There are many approaches to securing your retirement. The common approach is to save, save, save. Being an actuary, the financial background part of me can not stress enough the need to save if you want to retire at 65. However, for many, the emphasis to save brings a lot of stress and worry. Parents worry how they can raise a family, save for their retirement and save their children’s education, all at the same time. When they retire, they worry if they will have enough money to last through their retirement. They worry if they will outlive their retirement savings or if the market should crash and take their retirement savings with it. They worry about price of prescriptions, insurance and Medicare premiums increasing. There is always something to worry about in retirement, if we want to worry.
A few months ago, I heard a statement from a prominent personal growth speaker/writer that we should not worry about saving for retirement. I was shocked about how someone could say not to worry about saving for retirement. It must be that he does not know what he is talking about, especially because he does not have a financial background. I was thinking that many are not saving enough, so do not tell them not to save. Yet, when I am shocked, it is usually an opportunity to discover something new and different. I then listened again to what he said. He did not say “not to save”, yet to take the worry and stress out of the equation. This is a very important message because when we spend time and energy worrying, we have less energy for life, including energy that can be used to increase our income to be able to make saving easier.
We may think that worry and fear makes us more motivated to take action. Yet, as I discuss in an article about fear, it is our gut that tells us what to do while fear and worry can delay us from taking action. I have met many 50 to 60 year olds who say they have not saved for retirement and it is too late to save, so why try. The fear and worry about what they are going to do in retirement is stopping them from even coming up with a little nest egg to help them.
Even having a little nest egg could help them towards a phased retirement plan where they work part-time to make up for the lack of savings.
So how can you have a stress free and more secure retirement?
1) Quit the countdown
Many people are counting down the number of years to retirement. It even starts for some people in the late 30’s (just another 30 years left until retirement!). When someone hits their late 50’s, the countdown becomes stronger. Due to the risks involved, you should consider what would happen if there was a drop in the market that changes your retirement plans at the last minute. If there is a countdown to retirement, it is going to be more difficult to work longer than expected to solidify your retirement funds.
When you are counting down to retirement, your employer is going to pick up on this sign (even if you do not tell them). Look at it this way, if the company needs to layoff someone, guess who they would rather fire (i) a person who is waiting 2-5 years to retire with lack luster performance or (ii) an energetic younger employee who is trying to advance and succeed? So if you are counting down to retirement, you may find yourself in retirement sooner than you planned for (a major stressor).
2) Invest in yourself
When the focus is on retirement, you lose focus on opportunities to improve yourself in the meantime like keeping up your skills (e.g., through schooling or training) or starting in a new business. Yet, your investment in your skill set can be more important then saving for retirement. By keeping up with new skills and innovations, you are creating a person that anyone would want to hire at any age. Yet, if you sole focus is on retirement, you may find yourself coming up short in the skills needed and risk being laid off before you planned for. For example, if you are going to retire in 5 to 10 years, would going to training sound important? Probably not. Yet, with how things are changing these days, being even 2 to 3 years behind the curve is a big deal.
3) Do what you love and you will not want to retire
One reason retirement became popular in the 50’s and 60’s is because companies wanted to make room in their ranks for up and coming baby boomers. Thus, they wanted retirement plans to help transition an older employee out of the workforce to make room for younger employees coming up through the ranks. Before the pre-baby boomer generation, many workers did not even retire. In 1940, the life expectancy for a male was 62 years old while the average retirement age was 70 years old (see When do people retire? for more ). Over time the average retirement age has decreased while the life expectancy has increased. This has created a longer retirement and thus the need to save more. In recent years, we are starting to see a possible reversal of a longer retirement trend because employers need to keep older employees (via phased retirement and flexible part-time work schedules) just to have enough workers.
Because companies are going to be looking for older workers instead of shoving them out the door, there may be less of a need to retire. However, you may want to cut back to a part-time schedule (e.g., phased retirement) that will allow vacations and a weekly round of golf. This way you can feel like you are making a contribution and keeping up your social contacts by working part-time. It will also allows you to survive on a minimal retirement savings because part-time income and Social Security benefits can be more than enough to live on especially if your mortgage is paid-off.
