No boss, no responsibilities, no soul-crushing 40-minute commute across town — what could be less stressful than retirement? At the risk of bursting your bubble, consider this: Just because you reach retirement, doesn’t mean stress just melts away. Your leisure years can bring an entirely different kind of stress, and most of it is financial. But have no fear. We’re here to help you defeat the financial retirement stressors that can affect your wealth and health.
How stress effects health
Any kind of stress, whether financial or otherwise can cause symptoms that negatively effect your overall health. According to the Mayo Clinic, stress has been shown to affect your body, mood, and behavior; contributing to health problems such as high blood pressure, heart disease, obesity, and diabetes.1
Don’t suffer unwanted health issues due to stress. With the right tools and knowledge, you could reduce your stress and be on the path to living your retirement dreams.
Here are some main sources of retirement stress and ways to deal with them.
1. The realities of a fixed income
Managing your day-to-day expenses on a fixed income can be stressful, but ensuring your basic needs are met could go a long way in helping you reduce your overall stress levels.
- Create an income floor
Steven Sweeney, Certified Financial Planner®, Chartered Financial Consultant®, Chartered Life Underwriter®, Retirement Income Certified Professional® and director of Advanced Markets at Transamerica suggests creating an income floor that matches day-to-day expenses (housing, food, clothing, gym memberships) with guaranteed sources of income (Social Security, pensions, etc.). This could allow more flexibility with investing other assets and taking on more risk. This way you know your expenses will be covered, while giving your money a chance to grow.
- Find a financial product that deals with taxes and inflation
And what about taxes and inflation? These are common drains to fixed retirement savings. Sweeney says, when it comes to taxes and inflation, it’s the unknown that causes stress. What will happen to the tax rate or the rate of inflation in the uncertain future? How will this affect your savings? Sweeney says one way to head this off is to look for financial products that are constructed to address these stressors. For example, you can choose products that leave assets in a qualified, tax-free account as long as possible or leverage taxable investments managed to minimize for tax efficiency. For inflation, there are products that adjust overtime to balance growth and risk as you approach and eventually live in retirement.
2. An unpredictable market
Many retirees still have investment assets being affected by the risks of an uncertain market. The classic advice on dealing with this risk is diversification of investments. But how?
- Bucket your assets
Sweeney outlines a strategy called “bucketing.” Bucketing manages assets for different time frames: one to three years in cash, three to five years in fixed instruments, and five or more years with equity exposure. This allows you to feel secure in the short term while leaving opportunity for growth in the mid-term.
3. Expectations versus reality
You might spend a good chunk of your working life daydreaming about retirement. But very few of us will be able to realize all of our retirement fantasies. Dealing with the reality of retirement versus your expectations can become an unexpected financial stressor. Luckily, it’s one you can deal with.
- Visualize your unique, realistic retirement
Say you’ve always dreamed of owning a boat in retirement. But now that you’ve started planning your post-career finances, you realize owning a boat isn’t feasible, at least not right now. What do you do? Instead of looking to social media, movies, or television to tell you what your retirement should look like, try to figure out the essence of your retirement dreams. Is your dream more about owning a boat or being near the water? Is it more about having a place to gather with family or meeting new friends in the boating community? Once you discover the essence of your dreams you can make realistic financial moves to help achieve those dreams. For example, you could work part-time as a touring boat captain, or volunteer with a program that teaches young people to sail or canoe.
- Volunteer or work part-time
As suggested above, volunteering or working part-time in retirement is a great way to ease financial stress. While volunteering has been shown to ease stress in general, and part-time work allows for social interaction and a little extra income, doing either could also allow you a chance to get involved in an activity that would otherwise not be financially feasible. From working at a ski resort, or living and working in a park, to volunteering in exotic locales; you could satisfy some of your retirement dreams without breaking the bank.
4. High health costs
There’s no way around it — in retirement you will need healthcare and you will probably need more of it than you think. Healthcare is an expensive and complicated world to navigate, making it a significant financial stressor. Here are three keys to consider.
- Understand your Medicare gap
Sweeney suggests first understanding the options available to supplement Medicare. Do your research and talk to your financial professional to plan for how to best supplement your Medicare.
- Plan early for long-term care
Long-term care goes beyond skilled nursing care for short-term stays and likely isn’t covered by health insurance or Medicare, says Sweeney. And that uninsured expense could affect many of us. According to the Genworth Cost of Care Survey 2018, the annual cost for a nursing home care is $103,386 for a private room.2 Luckily, there are options that can help ease the financial stress of long-term care. There are independent long-term care policies; long-term care riders on life insurance policies, and some annuities offer long-term care waivers, providing additional access to the cash value of the policy. Sweeney says, the key to managing the cost of long-term care insurance is to plan early and allow policies to build up cash value while keeping premiums to a minimum.
- Stay healthy
This one’s a bit of a no-brainer, but it’s worth mentioning. Reducing your healthcare needs with lifelong healthy habits can fight financial stress caused by healthcare costs. In other words, if you stay healthy, you will likely have less financial stress. And you’ll likely be able to more fully enjoy your retirement — whatever you decide that looks like.
As you can see, there are many sources that can cause stress in retirement. Try taking small steps that will help you reduce stress and achieve your retirement goals.
Things to Consider
- Keep fixed income and high health costs in mind when making a financial plan for retirement
- Consider the realities of retirement versus expectation
- Work with your financial professional to plan for the financial obstacles of retirement
1 “Stress Management,” Mayo Clinic, April 2019
2 “Cost of Care Survey 2018,”Genworth, June 2018
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™, and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Neither Transamerica nor its agents or representatives may provide medical, tax, investment or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.