Most people within five years of retirement are pretty stressed out about it, according to brand new research from Charles Schwab.
The findings show that these pre-retirees are nearly as anxious about what the future looks like as the present. About two in three people (65%) within five years of retirement are feeling “overwhelmed” by saving enough now for retirement and about half (52%) are overwhelmed by how they will ultimately manage their different income sources once they take the leap into retirement.
These findings underscore how daunting the transition into retirement is for pre-retirees, revealing that the final years leading up to retirement are among the most sensitive and confusing in investors’ financial lives.
Retirement more overwhelming than other financial moments in life
Most pre-retirees consider managing retirement income more overwhelming than many other financial moments typically considered stressful, such as:
- Bearing the financial impact of losing a job (41% consider overwhelming)
- Buying a home (33% consider overwhelming)
- Paying for college (27% consider overwhelming)
Pre-retirees feel particularly anxious about how they’ll manage their income and spending needs once they move from the comfort of an ongoing paycheck into retirement:
- 72% are worried about running out of money in retirement
- 57% are overwhelmed by determining how much they can spend in retirement
- 60% are worried about not getting—or the thought of not getting—a regular paycheck in retirement
- 64% are overwhelmed by not being able to maintain their current lifestyle or quality of life in retirement
Planning for retirement income deemed complex
Schwab’s survey finds that people on the cusp of retirement are concerned about several aspects of how they’ll manage their money once retirement begins, including:
- Managing different income sources and accounts in retirement (52% are worried)
- Managing the tax implications of withdrawing from multiple accounts (54% find it difficult)
- Knowing how to invest (50% find it difficult)
- Projecting how long their savings will last (57% find it difficult)
- Managing unexpected expenses (59% find it difficult)
Pre-retirees unfamiliar with retirement income basics
Lastly, the survey finds that people within five years of retirement are unfamiliar or worried when it comes to some important basics about retirement income, which may add to their stress level:
- Annual Required Minimum Distributions (70% know nothing/not a lot about this topic)
- Tax implications of retirement account withdrawals (70% know nothing/not a lot about this topic)
- Fees (48% are worried about paying too much for advice on managing retirement income)
“So much of the emphasis around retirement planning is on helping people save, but helping them transition into spending down from their portfolios in retirement is just as important,” says Tobin McDaniel, Charles Schwab senior vice president of digital advice and innovation. “Millions of Americans are on the cusp of retirement, so developing solutions that enable investors to confidently manage their income needs in an easy, flexible and affordable way is one of the most critical challenges we are addressing.”
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
