May 26, 2012

Retirees and Financial Planning: Our Top Worries

Last month I wrote an article for the web site If you didn't have a chance to read it there, I have reproduced it here. Please feel free to click on the link to the site. It specializes in updated financial information every day that you may find valuable.

I receive lots of comments on posts and in e-mails about financial planning and decision-making. Preparing to live without a regular paycheck is a critical part of the preparation for retirement that every one of us encounters. It is a stage of life that most of us enter with more than a little fear. Over time readers have helped me develop a list of the top financial concerns that folks getting ready to retire, or who have just taken that step, are most worried about. What exactly are these investors looking for? There are six basic concerns that are addressed most often.

Understand our tolerance for risk and respect it: This is probably the most frustrating problem my readers continually bring to my attention. An investment or financial advisor who presents options that are simply not appropriate to the retiree creates tension and uneasiness. Even if an opportunity for a nice return may be missed, as retirees we have fewer opportunities to replace money that is lost. Accept what makes us comfortable and work within those parameters. Understand that a client will sometimes pass on what you believe to be a great deal. He isn’t rejecting your judgment; rather he is staying within his comfort zone.

Avoid Complicated Explanations: For most of us, the world of finance has become something akin to a foreign language. We grew up with some simple concepts: certificates of deposit and savings bonds. We understand the basics of stocks and bonds, mutual funds, maybe even ETF’s. But, when explaining a more complicated investment opportunity it is important to speak in a way that we don’t feel stupid or agree to something because we don’t want to ask too many questions. If an investment option is too complex to explain in simple terms, there may be problems.

How do we not outlive our money: Our biggest fear as retirees is that we will last longer than our money. Now matter how prepared we think we are, another major recession or serious health calamity is all that stands between us and a big problem. We are looking to for a plan that will do everything possible to protect our assets, while not violating our tolerance for risk.

Help us budget and simplify our lives: Understanding how to budget and save has allowed us to retire. But, now, what do we have to do? Do we live on 80% of our work income or is that more than we need to spend? What about expenses? What should we budget for after retirement? What categories are likely to increase and which ones fall? We’d like to simplify our lives by downsizing our housing, but is it best to rent or buy from this point forward? Leaving an estate for the children may be important. If so, what is the best way to set aside part of our money? Retirees want some input.

Bring us options and allow us to make the final decisions: Retirees often suffer from a feeling of loss of control and influence after leaving the workplace. It becomes quite important to these folks that they have the final say in how their money is invested. Bringing a client a few legitimate options and letting him make the final choice is a good idea.

Create a feeling that you care as much about our well being as we do: Everyone understands how business works: without a profit there is no business. But, some of the folks that contact me complain that the company they have put their trust in treats them like a number. Contact usually occurs only when a fee is being added or the government requires a privacy notice. These retirees are aware that they are not the firm’s only client, and most likely not the one that produces the most profit. But, in their mind their financial future has been put in the hands of a company or person. There is a definite need for a feeling that the individual matters, that his or her financial well-being is important.

Disclaimer: I was paid a fee to write this article for


  1. This month marks the end of my retirement severance package. We'll soon see how well I've planned!

    1. Steve in Los AngelesSun May 27, 01:00:00 AM MST

      One reason I am fully prepared financially for my retirement is I have given the idea of financial planning very serious thought. In addition to Social Security (probably starting on my 70th birthday), Medicare (starting in February 2021), and my pension, I will have the annual income from two variable annuities which have guaranteed lifetime income riders. I also have a Roth IRA. I currently have a part time job.

      I will begin taking distributions from one of the annuities, which is set up as a traditional IRA, in early April 2017, which is shortly after my 61st birthday. Between April 1, 2017 and April 30, 2025, each year, I will take each year's "distribution" and convert each "distribution" into my Roth IRA. Starting April 1, 2026, I will just take regular annual distributions from this annuity. Some of the net income from my job goes into my Roth IRA.

      I will begin taking distributions from the other annuity, which is set up as a non-qualified annuity, in early March 2021, which is shortly after my 65th birthday.

      With regard to my housing expenses, I still have a relatively small mortgage balance that I will pay off between 58 months and 120 months from now. Although many real estate sales people and brokers probably will be very disappointed about my decision, my current residence will be the last residence I own. In addition to the regular monthly loan payment, I also make regular additional principal-only payments. Some of the remaining net income from my work goes toward reducing the principal balance on my mortgage loan.

      I do have a financial adviser who works for a firm affiliated with my credit union. I have been working with my adviser for over four years. I have been very happy with my adviser.

      My biggest "concern" is staying health. I put quotes around "concern", because I am not really concerned and I certainly am not worried. I am in EXCELLENT health. Nonetheless, I do have long-term care insurance just in case I need long-term care sometime in the future. I easily could live well into my nineties and could pass the century mark. I get a lot of exercise, have a high metabolism, and have a good and sensible diet. My memory is sharp!

      In summary, I believe that I really am ready for retirement, even though I currently am only age 56.

