Afraid you’ll out­live your nest egg?

The Washington Post Sunday - - BUSINESS - Rod­ney Brooks

We once thought of re­tire­ment as a time to re­lax, play golf and maybe travel— to fi­nally have a lit­tle fun. For some, that will still be the case.

For oth­ers, the thought of re­tire­ment brings anx­i­ety: They’re wor­ried that they’ll run out of money.

In a re­cent sur­vey by the Transamer­ica Cen­ter for Re­tire­ment Stud­ies, 44 per­cent of work­ers of all ages cited hav­ing in­suf­fi­cient fi­nances as their big­gest fear.

And a quar­ter of mid­dle-class Amer­i­cans said they “get de­pressed” think­ing about their fi­nances dur­ing re­tire­ment, ac­cord­ing to a Wells Fargo Mid­dle Class Re­tire­ment sur­vey. Forty-eight per­cent of those who have not re­tired were not con­fi­dent that they will have saved enough to live “the lifestyle they want” in re­tire­ment.

“I don’t know that there is any­one who doesn’t have that fear,” says Kevin Leahy, chief ex­ec­u­tive of Con­necti­cut Wealth Man­age­ment. “Our clients tend to be very suc­cess­ful. Most of them have

a low prob­a­bil­ity of run­ning out of money. Yet they have that fear.”

Added Michael Mus­sio, man­ag­ing di­rec­tor at FBB Cap­i­tal Part­ners in Bethesda: “That is peo­ple’s big­gest anx­i­ety.” He’s found that the fear comes mostly from peo­ple re­al­iz­ing that they are no longer adding to their sav­ings but will soon have to with­draw. “The anx­i­ety is that I will have to have this last me for the rest ofmy life.”

Thomas West, se­nior as­so­ciate at Sig­na­ture Es­tate & In­vest­ment Ad­vi­sors in Tysons Cor­ner, says it is the over­whelm­ing fear among baby boomers.

“Some­times, the un­cer­tain­ties of how long some­one is go­ing to live can be over­whelm­ing, and the thought of health-care costs can be over­whelm­ing,” West says. “And the com­plex­ity can lock them out from tak­ing any neart­erm ac­tion.”

The best way to feel bet­ter about re­tire­ment is to de­velop a plan, fi­nan­cial ad­vis­ers say. Mus­sio says that in­volves dis­cus­sions of with­drawal rates from re­tire­ment sav­ings and longevity.

“Then you will un­der­stand ex­actly where you stand,” says Bob Gavlak, wealth ad­viser with Strate­gic Wealth Part­ners in Colum­bus, Ohio. “Rather than sit there and think, ‘Will I have enough money?’ or ‘I’ll prob­a­bly have enough,’ have a set plan in place. Take it from ‘I think I’m okay’ to ‘I know I’m okay.’ ”

“What I try to do is get them en­gaged in tak­ing some ac­tion and not be a by­stander to their own re­tire­ment fu­ture,” West says. “I like to give peo­ple some­thing to do. It re­lates to how do you make sure you are pre­pared, and get them used to fol­low­ing a reg­u­lar process where they are mak­ing fi­nan­cial de­ci­sions.”

Ryan Wib­ber­ley, chief ex­ec­u­tive of CIC Wealth Man­age­ment in Gaithers­burg, says your chances of not run­ning out of money in­crease with some form of guar­an­teed in­come.

“In D.C., we have a lot of peo­ple with pen­sions, es­pe­cially gov­ern­ment pen­sions,” he says. “Their prob­a­bil­ity of suc­cess is good.”

Stephen DeCe­sare, pres­i­dent of DeCe­sare Re­tire­ment Spe­cial­ists in Marl­ton, N. J., also says that fixed an­nu­ities are a good strat­egy if you are wor­ried about run­ning out of money. “A fixed an­nu­ity with a cost-ofliv­ing in­crease will give you steady in­come,” he says.

Which brings us to the peo­ple who re­ally are in dan­ger of run­ning out of money be­cause they haven’t saved enough or are spend­ing too much.

Tim McGrath, founder of River point Wealth Man­age­ment in Chicago, says he some­times rec­om­mends that the client work an ex­tra year or have a part-time job dur­ing re­tire­ment. “That makes a dif­fer­ence,” he says.

“The most im­por­tant first step is to have that frank con­ver­sa­tion,” Leahy says. “Some­times peo­ple un­der­stand that, and some­times they don’t. You can tell some­one they need to ex­er­cise and diet and take med­i­ca­tion. It doesn’t mean they will do any of those things. But you don’t want your physi­cian to dance around that.”

“Per­haps they can re­tire later,” he says. “Per­haps they can cut spend­ing. Per­haps they can change the in­vest­ment ap­proach. Some­times they can be­come more tax-ef­fi­cient. Ob­vi­ously, it’s dif­fer­ent for ev­ery per­son.”

Mus­sio says the size of a client’s nest egg can some­times make them over­con­fi­dent.

“We tell them the rate they are draw­ing down from their port­fo­lio is un­sus­tain­able,” Mus­sio says. “One mil­lion dol­lars is al­ways seen as a lot of money. For some­one who is re­tir­ing at 60 and plans to with­draw $80,000 a year from their port­fo­lio for the rest of their life, that’s not re­al­is­tic. We have to tell clients that if you keep spend­ing at this pace, you will run out of money.”

In ex­treme cases, he says, he will rec­om­mend that the client move to Plan B— selling the house. But he says it’s less painful if clients fol­low their plan­ners’ ad­vice.

“The most em­pa­thetic sit­u­a­tion is where there is a cou­ple, and one gets sick and has to go into a nurs­ing-home sit­u­a­tion,” Mus­sio says. “Now the per­son man­ag­ing fi­nan­cial re­sources has this gap where they went from sup­port­ing one house­hold to sup­port­ing two. That can be scary. You can look at long-term care in­sur­ance to in­sure against that risk. But these are lev­els of high emo­tional anx­i­ety and fi­nan­cial anx­i­ety. We try to coach peo­ple through that. But it can be tough.”

McGrath says he be­lieves that many are pre­pared and it’s just a mat­ter of whether they can main­tain the lifestyle they want. But a huge swing in the mar­ket, tax-law changes or in­fla­tion could change ev­ery­thing.

“Most peo­ple I work with, it’s not like they will live in the poor­house,” he says. “The ques­tion is, will they do all the things they want to do? If they have to cut back, it will be the va­ca­tions and the fun things they want to do.”



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