TOP RETIREMENT FEARS
Confidence among American investors is growing. First there were financial setbacks caused by
the recession. Then there was a slow recovery period when what mattered most was getting
back on track. Now, more Americans are starting to believe they can be financially prepared to
retire.1 But will their money last for some undefined period that could range from one to 40
years? The uncertainty is frightening.
What are We Afraid of?
When it comes to retirement, the biggest fear Americans have is running out of money before
they die. According to recent research from the Indexed Annuity Leadership Council (IALC), the
next two biggest fears Americans share are being able to sustain their standard of living during
retirement and paying for potential health care bills. When you look at the data underlying
these fears, it appears they are pretty well-founded:2
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1 in 4 Americans (24%) have absolutely nothing saved for retirement
1 in 4 baby boomers (25%), the age group closest to retirement, have less than $5,000
saved for retirement
More than a third (37%) of millennials have absolutely nothing saved for retirement
If you do have some retirement savings, and if you have more than $5,000 in those savings,
then take some comfort that you’re in better shape than many others. However, it’s difficult to
know if what you have is enough. To help you measure your own circumstances, compare them
to data for today’s average retiree in the accompanying table.
How to Handle Your Fears
There are two ways to address our fears. The first is the healthy one: Admit we’re scared. It’s
good to recognize and face our fears. In doing so, we know what they are, we can figure how to
address them, we can get help from professionals with the expertise we need and together
create an action plan to eliminate or at least placate the anxiety we feel about retirement.
Proactive planning can go a long way to alleviating fears and feeling more confident and in
control of our future finances.
Then there’s the other route: Fear can lead to inertia. Inertia is directly related to loss aversion.
In other words, we feel that if we do nothing, retirement, that’s not at all true. Retirement in
this day and age can last 30 years or more, thanks to longer lifespans and modern medical
innovations. To provide income for many years after you stop receiving a paycheck, you have to
act early, invest wisely, be diligent with steady contributions and understand the impact that
long-term inflation can have on your savings nest egg.
Those actions can be overwhelming, and it’s understandable how they can cause inertia. But
because of the long-term need for retirement income, doing nothing is the one thing that can
make our fears a reality.
are paying your annuities.”_
What You can do
Of the two options for dealing with retirement fears, action is clearly the most effective.
Consider the following proactive strategies:
1. Max out contributions to qualified retirement plans. In recent years, only 10 percent of
401(k) participants and 43 percent of IRA investors contributed the maximum allowed
each year.5
2. Work with a financial advisor to determine the appropriate asset allocation for your
goals. Adjust your allocation as your circumstances change, not in reaction to the
markets.
3. Maintain an appropriate level of growth opportunities to help offset the impact of
inflation throughout a long retirement.
4. Add more guaranteed sources of minimum income to your retirement plan so that your
lifestyle isn’t affected by market volatility.
5. Stay the course. A study of 401(k) participants conducted two years after the recession
revealed that investors who continued making regular salary deferrals to their 401(k)
account, including their stock allocation, fared substantially better than those who
stopped contributing and/or sold their stock positions.6
1.
2.
Final Thoughts
We can’t possibly know all the unknowns, such as when we’ll die, how we’ll die or who will take
care of us if we can no longer take care of ourselves. We can plan, we can prepare, but we still
may not know all of these things. One tactic that can help is to add some certainty to those
uncertainties. For example, insurance vehicles like fixed index annuities offer the opportunity to
combine a growth component with income reliability. Consult with your financial professional
to find out what’s available and what may work best for you.
1
Ruth Helman, Craig Copeland and Jack VanDerhei. EBRI. March 2016. “The 2016 Retirement
Confidence Survey: Worker Confidence Stable, Retiree Confidence Continues to Increase.”
https://www.ebri.org/pdf/briefspdf/EBRI_IB_422.Mar16.RCS.pdf. Accessed
Sept. 21, 2016.
2
Indexed Annuity Leadership Council. 2016. "Retirement Survey Data."
https://indexedannuitiesinsights.com/retirement-data/. Accessed Sept. 21, 2016.
3
StatisticBrain.com. Jan. 3, 2016. "Retirement Statistics."
http://www.statisticbrain.com/retirement-statistics/. Accessed Sept. 21, 2016.
4
Kathleen Coxwell. NewRetirement. Jan. 27, 2016. "“You’ll Laugh (or Cry) When
You Read These Famous Quotations about Retirement.”
https://www.newretirement.com/retirement/thoughts_on_retirement/. Accessed Sept. 21,
2016.
5
Fidelity. Sept. 10, 2010. "Lessons from the downturn."
https://guidance.fidelity.com/viewpoints-workplace/lessons-from-the-downturn-sv. Accessed
Sept. 21, 2016.
6
Emily Brandon. U.S. News & World Report. "How 401(k)s and IRAs Will (and
Won’t) Change in 2016."
http://money.usnews.com/money/retirement/articles/2015/10/26/how-401-k-s-and-iras-willand-wont-change-in-2016. Accessed Sept. 21, 2
Content prepared by AE Wealth Management, LLC.
We are an independent financial services firm helping individuals create retirement strategies
using a variety of investment and insurance products to custom suit their needs and objectives.
Investment advisory services offered through AE Wealth Management, LLC. Investing involves
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constitute an offer to sell or solicit any offer to buy a security.
The information and opinions contained herein are provided by third parties and have been
obtained from sources believed to be reliable, but accuracy and completeness cannot be
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