Two out of three (67%) Americans fear running out of money in retirement more than they fear death, according to the Allianz Center for the Future of Retirement. That’s up from 55% in 2022.
“Americans are well aware that preparing to fund a decades-long retirement is a big undertaking,” says Kelly LaVigne, VP of consumer insights, Allianz Life. “Rising costs and ongoing economic uncertainty are making many people wonder if their savings will run out.”
Weighing most heavily on people’s minds are inflation, health care costs and the potential for a health crisis, how much support Social Security will provide, taxes, and general economic volatility.
Uncertainty about what to do when market volatility spikes is of particular concern to many. Nearly 60% of survey respondents say they feel anxious about their future financial well-being when their retirement accounts decline, with 50% saying they immediately check their retirement accounts after a market drop. Some 34% say they typically withdraw money from investments to avoid further losses when the market falls.
The good that planning can do
Similar to other surveys, nearly half of respondents in the Allianz research said they do not have a written financial plan. “Not having a strategy for retirement can lead to Americans allowing fear to take over their financial future,” LaVigne says.
SMI encourages all members to develop a written financial plan. (See Do You Have in Place the One Financial Essential for the New Year? and 5 Steps to Creating a Long-Term Investing Plan.)
SMI premium members have unique access to the comprehensive MoneyGuide investing/retirement planning tool. MoneyGuide enables you to create a financial plan, gauge its likelihood of success, and stress test it against various potential threats.
Managing market downturns
If you are particularly concerned about market volatility, “the bucket strategy” may be of interest. In retirement, you put two to three year’s worth of planned portfolio withdrawals in very conservative holdings, such as a money market fund or short-term bond fund. In a market decline, you draw from those safe assets, giving more aggressive parts of your portfolio time to recover.
We have written several articles about the bucket strategy, including A “Bucket Strategy” for Managing Cash Flow in Retirement. You may also want to explore Cash Flow Reserve, an offering from SMI Private Client, an affiliated but separate company from the SMI newsletter. Cash Flow Reserve delivers a “retirement paycheck” to older clients by managing their portfolios using SMI strategies according to principles of the bucket strategy. You’ll find an educational article about this offering in the resources tab of the SMI Private Client website.
The Bible says, “The plans of diligent lead to profit as surely as haste leads to poverty” (Proverbs 21:5). Developing a financial plan will do wonders for your success and peace of mind.
Have you developed a financial plan? If not, what’s holding you back?
