I am a 61 year old woman with $ 700,000 saved for retirement. I own my own home (with a mortgage) and have more than five months of daily expenses in a cash account. I have a few investment accounts in addition to cash and I basically follow a 60/20/20 budget for my after-tax and post-retirement dollars.
Why can’t I stop freaking out about money? I save for home repairs and then freak out when I write the check. I save for a new car and then freak out when it comes time to buy it. I HAVE THE MONEY.
I am not poor, but I have been cash poor in the past. I’ve always saved for retirement, but I can’t help but freak out. And by freaking out, I literally mean days of frenetic panic attacks where Xanax is my only friend.
How do other people handle this?
Fear is healthy up to a point. It’s what makes us wear our seat belts and avoid dark alleys at night. Some level of fear related to money is also a good thing. If you don’t worry, there is a possibility that you will run out of it, why not spend every dollar?
But there is a big difference between healthy fear and serious anxiety that you are experiencing. An advice columnist is not a substitute for mental health treatment. Whatever you do, it is essential that you discuss your anxiety with a professional.
I wish I could tell you that $ 700,000 is more than enough for you. But that would not be an honest answer. There is no way I can tell you for sure that any level of savings is a guarantee that you will never run out of money. Even billionaires end up in bankruptcy court. But there are many things you can do to reduce the risk of any outcome that you fear.
Financial health is not just about any number. That $ 700,000 could be more than enough if you live in a low-cost area and plan to work for several more years. But if you live in Manhattan, want to retire next year, and your family members often live for more than 100 years, it could leave you woefully short. Context is what matters here. The amount you have saved is meaningless without knowing your lifestyle, goals, and concerns.
What I’m wondering is how much actual planning you’ve done beyond just saving. Do you have an age in mind for when you want to retire? Have you thought about when you will take Social Security? Do you plan to stay in your home and, if so, will it be mortgage-free when you retire?
It can seem overwhelming to think about all this when money is already causing you so much stress. But worrying constantly plays a trick on him. You spend so much brain space and energy worrying that you can feel like you are actually acting.
I want you to do what seems counterintuitive and think of the absolute worst scenarios. But I don’t want you to do this alone. I urge you to meet with a financial advisor, as you have the means to do so.
Write down your biggest fears so you can discuss them together. Are you afraid of outliving your savings? Are you worried that the market will collapse just as you are about to retire? Or that health care costs will eat up your retirement budget?
A financial advisor has no special source that can guarantee that none of these things will happen. What they can do, however, is help you reduce your risk of worst-case scenarios. If you are concerned about running out of money, they can help you plan how much you can safely withdraw from retirement accounts and when to take Social Security. Of course, they can’t prevent a stock market crash from happening, but they can make sure your investments are safely allocated based on your goals.
It sounds like you are someone with a low tolerance for risk, which means you probably want to invest conservatively. Perhaps a good investment for you would be to pay off that mortgage with a portion of those savings. Will it be scary to shell out so much money at once? Of course, especially since the interest savings will likely pale in comparison to the returns on your investment. But if you can sleep more soundly knowing that what is probably your biggest expense is covered, it could be worth it. I’m not saying it’s an absolute must-do, but it’s worth discussing with your financial professional.
I suspect that when you think realistically about your worst case scenarios, you will realize that things are not as dire as you imagined. Suppose that for some reason you have to stop work tomorrow. Your retirement plans would likely change significantly. But at the same time, he would not be left without food or a home.
He says he has been cash poor in the past. However, he got over it and even managed to save for retirement when he didn’t have a lot of money. You are not condemned to repeat your past.
I believe that if you do the scary things and face your fears head-on, with the help of a financial and mental health professional, you can reduce your anxiety about money. That doesn’t mean you never worry about money again. But it can get to a point where fears of money don’t dominate your life.
Robin Hartill is a Certified Financial Planner and Senior Writer at The Penny Hoarder. Send your misleading money questions to [email protected].