It used to be that when we turned 65, it meant it was time to leave the labor market. But now, boomers are delaying retirement-some, indefinitely.

The state of the economy coupled with unknowns like life span and how much we are going to need to fund our golden years has made the thought of retiring nerve-racking and seemingly undoable.  

Nearly three-quarters of Americans find thinking about retirement saving and investing to be a source of stress and anxiety, according to the 2013 Franklin Templeton Retirement Income Strategies and Expectations (RISE) survey released earlier this month.

The survey also uncovered misperceptions among pre-retirees about when they will stop working and begin taking Social Security benefits, which could jeopardize their retirement income.

Michael Doshier, vice president of retirement marketing for Franklin Templeton Investments answered the following questions about the findings in the survey:

Boomer: What did the survey find regarding anxiety and stress towards their retirement savings?

Doshier: Given the great importance and heightened anxiety surrounding retirement income, this survey is part of our efforts to better understand the topic and to bring useful insights to the marketplace. Some of our key findings are:

  • Stress/anxiety towards retirement begins earlier than commonly understood. The level of stress/anxiety that comes from thinking about retirement savings and investments peaks for those 6-15 years from retirement, with 39% of that group citing moderate/significant stress vs. 32% for 1-5 years from retirement and only 27% of those who have been retired one to five years.
  • Writing down a retirement income plan/strategy reduces stress related to retirement. People actually have a pretty good idea of what to expect when it comes to expenses during retirement, but have much less understanding of their income sources and  how they operate.
  • Anxiety regarding retirement income is reduced when one works with a financial advisor and has a written retirement income plan that they understand.

Boomer: What are the two retirement transition periods, and when do they happen?

Doshier: This finding has significant implications for both the financial services industry and consumers. Instead of one five-year window just before and just after retirement, when common wisdom says people are really gearing up and making changes for retirement, we found there are actually two periods, where much different actions are taking place and very different emotions are involved. We have named these two the financial and lifestyle transitions:

The financial transition is when people start thinking about – and taking action on – the financial aspects of their life in retirement. They look at how much they have saved/are saving. They begin thinking about how they are going to afford to retire and evaluate their investment portfolios.

Our survey found two key things about the financial transition period:

 1) It begins happening much earlier than is generally assumed (about 11-15 years prior to retirement)

2)  It tends to be more stressful than actually entering retirement.

The lifestyle transition is the period when people actually enter retirement. They are changing their lifestyle from one that is dominated by a consistent daily work routine to one in which work is not taking up the majority of their time. This transition appears to be less stressful than the financial transition just before.

Boomer: What are some of the top responses to making adjustments to retirement plans due to insufficient income?

Doshier: Surprisingly, the least attractive option involved changing to a more aggressive investment strategy. We believe this is due to the volatility in the market over the past decade and feel this has the potential to have serious, long-term effects as more people begin preparing for retirement. The top response was to delay retirement and work longer, with 62% saying this is what they would do if they faced a financial shortfall. This is troubling as we know that around a third of those we surveyed who retired before age 65 did not do so by choice – i.e. it was due to other circumstances like health issues and company downsizing.

The next most common response also involved continued employment: 45% said they would increase their sources of income (i.e. work part time). This was followed by reducing retirement expenses or lowering lifestyle expectations, at 44%. Interestingly, as people grow older, they are less willing to delay retirement or seek part-time work and are more likely to reduce their retirement lifestyle. Just 11% would consider a higher risk growth-oriented investment strategy that offers the potential for increased return while accepting increased risk of loss.

Boomer: What did the survey find about people’s tendency to work with a financial advisor?

Doshier: Those who have never worked with a financial advisor are more than three times as likely to indicate a significant degree of stress and anxiety about their retirement savings as those who currently work with an advisor. Not having worked with a financial advisor was also generally associated with less understanding about the practical aspects of retirement. For instance, 58% of those who have developed a written retirement income plan have a high degree of confidence about how much of their income will be replaced by Social Security, vs. only 35% of those who have not.

Boomer: What is meant by the term "Refocus Your Strategy" regarding retirement?

Doshier: Generally this means moving your strategy from an accumulation focus to one that is built with the idea of creating a sustainable retirement income. The refocused strategy itself will be different for everyone, as everyone’s situation is different. But a common thread is that if people don’t take the time to stop, assess their retirement goals and concerns, consider their expenses in retirement and understand the sources of income available to match those expenses, then they are not as likely to be ready for retirement.

Retirement has a lot of emotional as well as financial drivers associated with it. We strongly believe that working with an advisor who understands the complexities of retirement, including the emotional as well as the technical, to write out and regularly monitor a retirement income plan – even if retirement feels a long way off – is the best way to not only "retire" successfully, but to live with less anxiety and stress before you are retired.