Episode 65 – Fears about money and how to tackle them
Episode transcript:
[music intro]
Jenny
Welcome back to Fund Your Future with DRS. Today we’re diving into something that might surprise you. Or maybe it won’t. According to a study by Allianz Life, 64% of Americans are more afraid of running out of money than of dying. That’s right. Money anxiety is literally scarier than death for most of us.
So, we kind of want to look into what’s driving this fear. There’s inflation, taxes, the uncertain future about Social Security. What do you think Seth? Why is this scarier than death for so many people?
Seth
I mean, it does sort of reinforce one of the things we talk about in the office. It seems like people don’t want to talk about their retirement because it’s connected to death. I’m going to retire. And then the next step is I’m going to die. I mean, I appreciated the study, talked about one of the contributing factors for most of the people who responded that way is inflation being more top of mind. And so, seeing purchasing power disappear, I think has an impact on that.
You know, certainly the thing I’ve heard from my parents and other folks who are at or near retirement, is the cost of health care. And just knowing that that continues to grow oftentimes faster than inflation. And then I think similarly or related is end of life expenses for a portion of the population.
The last year or two of your life can be really expensive. And so that fear of, do I have enough saved to cover these things that are maybe going to come out of nowhere and in some unexpected way. So, what are your thoughts, Jenny?
Jenny
Yeah, I think that does have a lot to do with it. People have seen inflation go up over the last couple of years, and now they’re like, well, if that trend continues to happen that if it’s increasing at such a steep rate, you know, someone who’s in their 30s or 40s is now like, okay, that means it’s going to increase even that much more.
But by the time that I’m 70 or 80, I think it’s also more of a tangible thing, honestly, than death.
Because the reality is, we don’t know what happens to you when you die. But we do know what happens if you run out of money. So, I think it’s much more of that tangible, real possibility. Like everybody knows that they’re going to die at some point. But there obviously is much more of that fear of, “oh, I might run out of money. And what happens if I do? And what happens to my family or my kids if I do?” and all those “what if’s.”
Seth
Yeah, that’s a really good point, too, because I think the idea of running out of money, you think about all the burdens you put on other people, or what possible burdens you could put on other people, and maybe feelings of shame, feelings that you are letting people down where death is sad. But I’m also not around to see all of that.
Jenny
Yeah, like you’re dead. You don’t have to worry about what everybody else is doing.
Seth
Yeah, you have to live with the consequences. Still, I think with the running out of money. And I also wonder what people think running out of money means because especially for public employees like us, and that most of our listeners would fall into. You know, you have a guaranteed pension. Most of us have some form of Social Security benefits as well.
And so there is some income. You are going to continue to have, but it’s almost more of a concern of my expenses outpacing my income. My expenses are going to grow quicker and certain things I can’t dial down, I can’t not pay for health care. I can’t not pay for food and shelter. So I think that’s probably a big part of the concern. And Social Security fear is one of the things that came up in the study as well.
Jenny
Yeah. And I would imagine that obviously a lot of the people that they interviewed for this study may be working in a job where they don’t have a pension. So that’s obviously a real fear for a lot of people. But maybe we talk a little bit about what people could do in the face of this, possibly talking to a financial advisor and maybe that there’s a little bit of fear around that.
Seth
Yeah, there’s the fear of facing their reality. I also think financial advisors, financial planners that sometimes might feel like that’s for somebody else, I don’t earn enough or I don’t know who to even talk to about this. We had Bruce on an earlier podcast that he talked about the process of selecting a financial advisor and what questions to ask.
You know, I’m a fan of exposure therapy, and if there’s something that you’re afraid of getting a little bit of exposure to it and maybe realizing it is not as bad as it seems. And I think talking to a financial advisor, oftentimes you can figure out how much is one visit going to cost. What sort of outcome could I receive that would help me feel less worried?
Can they look at my overall financial picture? What information will I have to provide to them as far as income and expenses, to be able to have a better sense of what my financial future looks [like]. And get either some reassurance that I have on track, or some thoughts about how I can get on track going forward.
Jenny
Yeah, exactly. And I think this is a great time to share, too, that there are financial advisors out there that can offer free advice, like through a local credit union. So, it doesn’t necessarily always cost something. Sometimes it can cost money if you’re asking someone to manage your stocks for you. But if you’re just going into your bank or specifically a credit union to kind of get an assessment of your finances, a lot of times they will offer those free assessments.
And I know that’s something that’s been on my list as well for my financial to do list. And it’s just one of those things I haven’t gotten around to it.
Seth
Yeah. One of the things I found interesting in the survey as well was that basically the same percentage of people, said they’re not saving as much for retirement as they would like to. And the term I actually “like to” was what stood out to me in that. When do you know that you’re saving enough? When do you know you’re on track?
Like, some of this might just be uncertainty of “I haven’t laid out that path to know if I’m on track or not.” And maybe when you do sit down with a financial planner or map it out yourself. As far as “if I am saving this percentage of my salary, I’ll anticipate that I’ll have this much saved at age 65 or age 55.”
