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

 
 
 

28 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) and slashing the workforce o ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

8 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 ...
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

India to join Asian infrastructure bank
Beijing, Oct 24 (IANS) Twenty-one Asian countries including India, ready to join the Asian Infrastructure Investment Bank (AIIB) as founding members, Friday signed a MoU on establishing the bank.
 
 
Boom in dam construction threatens freshwater biodiversity
London, Oct 24 (IANS) An unprecedented global boom in the construction of hydropower dams, spearhead by developing and emerging economies, could reduce the number of rivers by about 20 percent and pose a serious threat to freshwater biodiversity, says a study.
 
 
Beetroot boosts athletes' performance
New York, Oct 24 (IANS) Forget energy drinks, athletes may now rely on a more organic drink to enhance their performance - beetroot juice.
 
 
Dark shadow of Ebola now a global threat: Trinidad PM
Port-of-Spain, Oct 24 (IANS) The dark shadow of the Ebola has now become "a real and imminent global threat", Trinidad and Tobago's Prime Minister Kamla Persad-Bissessar has said.
 
 
 

Latest from the Network

Second MERS case reported in Qatar
Doha, Oct 23 (IANS) A 43-year-old man in Qatar has tested positive for Middle East Respiratory Syndrome (MERS) in the second confirmed case of the deadly virus in 10 days, media reported Thursday. The patient had...
Read more on Business Balla
 
Two people die in Pakistan bomb blast
Islamabad, Oct 23 (IANS) At least two people were killed and 12 others injured in an explosion that took place in Pakistan's Balochistan province Thursday, media reported. The bomb was planted on a motorcycle, Dawn...
Read more on Politics Balla
 
Trott extends contract with Warwickshire till 2017
London, Oct 23 (IANS) England batsman Jonathan Trott, whose mental issues led to his abrupt departure from last winter's Ashes tour, has confirmed his successful comeback to competitive cricket by signing a new three-...
Read more on Sport Balla
 
Srikanth, Kashyap big movers in BWF rankings
Kuala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest Badminton World Federation (BWF) rankings released Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Alvin Stardust dead
London, Oct 23 (IANS) English singer Alvin Stardust died after a short illness. He was 72. Stardust's manager confirmed the news about his demise Thursday, reports mirror.co.uk. He was recently diagnosed with...
Read more on Celebrity Balla
 
Indian man reunited with family after 40 years
Dubai, Oct 23 (IANS) An Indian man, who had disappeared from his hometown in Kerala nearly 40 years ago, has been found by his family at a hospital in Dubai in the UAE, a newspaper report said. Now in his 60s, Abdulla...
Read more on Politics Balla
 
Srikanth, Kashyap, Saina rise in world rankings
Kala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest released Badminton World Federation (BWF) rankings Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Flintoff signs for Big Bash side Brisbane Heat
Brisbane, Oct 23 (IANS) Former England captain and all-rounder Andrew Flintoff, who retired from international cricket in 2009, Wednesday confirmed that he will play for Brisbane Heat in the Big Bash League (BBL) this...
Read more on Sport Balla
 
OPEC daily basket price falls again
Vienna, Oct 23 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $81.94 a barrel Wednesday compared to $82.09 Tuesday, the OPEC Secretariat said. The new OPEC...
Read more on Business Balla
 
Lopez to sign multi-million dollar deal?
Los Angeles, Oct 23 (IANS) Singer-actress Jennifer Lopez is reportedly in the final stages of securing a multi-million dollar deal to perform in Las Vegas. The 45-year-old is being offered $350,000 per show at The...
Read more on Celebrity Balla