Many working people, even some who have accumulated $1 million+, lack the confidence they need to plan to retire. In fact, 38% of Americans don’t feel confident that they are saving enough to retire comfortably, according to a study conducted by Capital One Investing. Why are we so nervous? Several reasons:
- Life expectancy
- Expenses during retirement
- Social Security income available during retirement
- Market performance during retirement
- Inflation during retirement
Sound familiar? With so many variables, it’s not surprising so many of us lack confidence.
Transitioning from Career to Retirement
If you want to step away from your career to “Life 2.0” or retirement, don’t you want to have confidence in knowing when you can retire? If you retire too early, you may not have enough resources to live the rest of your life on your terms, and you may have to take a job in retirement or scale back on travel. On the other hand, if you retire too late, you may have the resources to do what you want, but you gave up too many years working.
Here’s the Truth
There is no way to be 100% certain you will have enough financial resources for the rest of your life. There are too many variables that are out of our control. But, we can discuss degrees of confidence, or rather, the probability of success. And according to the Employment Benefit Research Institute, people who talked with a financial adviser about retirement planning are more than two times more likely to be more very confident about retirement than those who haven’t.
When I help clients create a retirement plan, the software I use acts as a calculator, taking into account your total financial picture. With that data, I’m able to compute a probability of success based on the input and a simulation of expected returns.
The higher the probability of success, the more confidence you can have retiring on your planned date. With a high probability of success, if things go against you (like market performance, inflation, and etc.), you may have the ability to adjust. Yet, if you have a low probability of success and things go against you, you may not be able to adjust.