Worried About Your Retirement? Steps You Can Take Now

Current market conditions have forced many people to re-think their retirement plans. Those already retired are worrying about sustaining their current standard of living in face of their reduced resources. Those nearing retirement worry about their future and consider postponing their retirement date, reluctantly accepting that they will have to work more years than they had previously anticipated. And those many years from retirement worry about whether to continue to invest in the market and whether the markets will recover sufficiently to allow them to retire.

Everyone is worried, and worry adds to an already stressful existence. Stress can compromise your physical and mental health. Alina Tugend wrote recently in the New York Times "Personal Business" section about a study of 3,000 people at the University of Michigan which examined the effects of chronic stress brought about by uncertainly about job security. The study found that, "People who felt chronically insecure about their jobs reported significantly worse overall health and were more depressed than those who had actually lost their jobs or had even faced a serious or life-threatening illness."

"The problem," according to Professor Robert L. Leahy at Weill-Cornell University Medical College, "is that people who are anxious tend to equate uncertainly with negative outcome." We are uncertain about the future, we worry about it, we make ourselves sick and, not surprisingly, things get worse, not better.

How can we break out of this vicious cycle? Begin by separating the things over which you have control and those that are beyond your control. It does no good to worry about the overall future of the stock market because you have no control over that. Markets are far more volatile today than they have been in a very long time, and this volatility has increased investment risk. The practical solution is to re-examine your risk tolerance in light of this increased volatility. Take direct steps now to bring your investments in line with your personal risk tolerance. This channels your worry into productive action. You are doing something positive which will help reduce future potential negative consequences.

This is not to suggest that you should retreat entirely from equities, but perhaps reduce the equity portion of your investment portfolio while increasing the portion dedicated to bonds and cash. You might also move from individual stock investments to low-cost mutual funds which provide significantly increased diversification (and less volatility) than an individual portfolio.

In addition to risk tolerance alignment, it is even more important to re-align your lifestyle with your resources so that you don't outlive your money.

Take some significant time to think about what is really important to you in your life and in your retirement, and then estimate what your retirement lifestyle will cost. If the numbers do not add up, based on your projected annual revenue, expenses and life expectancy, you will need to make some adjustments. Estimate the specific elements of your retirement lifestyle (living expenses, travel, continuing education, etc.) and then make an informed judgment about what is truly important to you and adjust your lifestyle accordingly. If and when things get better, you can always readjust again.

By reducing the amount of worrying you do and, consequently, the amount of stress you create for yourself, you can turn this vicious circle into a virtuous one.

Then, like Alfred E. Newman, you can say, "What? Me worry?"

John Trauth is co-author of "Your Retirement, Your Way" (McGraw-Hill, 2007), a step-by-step curriculum which explains the secrets for happiness in retirement and helps readers prepare for the psychological, strategic and financial aspects of this major life transition. Learn more about this book and take the free "retirement readiness quiz" at www.YourRetirementYourWay.com.