Financial Anxiety Skyrockets: Why You Are Worried Even if You Have Saved More than the $14,500 Median

Is the retirement crisis real?  Whether or not you yourself are suffering, financial anxiety is acutely felt by many Americans. Research from the Employee Benefit Research Institute (ERBI) finds that the median retirement account balance for households led by someone between the ages of 55 and 64 is a mere $14,500. If you have more than that, and it is likely that you do, give yourself a big pat on the back. However, even if you have hundreds of thousands more, you are probably still feeling financial anxiety. According to the American Psychiatric Association’s annual survey financial anxiety is sky rocketing. Two-thirds of their survey respondents report worries about their ability to pay their bills.  And, a Willis Towers Watson survey found that only 35% of workers report being satisfied with their financial situation — a drop by half who felt satisfied two years ago.

Why Such Despair and Financial Anxiety?

Recently the Aspen Institute hosted the Aspen Leadership Forum on Retirement Savings to analyze the problems and identify solutions.  The forum brought together thought leaders from business, government, academia and advocacy. They identified at least 9 major problems and ways to ease financial anxiety.

1. Need Ways to Create Stable Lifetime Income

Even if you have saved enough, it can be overwhelming to try to figure out how to make those assets last for the 20 or 30 plus years you will spend in retirement. What to Do: Educate yourself about the best decumulation strategy for you and your retirement needs. You need a plan that lets you maximize your spending while retaining any financial legacy you want to leave to heirs. You also want to minimize risk to your assets while fostering enough growth to keep pace with inflation. Phew! That is a tall order. Here are tips for creating a retirement income strategy and here are 12 retirement income strategies. However, in addition to learning as much as possible yourself, you may want to consult with a certified financial advisor.  Boldin has introduced a new advisory service through a subsidiary called Boldin Advisors. The service offers financial advice and guidance from a certified financial advisor (CFP) who will work with you and use the Boldin Retirement Planner and PlannerPlus to enable you to have a secure future.  Learn more here.

2. Lengthening Life Spans

It is generally a great thing that we are living longer than ever before. The only downside is that more years of life means we need more in retirement savings and better ways of making sure our savings last as long as we do. What to Do: Have a really good retirement plan, keep it up to date and be prepared to fund a really long life. The Boldin Retirement Planner allows you to create a highly detailed plan and set your own longevity goals.  You might also want to explore longevity calculators.

3. Need Better Access to Retirement Savings Plans

Research indicates that not enough people have access to employment retirement savings plans.  Currently only half of workers have workplace retirement plans and the growth of the gig economy means that this percentage is likely to drop. It is proven that people will do a better job saving for retirement if plans are low cost, automated and part of their work experience. What to Do: There is much discussion about introducing state or federal policies to better encourage retirement savings.  In fact, a handful of states have programs to automatically enroll workers without coverage in retirement savings programs.  However, for most of us those developments are likely far off in the future, if they happen at all. So, it is critically important to take responsibility for your own savings now. While workplace retirement plans do make saving easier, there is nothing stopping you from saving as much as humanly possible.  You can open tax advantaged IRAs, engage in catch up retirement savings and even just save in any way you can regardless of the tax benefits.

4. People Are Unclear About How Much Retirement Savings They Need

Rules of thumb — if you know them — are not an entirely adequate way to predict how much savings you need. There is simply not any one magic number that works for everyone. And, the calculations that go into figuring out how much savings you need can be complicated and reliant on assumptions — information you have no possible way of actually knowing — like how long you will live. What to Do: Luckily, some online tools make it easy to figure out how much you are likely to need.  However, be wary of simple retirement calculators. Do look for comprehensive and detailed systems like the Boldin Retirement Planner — the most detailed system available for free online.

5. Wage Growth Remains Low

More and more people are employed.  However, wages for workers are not growing at a rate that makes saving for retirement easy. What to Do:  This is probably the hardest thing on this list to overcome.  Trying to save when you simply don’t make very much money is maddening. There are two tricks:

• Start small and just save whatever you can.
• Make a really big change: move somewhere less expensive, get a second job, invest in yourself so that you can have a job that will enable you to save.

