Planning Matters: Well-Prepared Retirees Are Too Blessed to Be Stressed

As Benjamin Franklin supposedly said, if you fail to plan, you are planning to fail. He may not have specifically been talking about saving and investing to secure a comfortable retirement, but it certainly applies. 

Preparation is especially key for those in or near retirement. They have significantly shorter time horizons than early- or mid-career investors and are battling rising costs of living and healthcare — all while lifespans are increasing. A recent report from Cerulli found that having a formal financial plan in place can significantly alleviate stress: While 40% of roughly 500 retirees surveyed earlier this year said they experience at least a moderate level of financial stress, the figure dropped to 29% among those with a plan. 

Retirees “need to know they’ll be OK,” said Ken Lotocki, chief product officer at Conquest, a financial planning software firm. “And ‘OK’ isn’t a confidence score or a success percentage. It’s a concrete action plan they understand and control.” 

Why So Stressed?  

While retirees with a plan report less stress than those without one, stress is highest for those currently working on one, which implies that financial stress is a main incentive for re-evaluating financial strategies, Cerulli’s researchers said. What’s causing them all this strain? If you’ve been to the gas station or grocery store in the last few years, it’s probably no surprise that rising prices top the list. The report found that 21% of retirees cite inflation as a high or very high source of stress. Next up were healthcare expenses, at 16%, and concern about an economic downturn, at 14%. 

Bringing in a professional can help: 

• While many savers create plans on their own, doing so can feel akin to managing your own healthcare without seeing a doctor, said Warren Cormier, director emeritus of the Defined Contribution Institutional Investment Association’s Retirement Research Center. “You’ve been doing it, but you have this feeling that you don’t know if you’re doing it right.” 
• Significantly more retirees who work with financial advisors are comfortable taking money out of their retirement accounts than those who don’t work with an advisor, a recent survey from AllianceBernstein found. Fewer retirees who work with a professional are nervous when seeing their balances drop, and fewer are worried about running out of money.

What’s The Plan? Not all plans are equal. Instead of an abstract thumbs-up, a good plan offers retirees specific, sequenced steps: “Here’s how long your money will last. Here’s the plan if markets shift. Here’s what you are responsible for, here is what your advisor owns and how often the plan should be reviewed,” Lotocki said.