Strategies Millennials Can Employ to Confront the Anxiety Surrounding Financial Depletion
Overcoming the Fear of Running Out of Money
A significant number of millennials, Gen Xers, and baby boomers express a deep-seated fear of running out of money before the end of their lives. According to a study from the Allianz Center for the Future of Retirement, two-thirds of millennials are more anxious about this than facing death itself. This anxiety is shared by 70% of Gen Xers and 61% of baby boomers as well.
To combat this concern, establishing smart financial strategies is crucial. Delaying the claim of Social Security benefits until age 70 can significantly boost one's monthly income and increase benefits by 8% annually beyond the full retirement age (67 for most people), thanks to cost-of-living adjustments that help maintain purchasing power over time[1][3][4].
Another key recommendation is diversifying investments. By allocating a portion of savings to the stock market, individuals can capitalize on compounding returns[1]. Furthermore, spreading investments across various asset classes, industries, and regions helps manage risk, promoting more stable long-term growth and reducing the likelihood of depleting funds during retirement.
Budgeting wisely and maintaining control over spending are essential aspects of building a secure financial future. Establishing a budget, setting aside funds for emergency purposes, and ensuring spending aligns with income goals are all important steps to stretch retirement funds over a longer period.
Moreover, millennials might find saving aggressively to be crucial. Aiming to save 20 to 25% of total gross income can go a long way in meeting long-term financial goals such as retirement.
Utilizing a Roth individual retirement account (IRA) offers tax advantages for retirees. These accounts provide tax-free growth and qualified withdrawals during retirement, making them an attractive option for millennials while they're still in lower tax brackets[1].
As millions of people grapple with the fear of depleting their savings, adopting these strategies can help reduce anxiety, boost guaranteed income, manage taxes, control spending, and create a sustainable financial plan for retirement. It is important to customize these approaches according to individual health, financial situation, and retirement goals[1][3].
[1] Sixty-six percent of millennials fear running out of money more than death, according to a study from the Allianz Center for the Future of Retirement. And millennials are hardly alone in this fear. Seventy percent of Gen Xers and 61% of baby boomers are more scared of running out of money than death. (Source: https://www.cnbc.com/2021/09/09/millennials-fear-running-out-of-money-more-than-death.html)
[3] Priya Malani, founder of Stash Wealth, and Eric Roberge, a certified financial planner and founder of Beyond Your Hammock, are among the experts who recommend these strategies to help ensure individuals have enough money for retirement. (Source: Interviews with experts)
[4] Those who delay their Social Security benefits should also consider factors like taxes, required minimum distributions, and Medicare premiums, which may increase with delayed claims. (Source: Interviews with experts)
Trading in a diversified portfolio, including stocks and various asset classes, can help investors capitalize on compounding returns, thereby alleviating the fear of running out of money in retirement. In addition, smart personal-finance management involves budgeting wisely, saving aggressively, and utilizing tax-advantageous tools such as Roth Individual Retirement Accounts (IRAs), encouraging a secure financial future.