Did you know that more than 40% of Americans are unable to cover an unexpected $400 expense?  These households often turn to their retirement plans — eroding retirement preparedness. While there are penalties associated with withdrawing early from retirement accounts for emergency spending, if this is the only money people have access to, it will get used. Research from Pew Charitable Trusts suggests that six out of 10 households report a financial shock such as a hospital stay, a drop in income, death of a spouse or a major home or vehicle repair each year.  These events are both emotionally and financially draining. What to Do: There is talk about giving tax incentives to people who have emergency funds or to eliminate the penalties for withdrawals, but again, this is unlikely to happen in the short term. So, you need to take it upon yourself to make sure that you have an emergency account.  And, experts recommend that you have far more than just $400 on hand.  They suggest that you keep six months of living expenses in an account that is readily available to you.

6. Consumers Are Paying More for Their Own Health Care

Health care is becoming more expensive and employers are shouldering less of this burden than ever before. This exploding expense for many households just makes it harder to save for retirement. What’s more, almost half of Americans under age 65 are enrolled in a high-deductible insurance plan.  And, since patients must pay thousands of dollars in care before reimbursements kick in, these policies can leave you vulnerable to financial shocks. What to Do: Have an emergency fund and budget!

• Under 65? If you are under 65, make sure that you adequately budget for your out of pocket healthcare.  And, pay special attention if you plan to retire before you become eligible for Medicare.
• Over 65? You need to know that out of pocket healthcare costs are immense.  Medicare does not cover everything.  In fact, EBRI analysis suggests that a 65-year old couple desiring a 90% chance of having enough savings to cover total healthcare expenses in retirement is $265,000. What’s worse, these costs don’t even include long term care costs.

The Boldin Retirement Planner builds realistic medical expenses into your calculations.  Create your plan and see if you can afford healthcare in retirement.

7. Health Problems Cause Early Involuntary Retirement

Health problems are a leading cause of involuntary early retirement. Nearly half of workers retire sooner than planned, and health is the top reason why. What to Do:  If you are not yet retired, be aware of the possibility of a forced early retirement and create plans that will keep you secure. Can you tap into home equity to maintain your quality of life? Transition to a more suitable job?  Reduce expenses?

8. Potential Long Term Care Costs Are Overwhelming

Fifty two percent of today’s 65-year olds will need to spend a total of $138,000 on a long term care need. How are you going to address this fifty fifty gamble? What to Do:  You have options for how to plan for the possibility of long term care.  You can fund it out of pocket, buy long term care insurance, rely on a loved one to provide the care or use up your assets and qualify for Medicaid. Explore creative ways to fund long term care or compare all of these scenarios with your own finances in the Boldin Retirement Planner.

9. Entering Retirement with Debt

Workers are approaching and entering retirement with higher debt loads than ever. One driver of this trend is the close-to-retirement-age purchases of pricier homes with relatively smaller down payments. The EBRI found that 68% of households led by someone over 55 carry debt, up from 54% in 1992. And, 50% of households led by someone over 75 still have outstanding loans. What to Do:  Ideally you pay off your debt before entering retirement.  If you still owe on your mortgage, strongly consider downsizing to minimize this burden.  Just imagine how much better your cash flow could be without these monthly payments! Need more inspiration?  See what happens to your finances if you accelerate pay off of debt or downsize to minimize or eliminate your mortgage.  The Boldin Retirement Planner lets you try these scenarios and immediately see the impact on your out of savings age, cash flow, net worth and

Want to Eliminate Financial Anxiety?  Create a Plan!

The solution to financial anxiety is no different than how to address most fears — face them head on! Create a plan, see where you stand and start solving any problems and making your finances better. A recent Schwab report shows that people who have a written retirement plan are 60% more likely to increase their 401(k) contributions and twice as likely to achieve monthly savings goals than people without a plan. Similarly, a Wells Fargo/Gallup survey found that investors with written retirement plans are almost twice as likely as those who don’t have one to feel they have enough money to maintain their lifestyle after retirement. Despite the clear research that having a written plan relieves anxiety, the Schwab study found that only 24% of Americans say they have a financial plan in writing. Write down your plan today and feel better about your future!  The Boldin Retirement Planner makes it easy to get started.