360° Coverage : FidelityVoice: How To Conquer Your Fears And Plan For A Happy...

2 Updates

FidelityVoice: How To Conquer Your Fears And Plan For A Happy Retirement

Apr 10 2014, 6:04pm CDT | by

Over the course of recent decades, we’ve seen a seismic shift in the nature of retirement. People are living longer. On average, a 65-year-old woman has 23 years to live; a 65-year-old man 20 years....

Filed under: news

 
 
 

27 weeks ago

FidelityVoice: How To Conquer Your Fears And Plan For A Happy Retirement

Apr 10 2014, 6:04pm CDT | by

Over the course of recent decades, we’ve seen a seismic shift in the nature of retirement. People are living longer. On average, a 65-year-old woman has 23 years to live; a 65-year-old man 20 years.1 And those years are often healthy and active ones. “In less than a century, we nearly doubled life expectancy,” says psychologist Laura Carstensen, director of Stanford University’s Center on Longevity. (Read a Q&A with Carstensen: “Envision your future realistically.”) “That is a stunning, stunning change. Now, that’s good, but it’s also challenging because there are no real cultural guideposts—and that creates anxiety.”

The new-normal retirement is not your father’s retirement. For most people, there will be no one day when work stops and retirement begins, but rather a continuum of less work and more leisure—or volunteer work. Nor will there be a gold watch and a pension plan. Only 30% of Americans can count on a traditional defined benefit pension, according to the Employment Benefit Research Institute.2 The rest will have to rely on a combination of Social Security and their retirement savings. And the responsibility for managing a variety of imponderables—from how long you’ll live to what the markets and your portfolio will do—falls squarely on you.

Beyond the “misery myth”

Taking control of your finances during this important turn in life’s road is daunting enough, but the way we engage emotionally with that transition further complicates the process. One of the biggest hurdles to overcome, says Carstensen, is a phenomenon she calls the “misery myth.” It turns out that many of us have a deep-seated, rather irrational fear of old age. Either we can’t fathom what our lives will be like, or we imagine ourselves very old, frail, and lonely—even though modern medicine is keeping many people vital and active well into their 70s and 80s. As a result of this mis-imagining, Carstensen says, we tend to either not plan or plan too conservatively. “Not planning is the single biggest mistake people make,” she says.

The solution is to engage with your future self as early as possible, says Carstensen. Researchers at Stanford’s Center on Longevity emulated this experience by putting students in a virtual reality lab where they could meet avatars that looked like them at their current and their older ages. Afterward the researchers asked the students questions about retirement planning. The results were arresting: Those who engaged with their older avatar selves planned to save twice as much for retirement as those who avoided them.

As people approach or transition into retirement, another common hurdle emerges. Psychologists call it loss aversion. “Over the years, as money has gone into your retirement account, you’ve hopefully made a point of not touching it,” says Eric Gold, a behavioral economist who studies the psychology of financial decision making at the Fidelity Center for Applied Technology. “But when you retire, all of a sudden you need to write a check out of that account. You wouldn’t think that this would be a problem, but it is. Spending your retirement savings isn’t an easy thing to do. People fear the unknown and they fear loss. It can make them feel anxious.”

Imagine your future

To succeed in the transition from work to retirement, it’s critical to imagine your future life as realistically as possible. What is it you really want to do? Perhaps it’s travel, or moving to a warmer clime or closer to your grandchildren. Perhaps you dream of a second career. Whatever it is, give yourself the time to envision it, to own it. Once that future self begins to take shape in your mind’s eye, the planning process becomes easier, maybe even fun. After all, it’s your chance to take control and realize your dreams for life’s next chapter.

Once you can imagine that future, it’s easier to begin the planning process, which can help counter our natural fears of the unknown. And remember, it is a process, and one that will evolve with your goals over the course of your retirement. The key is taking the first step. “Set up an appointment with a financial professional, and tell yourself: ‘I’m not going to leave that session until I have a discussion and come up with a plan,’” advises Carstensen. “Once you start that process, I think the odds of finishing it will go up really dramatically.”

Having a plan can also help you cope with loss aversion by letting you benchmark where you stand as you move through retirement. “People need guideposts,” says Carstensen. “If you have a plan that lays out where your accounts should be when you hit 70, 80, and 90, you can know if you’re on target, and not in a losing position. I think that’s very useful, both financially and emotionally.”

Get started

Ready to engage with your financial future? Here are the steps to take to get better prepared—and we can help.

Step 1—Develop a picture of your retirement.
/>
Think about what a successful retirement means to you. What do you want to do? Will you work? Volunteer? Travel? What will retirement look and feel like at age 70, 80, 90?

Step 2—Translate your picture into estimated expenses.
/>
Identify and divide your monthly expenses into “essential” (food, housing, clothing, health care costs, insurance, etc.) and “discretionary” (travel, entertainment, etc.). This way you can understand how much income you need to have versus how much you want to have.

Step 3—Understand your sources of retirement income.
/>
List your expected sources of lifetime retirement income—such as Social Security, traditional pensions, and annuities. Compare your anticipated monthly expenses with your expected monthly income payments to see if you have an income gap to cover from your retirement savings. Also consider your potential for a long retirement, and whether you have enough from reliable or guaranteed income sources to cover your income needs throughout.

