A study by TIAA finds that Americans are having a bit of a crisis of confidence when it comes to their financial security, with fear of events like an unexpected expense, financially supporting loved ones, or even cuts to Social Security and Medicare impacting their peace of mind.
“A major lesson of this survey is that effectively addressing uncertainties is key to feeling financially secure.” – Lori Dickerson Fouché, CEO, TIAA Financial Solutions
The Cost of Financial Stress
While many people can relate to the issues TIAA found to be factors in causing financial stress, few understand the impact that stress has on overall well-being.
- People with financial stress are more than twice as likely to experience mental health problems, including depression and anxiety.
- 29% of people with high financial stress report severe anxiety.
- High financial stress levels increase blood pressure, heart disease, and increase the risk of stroke by nearly 20%.
(Source: University of Nottingham & Northwestern University)
The report found that ‘fear that they won’t have enough money to last a lifetime’ is the number one concern among all demographics with almost two thirds of Americans “not confident” in their retirement and lifetime income plans, and only 27 percent confident they’ll have enough money to get them to the end of life.
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Demographic Divide
Confidence in a financially secure retirement seems to grow with age. 53% of Baby Boomers believe they can maintain “a good standard of living” in retirement, while just 22% of Gen Xers and 28% of Millennials shared that sentiment.
.“For Millennials, it’s not surprising they aren’t confident since they’re many years away from retirement and are likely thinking more about their immediate financial needs,” says Dan Keady, TIAA’s Chief Financial Planning Strategist,
Meanwhile, A study by David C. John – deputy director of the Retirement Project and a senior fellow at the Brookings Institution – found women at-large, women of color, and minorities experience lower rates of retirement readiness than their white male counterparts.
In addition to systemic factors like discrimination, John writes financial education is a critical part to the overall financial wellness of these groups.
“Attitudes about saving are likely formed from an early age,” John writes. “Habits learned from when one is young tend to carry into adulthood. If children are encouraged at a young age to start saving and notions of budgeting are integrated into their daily lives, it may instill a positive attitude towards saving over their adult years.”
Financial Habits That Build Confidence & Reduce Stress
Keady and other financial experts agree that retirement planning should start as soon as possible, with as much money as possible.
That means if you only have a little to spare, then do it. Just starting on your retirement journey is statistically shown, according to the TIAA study, to boost confidence.
“Even just starting to think about it and putting a plan in place will greatly benefit people as they continue through their working years,” Keady said. “When individuals have no plan at all, they can feel even more overwhelmed and lack confidence.”
“People should closely evaluate their plan options and should even ask their employer about adding lifetime income options to their plan.” – Dan Keady, TIAA’s Chief Financial Planning Strategist,
Technology has made it easier than ever to track and develop retirement savings. Apps like Acorns, Stash, and others are innovators in making investing mobile, and companies like TIAA have mobile applications to help keep retirement top-of-mind.
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Battling Uncertainty with Advice
“Two great ways of reducing uncertain outcomes are by using financial products that guarantee lifetime income and getting the advice and building the skills needed to deal with adverse events,” Fouché said.
Financial advice is best given by professionals with credentials. Certified Financial Planners (CFPs) are duty-bound by their certifications to act in their clients’ best interests, which means you can hire someone to truly have your back.
Whenever you decide that a CFP is the right choice for you, do your homework. Make sure they are certified, and can provide references to current or past clients. Not all financial planners are created equal, so it’s crucial to get the right person in your court.
When faced with uncertainty, remember that there is always a way out. Perhaps more to the point, always remember that net-worth has nothing to do with self-worth. Financial challenges do not define us – what we do about them, however, is another story.