Retirement Planning: The Emotional Side
Earlier, I authored an article: Retirement: A Financial Decision or an Emotional Decision? This article is a sequel.
The truth is, there is far more to the emotional side of retirement planning than many people would imagine. Or, if you are not an emotional person, the “subjective” side. When individuals and couples come to us asking for a retirement plan, what they have in mind are detailed reports with charts and graphs showing how their retirement and investment accounts will be used, answers on optimizing their retirement options for pensions, social security, the distinct types of individual retirement accounts, tax planning for retirement income distribution, and how each year’s income will affect things like health insurance premium tax credits or future Medicare premiums. Certainly, that is what we do. But before I put pen to paper, pull out the calculators and fire up the software, we have a heart-to-heart talk. Equations are only part of the decision-making process.
Let’s take social security planning, for example. The two big questions everyone has, are When is the best time for me to begin receiving benefits, and if you are or were married, which strategy is best for us to choose? Mathematically, I can clearly show you how to optimize your benefits, and if you live beyond life expectancy, it might be better to delay your social security benefits because you will get a higher monthly social security check which will continue to pay into your advanced years. But many people approaching retirement are concerned about how long they will live and what their quality of life will be. Will they be able to enjoy life the same way in their seventies and eighties as they do in their sixties? Is more money a wise trade-off for less time? It is heart wrenching to look into the eyes of a person who has been fighting a chronic disease and knows they will not live a “full” retirement. It is devastating to go to the funeral of a client and friend whom I’ve worked with for years, to hug and look into the eyes of their husband or wife knowing this (early death) is not what they expected. Years of hard work, saving and planning for retirement travels, looking forward to time with grandchildren, and no more job stress. Dreams of retirement are then turned upside down, and there is no going back.
So, circling back to the question When is the best time for me to begin receiving benefits is not only a question to be solved mathematically, but also a question that merits thorough and thoughtful conversation. Please don’t get me wrong, I am not saying that taking your benefits or using your money early is always the best answer. Often times it is not. Equally as serious are concerns that people have including outliving their money, as well as inflation eating away at the power of their life savings. It is scary to think that one could spend through their entire nest egg only to become dependent upon others. Financial dependence would not only be humiliating for most people who have worked hard their entire lives, but it also comes with a price that is greater than monetary. You are limited to the options that your source of money provides, whether that is government or otherwise. Independence becomes greatly compromised if you run out of money, and that would be a nightmare for anyone I’ve worked with.
Decision making for retirement planning is not easy, and certainly is something you cannot sort through by attending a free dinner seminar. Prudent retirement planning is as customized to each individual as we are unique from each other. The good news is that although retirement planning is complex, it is achievable. My advice to you is to enjoy the present and prepare for the future. Certainly, do the mathematical equations with probabilities and simulations to guide you through your choices. Thoroughly think through the “what-if’s” and the “what-when’s” to help answer the “what do I do’s”. Equally as important to the equations, probabilities and simulations is to talk through the subjective side, because retirement planning has a significant emotional side.
LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com TheWealthInformationLady.com SchulferAndAssociates.com
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
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