Recent research from insurer Allianz Life indicates that many people remain skittish about investing for retirement and worry about running out of money in retirement.
According to its 2018 study on market perceptions, 37 percent of respondents admitted the recent volatility is making them anxious about their nest egg and 38 percent said that if the market experienced a significant drop and caused them to lose a lot of money, there is no way they could rebuild their savings in time for retirement. A second study this year from Allianz Life found that many Americans ages 45 to 65 who are actively saving and have a mean retirement portfolio of more than $400,000 still fear they’ll run out of savings in retirement.
Mitch Tuchman, managing director and chief investment officer of the RIA firm Rebalance IRA, knows a lot about retirement anxiety. His firm, which has offices in Palo Alto, Calif. and Bethesda, Md., focuses on retirement investing and builds portfolios using low-cost index funds. It utilizes a cloud-based back office model and does everything with clients by phone and online.
“We acknowledge and manage our relationships with our clients, from Day 1, assuming that they will have anxiety,” said Tuchman, who founded and previously ran robo-advisor MarketRiders.
At Rebalance IRA, Tuchman and his colleagues continually educate clients and provide historical context to the markets, he said. Their initiatives include educational videos, newsletters, quarterly market updates and videoconferences with individual clients.
Simplicity is key. “Our clients are paying us to watch their money so they don’t want to hear about creating alpha, Sharpe ratios and all that stuff,” said Tuchman. “They just want to understand that we know what we’re doing, that we have a process that they understand, and that we’re following that process.”
Clients (typically ages 45 to 65, with an average portfolio of $500,000 at Rebalance IRA) often e-mail or call about something that’s making them anxious, said Tuchman.
“Usually they’re watching TV, they’re reading the papers, they’re concerned about the crisis of the day,” he said. Rebalance IRA explains to clients that “the purpose of mainstream media is to keep you glued into that media event,” he said, and that the markets usually don’t react as poorly as people think they will.
“Most years the markets are up,” he said. “If you just show them facts and information and data about other crises, after a while they just kind of get it.”
Rebalance IRA also explains to clients that a normal market correction won’t have much impact on a retirement account that’s being drawn down 3 percent to 4 percent a year, he said, and that this withdrawal is mostly generated by interest and dividends.