Over the past two years, the floundering national economy has put many people's retirement planning on hold. It's hard to move forward when home prices are unstable, Social Security seems undependable and investment and interest rates show no signs of improving.
I think John Kalamarides, senior vice president of retirement strategy and solutions at Prudential Retirement, had it right when he told Investment News Daily, "Solving the financial and emotional gaps in retirement is critical to solving the unemployment and consumer confidence issues."
Just getting people to pull their money out from under the mattresses is tough. At John Hancock Funds, investment advisers are discouraged by their clients' insistence on leaving their money in cash. While 70 percent of advisers think that's a mistake, 69 percent of their clients say they are leaving their money where it is for various reasons, including because they are "scared" (26 percent), think the market will dip again (23 percent) or just don't think the economy is getting any better (34 percent).
Is there an answer to this kind of paralysis? Taking action can help. Here are five steps to feeling more confident about retirement:
- Have a long-range plan. Research by Harris Interactive for Ameriprise Financial found that 75 percent of people who have created a long-range financial plan for retirement said they were "on track and confident."
- Don't quit working unless you really want to. A study by researchers at Israel's University of Haifa discouraged taking early retirement because people who retire early often aren't ready to quit working. They don't think of themselves as "old." They frequently feel shortchanged by leaving the workplace early, and they are dissatisfied by life in retirement.
- Aim for discretionary spending. Get rid of your mortgage. Pay off your car and other debts. Budget for health care. Then give yourself several options for spending the rest of the money.
- Figure out how to create a paycheck. It is hard to know where you stand if you're pulling money out of your savings instead of spending a predetermined amount that is available on some kind of a schedule. Annuities aren't the only way to do this, but they are probably the easiest. About 80 percent of retirees who bought an annuity to provide them regular income are satisfied with them, according to research for Allianz Life Insurance Co.
- Decide what will make you happy. You've got a long way to go. Many people live one-third of their lives in retirement. Don't waste it; do something you enjoy.