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Retirement Planning: The Upside of Hesitation

According to a new Ameriprise Financial survey of pre-retirees, the financial crisis has ushered in two new seemingly depressing stages of retirement planning: Hesitation and Realization.

  • Hesitation is the "Oh crap, I'm pushing 60 and the numbers are not looking good for being able to pull of the retirement I want" phase. That's a paraphrase, here's the official Ameriprise explanation of the Hesitation stage:

"...people begin to visualize retirement and question their preparedness. The stress of the recession tends to intensify any feelings of uncertainty and insecurity."

  • Realization is the "Well it's time to retire even though I still have serious concerns how I will be able to pull this off" phase. Ameriprise's official take:

"In 2005, this stage was known as "Liberation," reflecting the mostly positive, "honeymoon" sentiment that encompasses the initial days of retirement. People felt excited and relieved to be liberated from many responsibilities and to concentrate on their retirement goals. However, these positive feelings of liberation have been somewhat muted following the recession, as worries about savings and overall retirement goals extend past retirement day. Therefore, to reflect the more complex feelings respondents displayed in 2010, this stage is now more aptly named the Realization stage."

Staring at the graphic below of Ameriprise's pre-crisis and post-crisis stages caused me to initially flash on Elisabeth Kubler-Ross' five stages of grief. Hesitation seems a bit of a mix of Bargaining and Depression and Realization is a mash-up of Depression and Acceptance.

But then I decided to go glass-half-full: It occurs to me that the Hesitation stage can in fact be the missing Liberation stage. I realize when you're in the midst of stressing out it doesn't exactly feel liberating, but to the extent you take a deep breath and make some smart tweaks to your plan during the Hesitation stage you can still pull off a successful retirement.

He Who Hesitates Can In Fact Win at Retirement
Here's how to use your Hesitation stage to put the final winning tweaks on your retirement plan:

  • Hesitate on the Retirement Date. This is well-trod turf, but still bears repeating: manage to delay retirement by just a few years-even if you don't save a penny during that time -can be a huge help. (Check out this delayed-retirement post for a compelling chart on how delayig pays offs.
  • Focus on how close you are. Yes, it's true that about half of boomers are at risk of coming up short during a long-retirement, but 30 percent of folks who are behind have at least 80 percent of what they'll need. Come on, you can make a dent in that final 20 percent.
  • Be House Smart. If you're going to be saddled with a big mortgage once you retire, time to give serious thought to downsizing. You can stay in your big (expensive) house and spend your retirement stressing, or you can find a perfectly comfortable and affordable home nearby that will allow you to actually enjoy your retirement. For serious savings, consider becoming becoming an ex-pat in retirement.
  • Embrace the New Frugality. Granted, it's a horrible name that connotes denying yourself. But spending less is actually one of the most liberating moves you can make. The less you need today, the less income you need to replace come retirement time.
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