How to ease stress surrounding retirement

How to ease stress surrounding retirement

There are a few common fears that we’ve all probably heard of or maybe even experienced ourselves at one point or another: arachnophobia—the fear of spiders, claustrophobia—the fear of small spaces, or acrophobia—the fear of heights.

But we’re willing to bet that you probably haven’t heard of chrometophobia, even if you’ve experienced it yourself. The phobia can include fear of handling or touching money, fear of financial disasters, or simply the fear of the responsibilities that come along with money—and it can have a major impact on the individuals it affects. Although only a small percentage of people suffer from full-blown chrometophobia, the vast majority of Americans do suffer from general financial fears and stressors, including credit card debt, student loan repayment, housing costs, medical bills, and retirement savings—to name a few.

Why retirement is America’s top financial worry

A recent study by the National Foundation for Credit Counseling asked respondents what areas of personal finance are most worrisome to them, and perhaps unsurprisingly, the top responses included retiring without having enough money set aside and insufficient “rainy day” savings [1].

This response isn’t necessarily unexpected, as the media and top financial influencers often remind us of the importance of saving for retirement. In fact, it’s rare that a day goes by without headlines revealing the latest survey results surrounding our impeding retirement crisis. So what can we do to combat rising higher education costs, large amounts of debt, and inadequate retirement savings?

It all starts with planning ahead.

The importance of planning ahead for retirement

Planning ahead for your retirement is a major key for easing your retirement worries and financial phobias. In fact, the Aegon Center for Longevity and Retirement reports that pre-retirees who have a written retirement plan/strategy in place are significantly more likely to turn their good intentions into actions [2].

And don’t even get us started on the benefits of saving earlier rather than later. Someone who begins saving early in their career is potentially able to grow their retirement nest egg much larger than someone who began saving later in life, even if the latter saves a higher amount, thanks to the snowballing effect that is compound interest. Someone who begins saving at 25 will have much more time to take advantage of compounding than someone who starts saving at 40—which can make a huge difference in the long-term balance of the account.

Let’s break it down.

To illustrate the magic of compounding interest, let’s look at two sets of young couples. One couple makes retirement a priority, while the other couple instead uses their money to pay for a new car, a vacation, etc.

Our first couple (Couple 1) begins investing in their 401(k) plan at age 25—contributing $5,000 per year in to their 401(k) account for ten years. Our other couple continues their frivolous spending until age 35 when they then decide to start saving for retirement. In an effort to catch up on lost time, Couple 2 contributes the same $5,000 per year as Couple 1 did, but for 30 years instead of ten.

Assuming a 7 percent annual return on investments, let’s look how each account will end up when the couples retire at age 65.

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In total, our first couple socked away $50,000 for their retirement while Couple 2 saved $150,000—and still came up short in comparison. It becomes clear that the benefit of saving for retirement early in life is monumental, meaning the simple act of planning ahead and saving early can make the difference between severe financial stress and complete retirement readiness.

Let’s talk about ways to help you reach your retirement goals. Contact us online or give us a call at 800.236.7400, option 1.