How to Put Your Retirement Fears Into Perspective

The first time I worked on a retirement plan, I was in college, and it was a required assignment. At the time, I remember thinking that retirement was eons away and that I would be absolutely ancient by the time it arrived.

I constructed a plan based on steady wage increases, low inflation, and the ability to stay with one company for as long as my heart desired. My naiveté would have been cute if I hadn't been so dead wrong.

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How wrong can one person be?

As full retirement age draws ever nearer, I find that I'm not old, that wages don't increase steadily for everyone, that inflation is a bear, and that companies are happy to kick faithful employees to the curb in the name of profit.

Someone really should have taught me something about economics before I entered college. I was absolutely shocked as huge, dependable U.S. companies moved the bulk of their operations overseas, wages stagnated, and job losses became a norm.

I believe that's when I became hyper-focused on controlling what I could -- planning my finances so they accounted for inevitable bumps in the road.

How being fearful has given way to perspective

Once, I remember lying awake at night, wondering if we were scrimping and saving to build a retirement fund that would eventually get wiped out by another Great Depression.

I suspect it goes without saying, but I got carried away. After writing about finances for decades, I've come to realize how much diving into the nitty-gritty has changed my perspective. By looking at retirement through a historical lens, I've gained confidence. Since I can't control what happens around me, I've learned to control what I can.

Here's how I've put my retirement fears into perspective, and how you can too.

Face the fear

I often recall something I read in a book by the motivational speaker Dale Carnegie, a man who died 70 years ago (his books still rock). I'm paraphrasing here, but Carnegie suggested that worriers should "imagine the worst, accept it as a possibility, and make moves to improve the situation."

It's only when I name the thing I'm afraid will go wrong that I can work on finding a solution. For example:

Fear: I'm afraid I'll make mistakes.

Solution: Pay for expert advice.

While I do solely manage one of our accounts, I leave the other two to the pros, fiduciaries whose job it is to ensure our accounts are balanced and growing along with the market. I may be afraid that I'll get it wrong, but I do have confidence in the professionals.

Fear: I'm worried that we'll run out of money in retirement.

Solution: My retirement plan has us drawing between 4% and 5% from our retirement account each year. Using an annual return of 7%, the balance on our retirement accounts shouldn't decrease in 30 years.

Fear: I'm nervous about what will happen when the market hits the skids.

Solution: The market does (and will) occasionally hit the skids. I'm slowly building a separate cash account we can draw from when the markets are down, so we won't have to take more than absolutely necessary from our retirement accounts. That way, the assets in our accounts can benefit from the next incoming bull market.

Fear: Bear markets worry me.

Solution: Remember history. There's nothing like a bear market to make you lose perspective. Here are some of the reasons I've learned to stay the course, even when the market is in the tank:

• On average, stocks lose 35% in a bear market. In contrast, they gain 112% during a bull market. A bull market follows every bear market, and I want those assets right where I left them so they can grow as the market improves.
• Bear markets last, on average, 289 days. That's less than 10 months. On the other hand, the average length of a bull market is 988 days, or 2.7 years.
• Between 1928 and 1945, there were 12 bear markets. Since then, the time between bear markets has been 5.1 years. Regulations enacted after the Great Depression and Great Recession have played an enormous role.

Fear: I'm sometimes nervous because I can't see what's coming around the corner. What if something happens and we lose all the money we've saved and invested?

Solution: By adopting Carnegie's advice to imagine the worst, I focus on what would happen if we lost everything. In that event, we'd still have guaranteed income, such as Social Security, a pension, and royalties. I try to keep our post-retirement budget below the amount we're scheduled to receive in guaranteed income (assuming Congress comes up with a way to shore up the Social Security trust).

I'm in no way saying I do everything right. In fact, some of the best lessons I've learned have been due to truly bone-headed moves. What I am suggesting is that it's possible to look your retirement fears in the face, do your best to come up with a plan of action, and start looking forward to the future. All worrying will do is make you miserable.

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