Your retirement quality of life will be affected by your money beliefs
How You Relate to Money in Retirement
by Gary Foreman
What's your relationship to money? Whether we're rich, poor or somewhere in between, we all have our beliefs about money. And for many retirees, how they relate to money can make a big difference in how good their retirement years are.
We wanted to explore the topic of money beliefs in retirement, so we contacted Dan Andrews. Mr. Andrews is a Certified Financial Planner™ who founded Well-Rounded Success. The firm provides financial planning services and works to understand the behavioral side of personal finances.
Q: Many people are forced to face their money disorders when they retire. What can a financial planner do to help them process the new information about themselves?
Mr. Andrews: A financial planner can help the retiree understand their money personality and what triggers lead the person towards poor financial decisions. There are surveys available that help an individual gauge their psychology with money.
Q: Compulsive spenders often have habitual spending patterns. Do those patterns change as they reach retirement? And, if so, how do they change?
Mr. Andrews: Spending typically goes up in the first few years of retirement when the couple travels and spoils other family members. After that, I've seen individuals get concerned about preserving their nest egg. It's interesting how the polar opposite of behaviors surface in people.
Q: For people who hate talking or thinking about money, retirement can force them to deal with the issue. Is there an easy way for them to approach the topic?
Mr. Andrews: Aligning money to support one's values helps the individual understand how money can be used as a tool to live a great life as well as create the legacy which they intend. Money shifts from being a burden towards being an asset to help the person live their best life.
Q: Studies show that a common fear among retirees is running out of money. That can lead to under spending and miserly behavior. Is there a way to balance that fear and allow reasonable spending patterns?
Mr. Andrews: I find it important for the person to psychologically feel like they're doing okay with money. Many retirees only see their accounts losing value due to not having an income. Some products out there can help, but it's important to discuss the solution with trusted financial professionals who act as fiduciaries to ensure the person is getting ethical advice.
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Q: For a generation, people have been taught that they should take fewer risks in their retirement portfolio. Yet, with life expectancy averaging 20 years and some living for 30 or more years after retirement, some risk is necessary. What can a financial planner do for those who are overly risk adverse?
Mr. Andrews: This is best prepared by understanding a family's goals with their money to ensure a plan is prepared to help the person in all possible scenarios like living more than expected, dying sooner than expected, and the possibility of poor health.
Q: Is there any money disorder that you've frequently found among retirees and those about to retire?
Mr. Andrews: The mentality of being ultra-frugal surfaces with retirees who are terrified to see a shrinking savings account. This is sad to see since the person isn't enjoying their money and is constantly in a state of fear.
Reviewed December 2017
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Dan Andrews founded Well-Rounded Success in early 2016.He's been working in the industry for over four years. Dan is an independent fee-only Certified Financial Planner™ who acts as a fiduciary for self-motivated millennials. His approach is to encourage clients to make responsible financial decisions, keep their costs low, and focus on what can controlled by understanding the behavioral side of personal finances.
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. Gary shares his philosophy of money here. You can follow Gary on Twitter. Gary is also available for audio, video or print interviews. For more info see his media page.
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