For most of my adult working life as a self-employed person, the end of the year meant pushing hard to try and beat the prior year revenue. This was always a challenge and often met with high anxiety as we entered the ‘holiday season’ from Thanksgiving to New Year’s Eve.

The problem was that even when exceeding my goals for the year, the celebration was brief! It was replaced by depression as I would wonder if I could do it again in the new year.

The Truth About Self-Employment

When you are self-employed, you wake up each morning unemployed until you go out and get the work done. This leads to multiple highs and lows throughout the year, especially when beginning your career.

Over time, however, I was able to reduce this choppy sea of crests and troughs to more of a gentle swell as business grew and became somewhat more predictable and the client base expanded. Having retired at the end of August, I thought that these emotional roller coaster events would become part of my past.

As the year end closed in, I really felt less stress not having to worry about ‘making the numbers’. However, with New Year’s Eve and the first of January upon us, anxiousness settled about what was to come. The new year was here and the thought of “where is the money coming from” entered my head.

I had done the spreadsheets for retirement income distributions hundreds of times for clients but now it was my turn, and I needed to go over the numbers with my wife to assure her and reduce her anxiety.

Had I planned for all the unexpected events that might have a negative impact on my projections? How would the downturn in the market affect our cash flow over the short and long term?

Would I need to start taking Social Security retirement benefits before age 70? What about dipping into the retirement accounts?

Would I spend down too much of the after-tax portfolio? Should we reduce expenses sooner rather than later? All the what if’s kept creeping into my head.

Have you had some of these thoughts in your head as you entered into your retirement life? Here are a few things to think about that might reduce your own anxiety:

Financial Spread Sheet

Doing a spread sheet is a good idea, but you should realize it is not set in stone! It should be a working document that you update periodically as your financial situation evolves.

Keeping track of actual income and expenses as well as the value of income producing assets is an important way to manage your retirement security.

Consider Your Financial Needs

You do not need all of your retirement money tomorrow. With a well-diversified portfolio that includes secure assets and assets that have greater growth potential, you can ride out the financial storms that will come as part of a normal long-term investment holding period.

The key is to maintain about a year to two years’ worth of cash needed to supplement your cash flow needs. This reduces the need to sell investments when the markets are down.

What About Social Security?

What is the impact of starting Social Security earlier than expected? If you start Social Security a little sooner, it will not have a major impact on your long-term income.

The issue is to determine the cost benefit of spending down investment assets or starting SS sooner to reduce the amount being withdrawn from your portfolio. Just remember that SS is a fixed income source while your investment portfolio is a variable income source.

Having fixed income is a good way to reduce anxiety during economic turmoil or bear market periods. Many people do not have the luxury of deferring the start of Social Security retirement.

IRA Is an Option Too

Taking money from retirement accounts before you are required to is fine. There is too much out there in the public about taking only the Required Minimum Distribution or RMD from your IRA or other retirement accounts.

The reality is that the vast majority of retirees will need to dip into their retirement accounts at an amount greater than the RMD and most before reaching age 70.

Again, this should be part of an overall distribution plan that takes into account all available resources to obtain the lowest overall income tax rate and provide the needed income.

Spending Wisely – or Not?

Reducing expenses is always a good idea if the value of your investment portfolio has dropped due to negative market conditions. When markets are positive you may be able to spend more, but during economic downturns if makes good sense to reduce expenses where possible.

These reductions are generally in the ‘voluntary’ expense category such as travel, eating out or deferring a larger purchase. It all depends upon your own particular situation. “Living within your means” is always the best advice.

Happy New Year.

What do you do to reduce your financial anxiety in retirement? How do you plan to better your situation in the new year? Let’s have a chat about it below!