“When you have to make a choice and don’t make it, that is in itself a choice.” – William James
Noted American philosopher and psychologist William James may not have been referring to financial planning in his famous quote, but it’s applicable nonetheless. When it comes to money matters, we’re absolutely bombarded with choices. Deciding how much to invest, how much to put toward debt, which stocks or funds to invest in, what tax strategies to implement—the list goes on and on. For every seemingly simple choice, there are often hundreds of possibilities. It can be overwhelming and unnerving, ultimately causing us to become victims of paralysis. We think we’re playing it safe, but in reality, we may very well be losing out. We spend so much time in inaction, trying to find that single best solution, that the cost of delaying the decision often outweighs its benefits.
This kind of financial indecision is understandable.
You’ve worked so hard for the money you have, and the notion of making a poor decision with it is downright frightening. If you’re approaching retirement, or are in the midst of it, you may be apprehensive about drawing your retirement savings too soon. Perhaps you have concerns about down markets or even economic collapse. If you’re of advanced years, you may have some not-so-fond memories of the Great Depression. Baby boomers vividly recall the 2008 financial crisis and the ensuing Great Recession. While apprehensions about what could happen again can create havoc in your mind, the fact remains that leaving your money on the sidelines isn’t the way to go.
We can’t control the future.
How long will I live? How will the economy perform over the next thirty years? These things are out of our control. Pinching pennies in retirement with the idea of holding onto the bulk of your savings can be draining. You’ve waited all of these working years to live out your retirement dream, so go ahead and do it. If you fear outliving your money, remember that certain investing approaches can offer the potential to generate a larger retirement fund for yourself. And many of them don’t involve great risk. Many retirees choose to take on an encore career to pad their nest eggs. Part-time work or hobby-centered side gigs can provide purpose and enjoyment while also increasing your bottom line. If you’re seeking more retirement income, talk with your financial professional about developing a strategy that will work for you.
Don’t underestimate the power of inflation.
Of all the risks to quality of life in retirement, inflation tends to be given the least attention. However, even minor price increases can subtly reduce your purchasing power over time. Doing nothing or investing in a way that avoids all risk may place you at an ever-increasing financial disadvantage as the years go by. While you may shy away from stocks and mutual funds, their returns often exceed the rate of inflation, so they can be a valuable part of your retirement planning.
Put Social Security on hold, if possible.
If there’s one place in the world of retirement planning where procrastination can pay off, it’s Social Security. These benefits can be a critical part of your retirement income, so it’s important to maximize them. Your Social Security check grows by 8% annually for every year you delay claiming benefits between your "full retirement age" (between 66 and 67 for people born after 1943) and age 70. In contrast, your monthly benefits are permanently reduced if you start taking Social Security before your full retirement age. Generally speaking, individuals without major health risks should postpone collecting Social Security for as long as they can, up to age 70, to ensure they’ll get the largest benefit possible.
Doing something is better than doing nothing.
If you want to save money, for example, choose a bank and get started. You can always move your money later. Taking action and putting that money to work, even if it isn’t the absolute best option available, will provide more rewards than doing nothing with it. Don’t be that guy (or gal) who lets years go by while sitting on the fence of uncertainty. Time gets away from all of us, even when we have the best intentions. Grab the bull by the horns and put your plan into action. After your mind is made up and you move from analysis to execution, it’s important to create a process for evaluating your decision. Nobody gets it right all of the time and your goals will likely change, too. Taking stock on a regular basis and changing course when your action plan is no longer viable will help you stay ahead of the game. If you’ve got a bad case of financial paralysis, you may find your cure by seeking out a qualified financial advisor. You can work together to anticipate what’s in the offing so you can prepare yourself and still enjoy your retirement to its fullest.
Do you need guidance creating a realistic retirement plan that can put your financial paralysis to rest? Our knowledgeable advisors are here to help. Please contact us to learn more.
About FAI Wealth Management, Inc.: Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life's uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $350 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at https://www.faiwealth.com or call 410.715.9200.