More U.S. baby boomers fear running out of money in retirement than they fear death.

Check out this summary from the news release:

Although 61 percent of Boomers fear outliving their money in retirement more than death, nearly one third (31 percent) say they are not too clear about what their expenses will be in retirement and 36 percent have no idea if their income will last.

Fear of the unknown is commonplace. Preparation and knowledge can conquer fear, even if the knowledge is bad news.

Why aren’t these baby boomers estimating their retirement expenses? If they did, they might learn ways to reduce those expenses.

Why aren’t baby boomers trying to learn if their retirement income will last?

There are plenty of tools available to help. I’ve written about many of them.

Read this nugget about the study results:

Boomers were asked which they were more likely to guess correctly, exactly how much money they’ll have (or need) at the point of retirement or how many gumballs are in the jar at the local county fair. Sadly, just over half (53 percent) felt confident in their ability to gauge their retirement income needs – only six percent higher than those more certain of their gumball guessing skills.

If you don’t know any more about your retirement finances than you do about gumballs in a jar, you may deserve the fate that awaits you when the money runs out.

To read more about the study:  Older Americans Fear Outliving Money, Retirement Savings, Assets

If you are in the “fear of running out of money” camp, here are some guides to retirement planning tools.

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First, I wholeheartedly agree with the premise that if owning a vacation home causes stress in your life, that home is not fulfilling its purpose. So what causes this stress and what can be done about it? I have some thoughts.

1. Financial Stress. You absolutely should not “stretch” your budget and cash flow to the max to purchase or own a vacation home. Every time you write a check for a mortgage payment, operating expense, or maintenance cost for that weekend home, you will feel it emotionally. Some people attempt to handle a cash flow problem by placing their vacation home into a rental program. That strategy comes with a set of problems of its own. You might end up merely converting financial stress to landlord stress. To avoid this, do not purchase vacation or weekend property unless you can easily cash flow all of the costs without a need for rental income. Don’t compound the stress by forcing yourself to rent and then having to worry about tenant problems and damage.

2. Guilt and Pressure. Many owners of vacation homes have difficulty finding time to get away to their property. This creates guilt and pressure because a significant personal asset is not being used much. There are two ways to handle this problem. First, buy property that is only a short drive from your primary residence. By short drive, I mean 1 to 3 hours, so that it is easy to get away on a Friday afternoon, including on the spur of the moment. Lots of folks want to buy beach homes or ski condos, then find that getting in the car or plane to actually use the home requires advance planning and significant investment of time and money. As a result, the vacation home is not used much at all.

Our lake house is only a 90 minute drive so we can use it even for day trips. More typically, we are there for 3-4 days at time, with the longest stay being ten days (when we host family). If you have to fly or spend a full day driving to your “getaway”, you will likely find that you aren’t “getting away” very often.

3. Poor Environment. The article discusses problems with “neighbors” at vacation home locations. A related problem is understanding if you will have neighbors at all and what they will be like. If your vacation home is in an area that is primarily a tourist destination, you can probably forget about having real neighbors at all. Most of the people around you will be tourists. If you don’t like this concept (and we didn’t), find property in an area where there are (or will be) other retirees – people you can get to know and spend time with. That’s the situation we have. Although we are in a rural area, there are a number of homes around us on the water. Many of the owners live there year-round. We have made some good friends in that group.

A bonus benefit of choosing a vacation home in a good “people” location is that it gives you the opportunity to transition that vacation home to an actual retirement home and destination.

Here is the link to the full article.

If It Causes Stress, Is It Really a Vacation Home?

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In a recent post I wrote for the On Retirement blog at U.S. News and World Report, I describe three different ways that our human nature gets in the way of proper financial decision making. You might want to give it a quick read to see if any of them apply to you.

Here is a link to the full post.

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First, I am very concerned about another significant and extended market decline. We cannot tolerate that. In fact, I expected the market to drop today and it happened. Therefore, I want to move most of our mutual fund holdings into ETF’s so that I can use stop loss orders. (You cannot place a trading day “stop loss” order on a mutual fund.)  That part is done.

Second, I have decided to transition from the “10 Speed” variety of couch potato portfolio to the “Four Square” couch potato allocation. This will reduce our 401(k) holdings from ten to four, making it easier for me to manage risk inside our self-managed brokerage account. It will also substantially reduce the percentage of equity holdings in the portfolio and therefore our market risk going forward.

