Losing Sleep-Literally-Over the Future
In lieu of a lullaby, here are steps to take to ease those financial worries
No surprise, concerns about their financial well-being in retirement mean too many Americans are watching infomercials for colon cleaners and home gyms at 2 a.m. rather then getting their REM sleep. "When you're struggling to put food on the table and feed a couple of kids, you're not in a position to plan for your future," says Joycelyn Ward, 65, of Juneau, Alaska, who plans to keep working for at least an additional 10 years out of financial necessity. "I wasn't able to start setting aside anything for retirement until I was in my 50s."
Some 43 percent of employees at small and midsize businesses, and 26 percent of retirees, are so anxious about being able to afford medical care in retirement that they lose sleep over it, according to the Principal Financial Well-Being Index.
Workers were also anxious about being able to enjoy the same quality of life they have now (42 percent) and even about affording the basic necessities in retirement (38 percent), a concern that is particularly common among women, including Ward. "There is a sense of concern especially since my family tends to live a long time," she says. And the top fear among those who are already retired is that inflation is gradually eroding their purchasing power (37 percent).
But you don't have to give up on getting a sound night's sleep or even having sweet dreams. Here are some ways to ease your fears about what retirement has in store for you.
Plan for the financial transition. Financial planners say it's key to develop a strategy for shifting your savings into a steady stream of income that you can tap in retirement. Lois Gfrerer, 77, a retired homemaker and mother of nine in St. Paul, Minn., met with a financial planner a couple of times each year before she retired to make sure she was managing her finances correctly. "The financial planner advised us to sell all our company stock because the stock is not very stable. So, we sold it and turned it into an IRA," says Gfrerer, who has been retired for 24 years.
But only 30 percent of current employees and 51 percent of retirees have a plan for turning investments into bills paid, the Principal study found. "Just investing the time to plan for the retirement transition with help from a financial professional or your employer and plan service provider," says Dan Houston, executive vice president of retirement and investor services for Principal, "can make the difference between achieving financial well-being in retirement or not."
Pay down debt before you retire. Both housing debt and consumer debt are rising for elderly families. The average debt for a family headed by someone age 75 or older rose from $7,769 in 1992 to $20,234 in 2004, according to the Employee Benefit Research Institute. Those approaching retirement age have increasing levels of debt as well. "You need to get your finances in order," says Craig Copeland, an EBRI senior research associate. "Having debt going into retirement is not the way to have a successful retirement."
Evaluate your assets. Take stock of all the sources of income you're going to have in retirement. "You need to think about what sort of guaranteed income streams you have-Social Security, defined-benefit plans-and also the amount you have in a 401(k) or other savings," says Emily Kessler, a staff fellow for the Society of Actuaries. "Figure out how much you need to live on, and factor in inflation."
Make health insurance coverage a must. If you retire before age 65, make sure you have health insurance. You may be able to qualify for COBRA coverage for up to 18 months after you leave your job. But even after age 65, "get access to some form of insurance to help you pay for those things that Medicare doesn't cover," Kessler says. Medicare does not cover long-term care or long hospital stays, warns Copeland. Long-term health insurance can help make sure your investments remain intact if tragedy strikes. Says Ward in Alaska: "I know my mother, who is still going strong in her 80s, has to have supplemental, and I will probably have to do that, too."
Take care of your health. Perhaps even more important than accruing financial assets is investing in yourself with healthful foods, exercise, and preventive care so that catastrophic healthcare costs can be avoided as much as possible. "I recognize that at 65 you don't heal as fast as you do at 24," Ward says. "So, I see the doctor regularly, and I have mammograms regularly, and I'm recovering from an injury, so I do my physical therapy and build up my physical strength."
Of course, making sure your retirement worries don't interfere with adequate shut-eye will also keep you healthier. "Good sleep is important for good mental and physical health, including resistance to disease," says Timothy Monk, professor of psychiatry at the University of Pittsburgh Medical Center. "It can be a predictor of longevity in seniors." Mary Carskadon, professor of psychiatry and human behavior at Brown Medical School, adds that too much nighttime tossing and turning "can contribute to the kind of illness that we typically associate with aging."
This story appears in the June 11, 2007 print edition of U.S. News & World Report.