And this is what my income opportunities will be at that point. So sometimes it is just like facing that reality and mapping things out. And I think a lot of the fear in this article is really about the uncertainty and not thinking about like, what are the different paths that could branch out, and how can I help put myself on one path or the other?
Jenny
Yeah, I think it kind of gets back to that piece of maybe people who had mapped out their future. And then now with the cost of inflation and then potential that the news about Social Security, they’re having to go back and look at their plan and going, “okay, shoot, now I need to reevaluate.” And so that could be causing a lot of stress for people as well.
Seth
“Yeah, some event throws me off. I have some medical emergency or expense and realize, oh my goodness, I’m going to have to pay for something else. This medication is expensive.” Whatever it is can really make the best laid plans seem maybe irrelevant at that point or less helpful. I think that’s one of the things that is also helpful to think about, is how you’ve adjusted over time, how other times maybe you have felt financial insecurity.
I can’t remember if I’ve told this story on the podcast before, but there was a time in the Great Recession where I wasn’t working and my wife was, and after about nine months I was freaking out. I was really feeling like, “oh my gosh, we’re falling behind. We’re not going to make it.” And, you know, we were in our early 30s and my wife just she had to kind of talk me off the ledge a little bit in a way that like, “we’re doing fine. We have an emergency fund still. We’re even still saving some for retirement.” Like things are going to be okay.
And, you know, things are okay until they’re not. And you have to be able to make adjustments. I think oftentimes what the studies show with people in retirement is their spending adjusts. If they’re worried about running out of money or if they’re not bringing in as much as they expected.
They make adjustments. Maybe they’re not going to travel as much as they thought they were, or they’re going to, you know, downsize where they live, but they make adjustments. I mean, maybe they take on a roommate or they, you know, invite a grandkid to live with them for a year or two. Like there are ways that people adapt. Once again, it’s that uncertainty of not knowing. What are my options going to be?
Jenny
Yeah, that’s true. And I like that sort of looking back, if it doesn’t apply so well to those who are in our 20s. But if you’re in your late 40s or 50s, like you said, kind of looking back and being like, okay, there have been these other times where I felt uncertain and things tended to work themselves out.
Or like you said, you just make those adjustments depending on what your situation is. Maybe you can’t travel as much as you would hoped, but you’re not going to run out of money per se.
Seth
Yeah, we’ve talked about like a number of times, about focusing on the negative. There are also studies that show a good percentage of people end up with more money when they die than when they started retirement because of this fear of, oh, I’m going to run out of money.
One of the greatest indicators of someone’s net worth or their retirement account, the people that have the highest balances are often the people that live the longest because they have time. They have more time.
There’s some great quotes about Warren Buffett, about how much money he’s made from age 80 to 90, in his life. One of the reasons he is so wealthy is because he’s lived for a really long time. You know, obviously he did well, but it’s that additional compounding time.
And this is one of the things we’ve talked about on other episodes around investing is thinking about, you don’t need all that money when you turn 65. You might need some of it, but it’s also going to have the opportunity to grow until you’re 75 or 85 or 95. And so there’s a reason to continue to keep some of it invested.
Jenny
Yeah, that’s a great reminder.
Seth
Maybe one of the takeaways for this episode is if this is something you’re worrying about, maybe the next best step is to talk to a financial professional. You know, get an outside perspective. Am I on track?
And maybe it’s a professional. Maybe it’s a friend or somebody who’s 5 or 10 years older and you’re bouncing some ideas about how they handled the situation, how did they handle this transition? Or, you know, what are the things that help them not worry about their long term finances and running out of money?
Jenny
Yeah, for sure. I think that’s great advice. Yeah. So definitely if there’s any listeners out there who are feeling this sort of pressure, we definitely encourage you to sit down with a financial advisor. There’s lots of free ones out there that would be happy to sit down with you, look at your finances, help give you some advice to hopefully ease some of those fears and everything.
Seth
Well and now, Jenny, I feel like a future episode has to be a follow up with you about how your meeting with your financial professional went. Maybe I should do the same thing. I’ll talk to my wife, and maybe we’ll go to the credit union and talk to somebody about where our finances are, because it is scary to expose your life a little bit to, you know, a third party, somebody that doesn’t know your situation.
Jenny
Yeah. And my husband is in between jobs right now. So, I think I was kind of waiting [until] he gets a job and then we can kind of have a better picture of what it would look like.
Seth
Yeah, but I think that it does go to the point of playing out future scenarios that could be different. You know, and this is something we talked with Bruce about financial planning in general. But, you know, playing out a couple of different scenarios can help with that worry as well. “What do our finances look like now? What would our finances look like in a year from now if we’re both working, if one of us is not working?” Yeah. What options do we have?
Jenny
Absolutely. Yeah. And of course, we want to remind our listeners that if you do have questions, you can certainly email us at drs.podcasts@drs.wa.gov.
Seth
Great. Thanks, Jenny.
Jenny
Yeah, thanks so much.
[music outro]
Disclaimer
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