Mind Matters: Navigating Mindset Shifts in Retirement

4 minute read

Retirement: A New Concept That Requires New Ways Of Thinking

Those in the Peak 65 Zone are being asked to do something that’s never been done before: Spending the money they’ve saved up for retirement and making it last over a longer period, as life expectancies increase. If you’re a Peak 65’er, you know what a challenge this is. But, the good news is there are steps you can take to make things easier, many of which start with the way we think about our money.

Morgan Housel is the author of the blockbuster bestseller The Psychology of Money: Timeless Lessons on Wealth Greed and Happiness and a new book, Same As Ever: A Guide to What Never Changes. In short, he’s an expert in how we think about our money and life in general.

Housel says as retirees navigate this uncharted territory, one of the biggest hurdles they face is that the concept of retirement is actually relatively new. When you think about it, as recently as the 1950s, a majority of people worked until they died. The idea that everyone should have a 10, 20, or 30-year retirement is unique to the past 40-50 years. Keeping this in mind, Housel says Peak 65ers–who haven’t had any generational knowledge transfer about making their money last for such a long period–need to cut themselves some slack. “The Baby Boomers are really the first generation ever, where society told them the expectation was, ‘You save for your retirement and best of luck to you…you need to save for your retirement and keep yourself going for a quarter of a century.’”

Another thing that needs to shift? Expectations for what a decent retirement looks like have massively inflated. “They have expectations for a grander lifestyle and that’s great,” Housel notes. “But the inflation of expectations and aspirations makes it that much harder to clear the bar of how much money you need for retirement and making that money last,” he says.

To avoid planning for a retirement that doesn’t match up with your financial situation, Housel says the key is understanding that wealth is a two-part equation: how much money you have and your money in relation to your expectations and goals. “It’s the gap between the two that makes you prepared for retirement,” he notes. “For a lot of people, the ability to have a good retirement means managing both ends of that. It’s not just growing your money, it’s growing your money and keeping your expectations in check at the same time.”

As studies from the Alliance for Lifetime Income (ALI) have shown, the risk of running out of money in retirement is the biggest worry many people have as they approach their golden years. One of the ways people can reduce that risk is by starting to think about buying themselves a paycheck. Or, in other words, obtaining an annuity income stream that will work in parallel with Social Security and secure their financial future. Despite the benefits of protected income, unfortunately very few people take advantage of annuities. ALI research has shown less than 20% of consumers are extremely familiar with annuities. Yet, 97% say having guaranteed lifetime income–in addition to Social Security in their retirement–is of value to them.

One of the reasons for the disconnect? A lack of knowledge about what annuities are. “People understand savings accounts, they might understand bonds, but conceptually, an annuity where ‘I give you this money or I pay you this money and you give me a paycheck for life’…it’s harder for people to wrap their heads around exactly what that means,” says Housel, who also notes that historically some products have been both expensive from a fee perspective and difficult to understand . Getting over that “fear factor” as Housel puts it, involves better education around what annuities are and how they can be used by retirees to protect and grow their retirement savings, as well as provide peace of mind for life’s next chapter.

WATCH Your Money Map: Navigating Mindset Shifts in Retirement

Morgan Housel is a partner at The Collaborative Fund. He’s the New York Times Bestselling author of The Psychology of Money and Same As Ever. His books have sold over five million copies and have been translated into more than 50 languages. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, and winner of the New York Times Sidney Award. In 2022, MarketWatch named him one of the 50 most influential people in markets. He serves on the board of directors at Markel.

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