You’ve done a good job saving consistently over the years, and you take pride in increasing your nest egg. You’ve paid off your mortgage and have no outstanding debt. You studiously monitor your retirement accounts, and when there’s market turbulence, you take quick corrective action, such as cutting down on spending.
Congratulations would be in order, except…the idea of starting to draw down on your assets frightens you, and you constantly fear you’ll run out of money in retirement.
Truth is, you’re a worry-wart. And you’re not alone. According to the Center for Retirement Research’s National Retirement Risk Index* (NRRI),1 one in four (24%) working-age American households believe they risk being unprepared for retirement — even though their savings history and attitude suggest that they’ll be well prepared.
This misperception puts worry-warts in danger of being “oversavers” who live below their current means. That’s not always a bad thing. But it can become a problem if you’re not living the lifestyle you want — and can afford. “You could be forgoing travel or other nice plans,” says Robert Fishbein, a Prudential vice president and author who speaks frequently on retirement planning strategies, “Or worse, not enjoying basic living comforts or appropriate medical care.” In this case, an “oversaver” may need help moving from an all-saving mindset to a prudent spending mode.
Not worried enough
Yes, you think about retirement, but not regularly or methodically. To you, life after work is either a distant concern, not a priority or simply too frightening to truly consider. Result: You forgo years of planning (and saving), thinking you can always invest more aggressively later to catch up. You confuse current wants — a new car, a bigger home, new furniture — with needs, and give them greater priority. You have a long-term savings goal, but when you estimate the retirement assets you’ll have and see how far behind you are, you take no action to change your behavior.
Fact is, you’re a what-me-worrier. And you are not alone either. The NRRI found that one in five (19%) households believe they’ll be well prepared for retirement even when their current strategy and attitude tell a very different story.
“The person who is not worried about retirement ultimately loses the ability to control his future,” says Fishbein. “By saving and planning into retirement properly, you can control when you stop working. By failing to do so, your only choice is to keep working or live poorly in retirement.”
There’s the rub: The choice to continue working may not be yours. In fact, according to a study for Prudential,2 51% of American retirees left the workforce earlier than they’d planned. The notion of “working until I die” is far from a given — and certainly not an adequate substitute for planning ahead and accumulating a nest egg to fund your retirement years.
The notion of “working until I die”… is not an adequate substitute for planning ahead.