Navigating the Fear: How to conquer the anxiety about outliving your retirement funds
- by Dani Parthum
- Est. Reading Time: ~4 Mins
Navigating the Anxiety: Strategies to Ensure Financial Security Beyond Retirement - Strategies for Conquering Financial Anxiety About Retirement Expenses
The legendary Mae West once quipped, "Retirement is not for the weak," while Bette Davis famously declared, "Growing old isn't for the faint-hearted." These acerbic comments were probably made when the two screen icons still had glowing complexions, youthful roles, and throbbing social lives. The focus, however, is more somber as we grapple with the reality of our own finances and the specter of poverty in old age.
About the Author
Dani Parthum is a qualified economist, financial coach, finance blogger, and author. Under the brand Money Lady , she helps women confront their apprehension around finances and develop strategies for self-determined financial management and wealth accumulation. She contributes to Capital's regular column.
As time inexorably burns away our smooth skin and fortitude, a steady dose of courage is required. The struggle is not only about grappling with wrinkles and loss of strength but also with addressing the harsh truth about our own finances for retirement.
Surveying my 4,500 newsletter subscribers reveals that many are haunted by the fear of outliving their retirement savings. Yet, this apprehension stems more from the unknown than from the actual fiscal situation. Unsurprisingly, this vague concern often leaves us frozen, scared to delve too deeply.
But that's the point: To inspect, one needs courage. And yes, perhaps a touch of Mae West's audacious spirit. For only by staring down the numbers can we be liberated from fear. And there's a bonus: It's simpler than it seems.
My experience tells me that most people have no clue what they need or have. Gender doesn't seem to make much difference, nor do vast sums in securities on their accounts. The fear of running out of money remains persistent, even when there seems to be plenty in the bank.
In the realm of the elderly, various fears loom: physical and mental decline, the inability to adapt, feelings of abandonment, rejection, vulnerability, and helplessness. Then there's the fear of money—that vital resource that maintains our dignity in Western societies. Without enough financial resources, we risk reaching the limits of our dignity even with basic security.
Will my retirement savings suffice? The question of having enough vs. managing well
Although they sound similar, these two questions address distinct concerns and fears:
- Managing the wealth we already possess wisely
- Having enough money for a comfortable lifestyle in retirement
Many will inherit, but when is "enough" enough?
What ignites the most anxiety when you think about finances in relation to old age?
My newsletter subscribers report significant trepidation surrounding the idea of poverty in old age. However, this dread rarely arises from cold, hard figures but from ignorance and the apprehension of engaging with personal finances. The specter of insurmountable bills looms when you're unsure what you require or what you currently possess.
The Solution Lies Here: Fear springs from uncertainty, and uncertainty vanishes when we create clarity. Knowing your financial status liberates us from paralysis caused by fear.
Why So Many Are Afraid - And So Few Are Clear
According to a December 2022 study by the banking association, 43% of those over 60 believe they will not enjoy a comfortable lifestyle in old age. Simultaneously, 42% of women and 38% of men anticipate a decline in their quality of life in retirement. Yet, when asked about the size of their pension deficit—the difference between their expected needs and their actual pensions—a third of women and a quarter of men are unaware of the answer. Ignorance breeds uncertainty, and uncertainty makes the deficit appear insurmountable. However, an AXA Pension Report for 2024 reveals that those who regularly invest in their retirement are much more optimistic about their prospects in old age. How do we move from fear to action?
The first step is usually the hardest—yet it's inevitable: Lay your numbers bare. Begin with the basics:
- Assess your pension information. You receive this annually from the German Pension Insurance and shows what you can expect to receive in retirement.
- Realistically calculate your monthly expenses in retirement—including housing, daily costs, leisure activities, health expenses, and if desirable, travel.
- Compare your needs with what you expect from the pension insurance. The discrepancy is your pension deficit. It may seem daunting, but now you understand what you're facing.
Capital is a partner brand of Stern. More content from Capital can be found at www.stern.de/capital.
- Financial Anxiety
- Pension
- Poverty in Old Age
- Retirement Preparation
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- In Dani Parthum's article 'Navigating the Fear: How to conquer the anxiety about outliving your retirement funds', she emphasizes the need for personal finance management and wealth accumulation as mental health and well-being concerns increase with age.
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