According to Nick Murray, a well-known expert in financial advice, people’s financial fears can be categorised into three parts: lack, loss and limitation.
1. Lack
This is the belief that you will not have enough money to retire.
2. Loss
This is the belief that you will lose whatever you have saved as soon as you reach retirement. For example, people often say to us, “but what if the day after I retire, we have another GFC?”
3. Limitations
This is the belief that not only will you lose your money, but you won’t be able to get it back, either.
Like a lot of things in life, these are not founded on anything concrete – they are simply fears. And when you talk about them, you can rationalise them a little bit more – hence this blog.
We often tell clients that they will struggle with the feeling of lack in the first three years of retirement. It’s not hard to feel like you don’t have enough money, even when you are on the right track.
As for those who are afraid of a GFC happening the day after they retire, bringing them loss, we remind them that their retirement might span up to thirty years. That’s thirty years of ups and downs – it’s not a simple case of losing all your money and having nothing left. It’s simply volatility. We know there will be drops in the market. It’s a fact. We just don’t know when, and nobody does.
Finally, limitation refers to the fear of never getting back the money we’ve lost in shares. As always, our view remains the same – hold onto your shares, don’t sell when prices are down. If you do, you will definitely lose money.
The second part of limitation fear for people is that once they fully retire, it’ll be very hard to be employed again, thus losing the chance to earn more money. But again, we have found this to be untrue. Many people in their 60s are successful in securing casual or part time employment when they look for it.
These fears are real. We see them all the time. And while they might be hard to avoid, it’s good to be aware of them and try to get them into perspective. These fears, feelings and thoughts are not just normal, but common. You’re not alone! But having the relevant information is good, and being rational with your thoughts.