    2. Galen,

      Yes, that is another test of foresight, isn't it. I am willing to bet you had this day all planned for. One help: Betty and I will be buying you a nice dinner during our visit!


      Your planning has been well documented in previous comments. I'm not sure I know of anyone who has planned as thoroughly as you. Of course, life does have a way of occasionally getting in the way of the best-laid plans. But, I sense you'd figure out a alternate route pretty quickly.

    3. Ha! Well, good to know that is one dinner I don't have to worry about. Looking forward to it.

    4. Steve in Los AngelesSun May 27, 03:14:00 PM MST

      Fortunately, I have enough non-perishable packaged and canned food at home to last me at least until the end of this year. The money I save by having food at home, in addition to my income, goes toward paying off my mortgage faster. I am also looking at all of the mortgage interest that I am forever saving. Life right now is pretty good. Life later on will be GREAT!

  2. Best laid plans:)
    I agree with your list of fears. Understanding the tolerance for risk is my toughest hurdle these days. Yes, I need to be somewhat aggressive, but the bag lady fear starts shining through.
    Nice job laying out what I hear the most often in conversation. This should be printed off and take to every 20 something financial planner. That is the age I want- because I need him/ her to still be in the business when I really need them in 30 years!

    1. Good broker/advisor is the same age as I am. He has been my go-to guy for almost 20 years. He understands my risk tolerance and doesn't bring me stuff that makes me nervous (except for the investment in the Greek Bank 3 years ago. He's allowed an occasional screw up). He can't retire until I no longer need his I hope he wants to work well into his 80's!

  3. Hi, Bob... This is an interesting and important post. I especially like two specific points which you make. First, about the investment or financial advisor making recommendations which are inappropriate to his or her client. This is the classic problem of the sales person (pardon my calling the advisor a "sales person.") doing more talking than listening. The best advisors (and the best sales persons) ask lots of questions in an attempt to understand their client's needs.

    The other point which caught my attention is "avoid complicated explanations." Yes, I totally agree. If an investment isn't easily explained and understood, beware. Try, for example, to explain a credit default swap to a room full of retirees. Bill

    1. Try to explain a credit default swap to a room full of bankers...we see how well that worked 4 years ago!

      Welcome home from your two month jaunt. I bet it feels good to sleep in your own bed!

  4. Steve in Los AngelesMon May 28, 10:18:00 PM MST

    Sometimes, the components of variable annuities can confuse people. In order for me to understand completely the components of my variable annuities, especially the two variable annuities I will be keeping, I had to learn the terminology and processes associated with the annuities and especially the terminology associated with the guaranteed lifetime income riders. I had to read and re-read the annuity contracts and the prospectuses thoroughly. Reading all of this material probably was almost as dry as reading a textbook on human gross anatomy. I also had to understand the legal aspects associated with Internal Revenue Code Section 1035 Tax Free Exchanges, including tax law and regulation changes, with regard to the variable annuity I will not be keeping. Learning all of these things has been most worthwhile! I know, as long as I stay alive (and fortunately I work very hard to stay healthy!), having purchased these annuities together with the guaranteed lifetime income riders will be quite profitable for me and will enable to have a "Satisfying Retirement" indefinitely. With no financial problems, I will continue to be a productive member of society and continue to pursue what Psychologist Abraham Maslow calls "self-actualization", included in Maslow's "hierarchy of needs". For example, I will continue to be a regular platelet donor (hopefully every two weeks) at my local American Red Cross facility.

    My financial adviser has been very helpful. Nonetheless, I really like to thoroughly read, study, learn, and understand everything associated with my variable annuities.


    1. Steve in Los AngelesMon May 28, 10:24:00 PM MST

      I omitted one word above. I meant to say the following:...will enable me to have a "Satisfying Retirement" indefinitely.

  5. I totally agree with avoiding complicated explanations. Sometimes it's hard to understand what's being said if you talk with highfaluting words or in jargon words that customers don't understand. You're not there to impress but make customers understand. Make sure that you speak or explain in laymen's terms.

  6. I totally acknowledge with preventing complex details. Sometimes it's confusing what's being said if you talk with highfaluting terms or in vocabulary terms that clients don't comprehend. You're not there to make an impression on but create clients comprehend. Ensure that that you talk or describe in laymen's terms.

  7. Handling the finances is really tricky stuff. So, it would be better to plan it early, so you won’t have problems in your retirement life in the future. I like the idea of bringing up options that can help finalize the plan. Plans like 501k, 401k, and reverse mortgage are being availed nowadays by retirees. It can help, so that they can choose what best can suit their retirement lifestyle. Investing on retirement can be hard, but having options to choose from can help you find your ideal retirement.

  8. Hey! You have such an interesting and informative page. I will be looking forward to visit your page again and for your other posts as well. Thank you for sharing your thoughts about financial planning in your area. I am glad to stop by your site and know more about financial planning. Keep it up! This is a good read.
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  9. As an average American, there will come a time when we have to live without a regular paycheck. That's why we have to prepare for our retirement and do financial planning as early as possible. Thanks for sharing your points. That really helped.


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