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Minimizing Stress during your Retirement Transition

Minimizing Stress during your Retirement Transition

All major life events bring some level of stress. Retiring has to be near the top of this list. A recent study by Allianz Life suggests that more than 60% of baby boomers are more afraid of running out of money than dying! For people aged 44-49, it is even higher at 77%.

So how do you minimize the stress of transitioning into retirement?

Here are 5 tips that have helped our clients over the last 25 years:

  1. Stress Test your Plan: Approaching retirement, most people do some sort of financial analysis to determine if they have enough funds to retire. The main fault with most analysis is that they assume you earn the same return every year and it is always a positive return. Obviously, this is not real life. There are years of both positive and negative returns, with those returns being big and small. To get a more realistic view of whether your nest egg will last, we would suggest that you have a “Monte Carlo” analysis run on your retirement plan. Monte Carlo will vary the returns year by year, both positive returns and negative returns. Monte Carlo is not perfect, but it will give a better idea if you can weather major downturns.
  2. Have a Plan B: After stress testing your plan, you will have a good idea of how much you would have to drop your monthly expenses should a major downturn happen. Review your expenses and see how could you adjust your lifestyle if this scenario were to occur? For example, could you drop your discretionary expenses, such as travel and dining out, enough to get your monthly expense down to the new monthly expense target? If not, you should consider delaying retirement. If you can work within this lower budget, you now have your Plan B. While no one wants to live on their Plan B, it should give you comfort to know you will still be ok should the economy get ugly.
  3. Income Game Plan: Your “paycheck” will start to come from your investments and not from working. After several decades of working for your paycheck, this change can be daunting. We suggest you create a plan that answers which investments, in which accounts, will your income come from for the next 2-3 years? (At the end of each year we recommend going over this.) Answering this question, will help provide peace of mind as the markets bounce around.
  4. Retire to Something: We have found the clients that thrive in retirement are the ones who have a reason for getting up in the morning. A part time job in an area they love, or volunteering are two examples. The key is not have your hobby (i.e. golf, tennis), fill 100% of your time that once was dedicated to working. Otherwise, your hobby will slowly turn from enjoyment to more like work. You have a lifetime of experience and knowledge. We encourage you to utilize this knowledge to help others in a way that excites you.
  5. Don’t Do It Yourself: We would highly recommend that you seek guidance with a professional who specializes in retirement income planning. Like every other situation that is high stress, that stress can cause cloudy thinking. Having a second set of eyes from the outside looking in, can be more objective and provide more clarity.

If you would like to talk about your plan for retirement, contact our team! We are here to help you find your Meridian.