Retirement Is Scary. Plan it Out

Retirement creates many challenges. Unfortunately, while about 10,000 Americans retire daily, the sad truth is that most people seem to spend less time planning for retirement than they do for a vacation. Anxiety regarding our futures is a common ailment, especially among the millions of Americans rapidly approaching the end of their working years. And there are good reasons for that anxiety.

  • Retiring can be as stressful as getting married, losing your job or having a close family member become ill.
  • The highest suicide rate in the United States for any segment of the population is men over 70. That’s 50% higher than the suicide rate among teenagers. The speculation is that these men have lost their lives’ purpose and their zest for living.
  • Only 35% of retirees have a written plan for their future finances. This is unfortunate because successful retirement is no different than successful investing: Those who fail to plan, plan to fail.

The Challenges Of Retirement

From an investment standpoint, retirement generates a number of financial challenges. First, your ability to take risk has been reduced because your investment horizon is now shorter. In addition, you no longer have labor capital that can be used to generate income to help offset investment losses.

Second, once you enter the withdrawal stage of the investment life cycle, the negative implication of losses increases, because spent assets cannot benefit from future market recoveries.

Third, it’s likely that your willingness to take risk will fall, and thus your stomach’s ability to absorb the acid created by bear markets will be reduced. And that can lead to panic selling and the abandonment of even a well-thought-out plan.

At the same time, investors have to consider that today’s typical 65-year-old couple has a second-to-die life expectancy of about 25 years. And because half of couples will have a spouse live longer than average, 65-year-old retirees really need a financial plan that’s likely to last at least 30 years. Such long horizons can lead to a greater need to take risk.

As the director of research for The BAM Alliance, I’ve learned that the very act of retirement creates another problem, one that impacts not only quality of life, but the quality of investment decisions as well. One-third of all men over 65 become depressed within one year of retirement. The generally accepted reason is that work had been their primary source of meaning and the biggest occupier of their daytime hours. Replacing that time with activities both mentally challenging and/or emotionally fulfilling doesn’t happen automatically. Additionally, for married couples, the shift in daily household routine to one where both spouses are at home at the same time can also lead to marital stress.

Combine the challenge of finding a replacement for work with the increased investment risks discussed previously and retirees often begin obsessing about their portfolios. The time they used to spend at work is now spent watching CNBC, reading financial publications and browsing financial sites online.

And despite Warren Buffett’s advice to ignore all market forecasts because they tell you nothing about the market (although they do tell you much about the forecaster), the increased attention that retirees give to the markets can lead them to become more worried about the latest predictions of gloom and doom from “gurus” who are nothing more than the financial equivalent of a soothsayer.

Beware Recency & Regret

Retirees also become more susceptible to the dreaded twin diseases of recency (pursuit of the latest hot asset classes and funds), and tracking error regret (panic when a globally diversified portfolio underperforms some common index, like the S&P 500).

While this isn’t an exclusively male problem, my own experience, as well as the research, show that women make better investors because they tend to be less active, adhering to their plans to a greater degree.


Not only does all of this activity create increased anxiety, it often leads investors to act. And the result of that action is that even well-thought-out plans end up in the “trash heap of emotions.” The evidence shows that the actions most investors take are usually the wrong ones. In fact, studies have shown that investors actually underperform the very mutual funds in which they invest. They tend to buy after periods of good performance and sell after periods of poor performance.

Assuming you have a well-thought-out plan, you are best served by adhering to it. To help you accomplish this objective, we can again turn to some words of wisdom from Warren Buffett, which he offered in his 1996 letter to shareholders: “Inactivity strikes us as intelligent behavior.” Buffet also warns investors that “the most important quality for an investor is temperament, not intellect.”

Instead of focusing on the latest economic report or the latest presidential poll (political biases can also cause us to make investment mistakes), focus on what have been called the “big rocks” in life—be it spending time with family and friends, doing community service, working on your hobbies or whatever brings you fulfillment. These are the things that we can actually control and bring us joy, instead of angst.

Believe it or not, it will also make you a better investor. The research shows that the more time we spend on our investments, and the more frequently we check the value of our portfolios, the worse our investment outcomes. Again, that’s because inaction (other than rebalancing and tax-managing the portfolio) is more likely to be the right strategy.

Recommended Reading

Finally, to help you meet the task of creating a mentally challenging and emotionally fulfilling retirement, I highly recommend two books. The first is “Your Retirement Quest: 10 Secrets for Creating and Living a Fulfilling Retirement.” The authors, Alan Spector and Keith Lawrence, provide readers with a road map and directions for developing a holistic plan that will enable you to live a fulfilling retirement.

While financial security is indeed an important aspect of retirement, this book focuses on the all-too-often neglected nonfinancial aspects. The authors also provide compelling (and perhaps surprising) data on why “it’s not all about the money.” The book is filled with practical planning tips and worksheets that will help you think about critical choices, how to collaborate with those closest to you and guide you in putting the plan together.

My other recommendation is Mitch Anthony’s “The New Retirementality.” If you care deeply about having a fulfilling retirement, these two books are must-reads.

This commentary originally appeared June 13 on

By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.

The opinions expressed by featured authors are their own and may not accurately reflect those of the BAM ALLIANCE. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

© 2016, The BAM ALLIANCE

Share Button

Larry Swedroe

Larry Swedroe is the Chief Research Officer for Buckingham Strategic Wealth. He has authored or co-authored more than a dozen books and is regularly published on and Advisor Perspectives. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry holds an MBA in finance and investment from New York University, and a bachelor's degree in finance from Baruch College in New York.

Foundational Materials

Buckingham prides itself on producing a wealth of non-biased financial information on a regular basis. See these articles from our blog and from our thought leaders around the nation.

Buckingham Library

Click on the covers to learn more and order the books our national thought leaders have written in recent years.

Previous Slide
Next Slide