Step 4—Develop a strategy to generate lifetime income.
/>
Build out a detailed retirement income strategy to generate the additional monthly income you believe you will need over your lifetime. That additional retirement income will typically come from a combination of regular withdrawals from your retirement savings and Social Security as well as traditional pensions and some type of guaranteed lifetime income product3 such as an income annuity4. How much monthly income will come from investment accounts and retirement income products will depend on your financial needs and product preferences.

Learn more/>/>

This article is also published on Fidelity Viewpoints.

Forbes and Fidelity Investments are independent entities and are not legally affiliated.

Investing involves risk, including the risk of loss.
/>

Where noted, the views and opinions presented above reflect the opinions of Laura Carstensen, as of January 5, 2011. These opinions do not necessarily represent the views of Fidelity or any other person in the Fidelity organization and are subject to change at any time based upon market or other conditions. Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
/>

1. Based on the Annuity 2000 Mortality Table, Society of Actuaries. Assumes a person is in good health.
/>

2. Based on March 11, 2011, survey of participation in benefits over time, among all employees at medium and large private establishments. Source: Employment Benefit Research Institute.
/>

3. Guaranteed lifetime income is subject to the claims-paying ability of the issuing insurance company.
/>

4. Investing in a variable annuity involves risk of loss. Investment returns, contract value, and, for variable income annuities, payment amounts are not guaranteed and will fluctuate.
/>

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

570751.7.2

 
Update
2

7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) an ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

7 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH17" ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Brain myths hampering teaching worldwide
London, Oct 19 (IANS) Myths about the brain are common among teachers worldwide and are hampering teaching, noted a study that called for better communication between neuroscientists and educators.
 
 
How a rare pathogen could infect the healthiest of people
Washington, Oct 19 (IANS) A unique evolutionary trait in a rare pathogen called Cryptococcus gattii allows it to infect even the healthiest of hosts through a mechanism that neutralises the body's immune response against it, a study showed.
 
 
Implantable eye devices that improve vision
Washington, Oct 19 (IANS) Scientists have developed implantable eye devices that improve vision and could soon become a viable alternative for ageing eyes.
 
 
Virus infection ups diabetes risk in kids
Taipei, Oct 19 (IANS) Children who have been infected with enterovirus are around 50 percent more likely to develop Type 1 diabetes, says a study.
 
 
 

Latest from the Network

Bush shoe-tossing painting hits record at Doha auction
Doha, Oct 15 (IANS/EFE) A controversial painting by Iranian artist Mahmud Obaidi, depicting an Iraqi journalist throwing shoe in 2008 at then US president George W. Bush, was sold for $62,500 at a Sotheby's auction in...
Read more on Celebrity Balla
 
US offers $45 mn bounty for eight terror leaders
Washington, Oct 15 (IANS) The US said Tuesday it is offering rewards totalling up to 45 million dollars for information on eight key leaders of the Al Qaeda in the Arabian Peninsula (AQAP) terrorist organisation. The...
Read more on Politics Balla
 
UNSC extends peacekeeping mission's term in Abyei
United Nations, Oct 15 (IANS) The UN Security Council (UNSC) has renewed the mandate of the UN peacekeeping mission in the Abyei border region between Sudan and South Sudan. In an unanimously adopted resolution, the...
Read more on Politics Balla
 
Ebola cases in West Africa could reach 10,000 per week: WHO
Geneva, Oct 15 (IANS) The World Health Organisation (WHO) has warned that the Ebola epidemic in West Africa could reach 5,000 to 10,000 cases per week by the first week of December. "Quite frankly, ladies and...
Read more on Business Balla
 
Turkey, Singapore sign strategic partnership agreement
Ankara, Oct 15 (IANS) Turkey and Singapore have signed a strategic partnership agreement to boost economic, political and cultural cooperation, as well as security collaboration, during the official visit of...
Read more on Politics Balla
 
Christina Aguilera is returning to 'The Voice' USA
Christina Aguilera will return to 'The Voice' USA next year. The 'Your Body' hitmaker, who previously shared a rotating spot on the judging panel with Shakira, has been replaced by Gwen Stefani this season as she is...
Read more on Celebrity Balla
 
Kesha's music producer hits back
Kesha is being countersued by her record company boss, Dr. Luke. The 41-year-old music producer, who runs Kemosabe Records, claims the 27-year-old 'Tik Tok' singer is a liar and is trying to extort him after she accused...
Read more on Celebrity Balla
 
Jason Derulo won't get back together with Jordin Sparks
Jason Derulo insists his split from Jordin Sparks is permanent. The 'Talk Dirty' hitmaker, who recently ended his relationship with the 'No Air' singer after three years of dating, has ruled out getting back together...
Read more on Celebrity Balla
 
Josh Groban feels 'very lucky' to be dating Kat Dennings
Josh Groban feels ''very lucky'' to be dating Kat Dennings. The 'Brave' hitmaker was very nervous before singing in front of the '2 Broke Girls' actress for the first time at the Carousel of Hope Ball in Beverly Hills,...
Read more on Celebrity Balla
 
Australian Richard Flanagan wins 2014 Man Booker prize
London, Oct 15 (IANS) The first Man Booker prize to allow American nominees was Tuesday night won by an Australian, with Richard Flanagan triumphing for a novel of love and war that tells the harrowing stories of...
Read more on Celebrity Balla