Are You Feeling Pre-Retirement Jitters?

Are You Feeling Pre-Retirement Jitters?

August 07, 2023

Are You Feeling Pre-Retirement Jitters? 

Can you remember a time when you were truly fearful? 

When I was 11 years old, I received a phone call from a neighbor late one Saturday night with some terrifying news. At the time, my parents and my 14 year old sister were gone.  This was the first night that I was tasked to look after my two younger brothers. 

We lived in a rural area with very few neighbors. We had seven acres of land that surrounded our home. Lying in bed around 10pm I heard the phone ring. Startled, I wandered to the other end of the house to answer.  Mr. Carter said, “I just got a call from the Sheriff. There is an escaped convict in the area. Don’t turn on your lights.  Go around and make sure all of the doors and windows are locked.” And then he abruptly hung up the phone. 

I remember standing there speechless hearing the dial tone after he hung up. My heart began to race. I was all alone. My brothers 8 and 5 years old were sleeping. I didn’t think it was a good idea to wake them. What was I to do?  I remember grabbing my baseball bat and making the slow, fearful journey around our dark, large one story California rambler home.  I slowly made sure every window and door was locked. I was terrified! Every sound seemed to signal an intruder.  

About half way through my pacing I heard the sound of a helicopter overhead. It sounded as though it was right above the house. You can imagine the sound as is reverberated through the roof. I crawled over to the front kitchen window only to see a spotlight shining on our front lawn from the helicopter.  They were no doubt searching for this person. The light moved back and forth, over the top of the house, across the front yard and then to the back. I was paralyzed.  My worst fear was that this individual was going to break into the house and cause us harm. 

This was the first time in my life I remember being truly scared. The adrenaline was pumping, my nerves were on edge.  Every emotion was heightened.  It was a long couple hours before my parents and sister finally got home.  What an experience! 

Good News!  They did catch the escapee that night. It was a night I will never forget.  At age 11 years old I became acquainted with true fear.  

We all experience fear in different ways. I have cliff jumped on many summer vacations at Lake Powell, Arizona. What an incredible place! Standing at the top of a 30-40’ cliff and jumping into the water below. Now, that’s a different kind of fear.  

Most have stepped off the edge of a curb on a busy downtown street, only to quickly step back as a bus or truck wizzes by.  Your stomach leaps into our chest and you realize, “wo, that was close.” 

Fear can manifest itself in our financial lives as well. Losing a job, having bills you can’t pay, a foreclosure or repossession, a business failure, a bankruptcy or mounting medical debt. Even worse, having a loved one who needs long term care and then watching a hard-earned estate slowly evaporate over a series of months and years. I have seen families experience this and it is not only financially devastating, but emotionally exhausting. 

Consider the life of a pre-retiree.  American’s age 55-65, especially in the private sector, are faced with a rung of unfamiliar economic decisions and choices.  These choices are laden with new economic risks and threats.  What results is an uneasiness and fear of making a wrong turn. 

For example:  

  • When should I retire? 
  • When should I elect Social Security? 
  • What about pension elections and survivorship options? 
  • How about Medicare? 
  • What about my 401k? 
  • When should I sell the business? 
  • What about succession planning? 
  • Do I have a will or a trust? 
  • Should I be managing my investments differently? 
  • Do I have enough? 
  • Will I run out? 

We may start to feel a loss of control.  Our runway has shortened, and we feel pressure.  Many feel inadequate because the subject matter is not their area of expertise.  We don’t want to make a mistake, so we often do nothing.  This inevitably makes it worse and the anxiety grows. 

I describe this all as Pre-Retirement Jitters.  Have you felt them?  Are you feeling them now?  As a CPA and Managing Partner of a comprehensive wealth management firm on the west coast, I am acutely aware of pre-retirees experiencing these feelings.  I have engaged thousands of these individuals.  Their fear is real and their anxiety for the future is well grounded. 

Here are six economic risks that tend to amplify what we call “pre-retirement jitters.” 

Market Risk 

As we enter retirement our time frame shorten. Our ability to rebound from a significant market adjustment becomes more difficult if our assets are not positioned correctly. Can you imagine retiring in 2007 and not making proper adjustments a few years before?  Understanding sequencing of returns and withdrawal rate risk must be understood at this juncture. Popping the hood on your investment portfolio is essential in pre-retirement.  When was the last time you did an investment audit on your holdings? 

Survivorship Risk 

If you are in the retirement red zone, 5 years from retirement, what happens if the primary wage earner or business owner doesn’t come home? These are typically one’s best earning years.  Do you have life insurance in place?  If we are in retirement what about lost pension and/or Social Security benefits?  Having a financial strategy to replace this eventual lost income would be important, wouldn’t it? 

Long Term Care Risk 

The impact of a long-term care event can be devastating. Cost for care today can be $6,000 - $8,000 per month for home or nursing care respectively.  The average length of care at home is about four years and three for nursing.  Do the math!  This is a serious risk. 

“What are the odds?” you might ask.  The Department of Health and Human Services tell us that for a couple at age 65 there is a 75% chance that one of them will have a long term care event.  None of this is good.  Do you have a strategy to mitigate long term care risk? 

Inflation Risk 

Recent years have raised an awareness of the damaging impact of inflation on the American family.  My first tank of gas in 1976 was $.49 a gallon. Those were the days! Does anyone believe gasoline is going to stay in the $4-5.00 range? Living 20-30+ years into retirement without addressing this risk is less than smart.  How have you built this risk into your retirement budget? 

Longevity Risk 

Gone are the days when you retire at 65 and then pass at 72. We are living longer and with medical advances, the prospects of hitting 100 are increasing.  My own grandfather passed just shy of this 104th birthday.  I have clients who are well into their 80’s that say, “Mark, we never thought we would live this long” and yet they are living vibrant lives.   How are you addressing the fear of running out?  Have you built actuarial science into your plan? 

Legacy Risk 

Our objective is to keep the money in the family.  Remember, different asset classes pass to the next generation differently with respect to taxes. Understanding the role of wills, living trusts and power of attorney documents is essential to financial peace.  Most have put off the need for a living trust.  Have you?  

Each of these risks, if left unaddressed, can cause harm to one’s financial life.  Planning can help melt away those pre-retirement jitters.  Feeling financial fear for the future is a choice.  Effective holistic planning can provide a credible claim on financial peace.  Get started today.