The Fiscal & the Physical
The money-mind-body connection in retirement planning
Written by John Ferrari
Money may not buy happiness, but it can give us peace of mind—especially as we consider our financial health in retirement. Financial concerns “definitely take precedence in people’s minds,” says Brittany Rudinica, LCSW, an oncology social worker with Torrance Memorial Hunt Cancer Institute’s Cancer Resource Center. And that, she adds, can have a big impact on our mental and physical well-being.
When we experience a threat to our sense of safety and security—whether it’s a new health diagnosis, financial concern or any other highly stressful event—our body activates an alarm system to help us survive. Even though many of the things that cause anxiety today, like money, are not the kinds of threats our ancestors faced, like saber-toothed tigers, they still cause the same fight-flight-or-freeze response.
While a low level of stress can help us remain alert and respond to threats of both the financial and saber-toothed varieties, long-term, severe stress is associated with health disorders ranging from sleep deprivation to high blood pressure. “Chronic financial anxiety leads to survival mode, focusing on immediate needs rather than long-term planning,” Rudinica says. “Physically, stress is related to increased levels of cortisol and inflammation.”
All of this can lead to a cascade of health issues, from heart disease to depression. And the prevalence of financial anxiety surrounding retirement is high. In a 2023 survey by insurance provider Allianz Life, 61% of respondents feared running out of money in retirement even more than they feared death.
Outliving their money “is a major worry individuals have as they approach retirement or are already in retirement,” agrees F. Thomas Schlappatha, CFP, a wealth advisor, estate planning consultant and executive director with Morgan Stanley Wealth Management. As we move through our working life, there is a map to financial security, Schlappatha says (see page 3), as well as advice for individuals at all stages.
Personal or household budgets are a key tool, but “whether it’s a detailed spreadsheet or a back-of-the-envelope calculation, budgeting is something people must manage themselves,” he says. “No tool, app or advisor can force you to change how you spend or save your money.”
On the other hand, professional financial advice can be a lifesaver (or at least money-saver) when individuals “want help (or don’t feel comfortable) with investing in capital markets, creating a financial plan, getting their estate in order, creating a trust, filing taxes or holistic financial management.”
Finding the right advisor can seem daunting, but we can turn to people we already trust, Schlappatha says. “Talk to family, friends, coworkers or any professional you currently work with and ask if they can refer you to the financial advisor they work with. Your initial conversations with a financial professional should be informational, so ask as many questions as needed to better understand your own needs and what your options are.”
He notes, “Many advisors work with specific individuals such as business owners, high net worth families or C-suite executives. Other advisors focus on retirement planning for the general population. So if you have a more complex financial situation, ask each advisor you are considering how many of their clients have a profile similar to yours. For those with less disposable income, your local bank or credit union branch may have resources to help.”
And, Schlappatha adds, be aware of recent and potential changes to legislation and regulations affecting the financial aspects of retirement. “For example, our legislators have a big decision to make on whether the income and estate tax cut provisions of the 2017 Tax Cuts and Jobs Act should be extended. They are set to expire after 2025 unless the new administration and Congress members make the changes permanent following the 2024 election. Due to that unknown, it would be prudent for people to refine their financial or retirement plans ahead of any potential changes in the tax code.”
In the meantime, says Rudinica, breathe deeply. “Mind-body skills like conscious deep breathing engage your parasympathetic nervous system, relax the body and lead to better thinking. Calm your body down: go into nature, go for a walk, engage in things that bring you joy and relaxation. When we regulate our nervous system, we are much better at being creative and problem-solving,” she says.
And, just to be on the safe side, stay away from saber-toothed tigers.
Planning for Financial Security:
A Roadmap to Retirement
Written by F. Thomas Schlappatha
- Starting Your Career: 20s–30s
Prioritize savings and investing, and build good money habits: start an emergency fund, make contributions and invest in retirement accounts and avoid high-interest debt. This will start you on the road to financial security and flexibility throughout your life.
- Beginning Your Prime Working Years: 30s–40s
Increase your savings rate as your earnings rise. Try to limit lifestyle creep (“keeping up with the Joneses”) to protect what you have, and give yourself more options in the future. Speaking of protection, it’s important to take care of your family by ensuring you have life insurance and a will, just in case a worst-case scenario occurs.
- Peak Earning Years: 40s–50s
Keep your momentum as a saver and investor going! If you can, max out your contributions to your 401(k), 403(b) and/or IRA and diversify your portfolio. Depending on your level of income, additional insurance may be warranted (life, disability, long-term care or an umbrella policy) because insurance premiums tend to increase with age. Create an estate plan that includes a will, advance medical directive and possibly a trust.
- Pre-Retirement: late 50s–60s
Plan your transition into retirement—this is key to ensuring financial security throughout the rest of your life. Think about your goals in retirement and the associated expenses. Will you move to a different state? Travel the world? Donate to charity? Understand your personal Social Security and Medicare situation and your retirement cash flow (income from Social Security, pension, real estate and/or your retirement accounts).
Enjoy the retirement you planned for! Be ready to adjust to life’s inevitable changes. Keep enough money on hand to cover one year of expenses so you’re not forced to withdraw funds from an investment portfolio or retirement account in a down market. Ensure your estate, charitable giving and inheritance plans reflect your current wishes.
If you’ve made a detour along the road to financial security, you may still be able to get back on track. First and foremost, start saving more. Utilizing your employer-sponsored retirement plan—a 401(k) or 403(b)—is a great place to start because investing becomes automatic. Every paycheck will contribute funds toward your retirement savings. Plus, companies often match a portion of your contribution, so you actually make more if you save. Individual Retirement Accounts (IRAs) are also very useful, especially if you don’t have access to an employer-sponsored plan. If you feel there’s no room in your budget to save more, there are two ways to make some room. First, pay down debt, especially if it has a high interest rate (e.g., credit cards and car loans). Second, try to start cutting costs in a meaningful way, particularly for recurring expenses. Shop around for cost-effective cell phone plans, insurance policies, etc. The more you save and invest, the more you’ll have later on!
F. Thomas Schlappatha, CFP, is an executive director and wealth advisor, senior portfolio manager and estate planning consultant with Morgan Stanley Wealth Management in Torrance. Contact him at 310-543-0209 or 800-221-8764, or email ft.schlappatha@ms.com.