Finally, our 401(k) account holdings were due for a re-balancing anyway so it made sense to accomplish all of this at the same time.

After the dust settles, I expect that our asset allocation in our 401(k) account will look like this: 25% in VIPSX, 25% in Vanguard’s Total (U.S.) Stock Market ETF (VTI), 25% in Vanguard’s All-World (except U.S.) Stock Market ETF (VEU), and 25% in BWX (an international treasury bond index ETF). We already own the VIPSX and BWX.

I also have some cash accumulated in our 401(k) account that I am using to buy TIPS for the guaranteed income portion of our retirement plan.

At first I was hesitant to eliminate certain assets, such as our REIT index fund. But we own plenty of residential real estate now (with more to come) so lowering our ETF exposure in that category doesn’t bother me.

Are you making any changes to your retirement investments?

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This technique can be very helpful to someone who applied at age 62 and has reached full retirement age or even age 70 with adequate other retirement assets in reserve. By repaying and reapplying, you can increase your spending power by 10% or more for the rest of your life. Where else can you get that kind of return for your money?

The current problem is that the SSA considers this strategy to be a “loophole” in the retirement system that needs to be closed. No doubt SSA will get its way and soon. So give it some serious consideration.

For more information about this repay and reclaim Social Security benefit strategy, read the following article from Forbes, written by one of the “Spend ’til the End” consumption smoothing authors, Larry Kotlikoff. He can give you the science behind it.

Get A Bigger Social Security Check Now

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With interest rates on refinancing so low, it appears that we can reduce our mortgage payments on our present home to a point where it would be more expensive to rent. Refinancing would allow us to stay where we are and use the extra cash flow to gradually make the upgrades we were planning before selling. We are in no hurry to leave the area because my office is here and because it seems that our sons enjoy living in the city where they grew up. How about that?

Our new community bank offered us a seven year ARM at 3.875% with no points or origination fee and a $200 rebate of our closing costs because we are an existing customer. The lower rate and new amortization schedule will cut our total monthly payment (PITI) in half and reduce our monthly interest payment by more than $200.  The lower interest payment will allow us to recoup our out-of-pocket (non-escrowed) closing costs in less than a year. I chose not to finance the closing costs because I am emotionally opposed to increasing our debt load on an existing asset. We can either sell the house or pay off the loan before the rate adjusts seven years from now. It seems like a no-brainer. The extra cash flow will also make it easier for us to finance our condo purchase and not be in a hurry to sell our primary home.  Our lake house is paid for.

The downside to keeping the house is that we will have a lot of equity tied up in the house for a longer period. If the stock market were flying high, the lost investing opportunity would be a concern. In our case, I expect that we will get more of a return (and tax free at that) from a rebound in real estate values in our area.

So it looks like our physical downsizing will be delayed but our cash flow downsizing is on schedule. I locked the rate on the loan today and started the paperwork.

During my search for refinance rates, I called Bank of America, our long time (but soon to be former) bank. The loan officer was located in another state. The Bank of America rates were much worse than those offered by our new community bank. I specifically asked if we could get preferred rates or lower closing costs because of our long time relationship and because our present mortgage is with BofA.

“No can do” he said. “That would be discriminating against other borrowers who are not bank customers.”

Of course it would. That’s how you keep long time customers, by rewarding them for their loyalty and profitable business relationship.

No can do, he said.

No more Bank of America, I thought.

What do you think about this new strategy? Have you explored the benefits of a new banking relationship?

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Meanwhile, have a look at another recent post I wrote for the On Retirement blog at the  U.S. News and World Report site. I briefly discuss attitude adjustments that many of us need to have clear a path to retirement success. I hope you enjoy it.

5 Attitude Adjustments Necessary for Retirement Success

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For some other reading until I return, you might be interested in my most recent posts for the On Retirement blog at U.S. News and World Report: Three Steps for Easing into Retirement and Five Attitude Adjustments Needed for Retirement Success.

I will crank things back up next week with some interesting things to report.

Thanks for reading.

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The full post is here:  Five Ways to Protect a Surviving Spouse in Retirement

Here is more that I have written about the Social Security spousal benefit.

On a somewhat related spousal topic, here is some information about using a simple durable power of attorney for health care.

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