4) Rethink what retirement means
Usually we think of retirement as the finish line to a more relaxed and stress free lifestyle where we are able to take vacations and be grateful that we do not have to work again. Retirement is seen as an entitlement for a long and hard career. For some, it may be a transition to the final stage of their life because they can not keep up with the grind of day to day life. Yet, if retirement is thought of as a finish line, then we create a mentality of the beginning of the end of our lives. I am not surprised to find more research that working in retirement years can make you live a longer and more productive life as pointed out in a U.S. News report. This is because work can provide a sense of worth and accomplishment.
For many, they find themselves working in jobs that they do not enjoy and counting down the days until they can retire. They live a less then desirable life to make ends meet thinking that retirement will bring them more joy. Yet, if retirement is a finish line, the joy is found in the instant that it is crossed. The question is then what? Taking vacations and sitting back may sound enjoyable. Yet, after a few years, it can become very repetitive and you miss the benefits that work gave you (social network, feeling of being productive, enjoyment of helping others, etc.). The key is balance. Not stressing out and working yourself to death just to relax in your retirement years where you might become bored. Why not balance work, vacation and enjoyment through out your whole life?
5) Take the worry and stress off your financial situation
When we are stressed about money, there is less energy for other things. By focusing your energy on money decisions, you have less energy for your family or work. I was talking to a client who is self-employeed the other day, I pointed out that by living paycheck to paycheck she is giving a larger amount of her energy to stress about money rather than to her new business. Thus, by having an emergency fund and living within her means (e.g. having a budget), she can refocus her energy on her business which will bring more prosperity her way.
Unfortunately, living paycheck to paycheck is a continual struggle that is hard to get out from, unless you either remove the stress or remove the conditions that lead to the stress. It is sometimes easier to remove the conditions (e.g., living paycheck by paycheck) by putting in controls (e.g., budgets and emergency funds). In actuality, you can live paycheck to paycheck and not have stress. Stress is created by you react to your situation. Thus, take the stress out of saving for retirement or living paycheck to paycheck and focus your energy on work and family. Some stress relievers that help me are breathing deeply and working out. It is a decision to be stressed or not. We can let stress control our lives or find a way to release it so we can focus our energy on more productive pursuits.
6) Focus on what you can do, versus what you can not
It may not sound like a big deal, yet there is a big difference in the following statements
“I have to cut back on eating out to save for retirement”
“I am going to save for retirement by cutting back on eating out”
The first statement is coming from being deprived, what you are giving up. By thinking you need to give up eating out to save, it is creating a sense of lack. The lack will drive of wanting it more and you will find ways to cheat on your plan.
The second statement is coming from a decision to choose saving for retirement over going out to eat. By choosing to save, it is not from lack rather from choice. It is creating a frame of mind that retirement is more important to you than eating out.
7) Consider about what you have versus what you are putting away
The key is gratitude . When you see that you already have an abundant life than it becomes easier to skim some off the top to save for a rainy day and for retirement. Yet, if you focus on the 5%, 10% or 20% that you are saving, you focus on what you are giving up. Thus, it is coming from lack instead of abundance. If the focus is on lack, then the stress will build and divert your energy from what you really want in life. If the focus is on abundance, your energy is pointed towards pursuits that will create more abundance in your life.
To summarize, if retirement is an insurmountable goal, it makes it harder to achieve your goals and the stress and worry will drain your energy. Thus, by taking the focus off retirement and living in the present, you can create energy that will bring you even greater prosperity.
So does this mean that I do not need to save for retirement? No. It just means to take the stress and worry off of it. You may not need to save as much if you plan to work in retirement. Yet, the risk of being disabled does increase as a person grows older. And, even if you have disability insurance to cover the risk, disability insurance will only pay out a benefit for a limited number of years because it is not suppose to cover your retirement years. So, you will need some savings in case you can not work in retirement even if you want to. And, if you plan to work in retirement and find that you do not need to work due to having enough saved, you will have more opportunities open to you (like doing volunteer work instead of working for a paycheck).
In the end, by focusing your energy in the here and now and away from worry and stress of what may happen in the future, you will bring more financial prosperity into your life.