I see two main types of phobias about retirement. One is the fear of not having enough money. The second, though not always front of mind, is how to spend all of the free time that you will now have.
The first fear is easily quantified once you know what your annual cost of living will be. Note a few things when compiling this list. In retirement, every day feels like a Saturday... so it is possible that your spending may increase. Also factor in your wish list items- extended travel, family visits or other bucket list type of items that you may feel you can’t afford. If you start with a complete list... even an aggressive overestimate of your spending, you are building in a cushion.
Be sure to factor inflation and a reasonable rate of return on your retirement assets. While the forecast may look like a linear projection, in that you’ll assume an X% rate of inflation or return on your assets for each year- this isn’t likely to happen. To make it more realistic, do a simulation of real investment behaviors, which can range from large losses to large gains. This will help capture how things may act if you have a sequence of poor returns on investments for a few years in a row.
Consider a few wild card events. I’m not talking about winning the lottery or some other windfall but the exact opposite. Factor in the possibility of a long term illness or some other catastrophic event to both see if you can weather such an event and what you may do to protect against it. This exercise is like organizing your sock drawer. Great for a rainy day, but something that most put off as long as possible. Conversely, get a handle on this early on to understand the facts and your plan to help ease retirement phobia number 1.
The phobia of wondering how to fill your time will fade away once you’ve got a clearer vision for how you’ll fill your 168 hours per week when work is optional or done. Of course, continuing to work is a viable option if that is what you love to do. But try an exercise where money isn’t a part of the conversation, and ask yourself about the things that make you happiest. For many, it is more than endless rounds of golf or trips to the beach and includes meaningful things like volunteering, time with grandchildren or exercise.
Ask yourself this question: If tomorrow your MD told you that your life would end in 6 months... what are your regrets? What do you wish you had done? Then set out a plan to see if you can live like there’s no tomorrow.
John P. Napolitano CFP®, CPA is CEO of US Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John P. Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.