The Fear Tax

A client called us recently because she’d started feeling like she shouldn’t be spending on things she’d already budgeted for years ago. Her net worth had increased, but the headlines she was seeing made her question her plan.

This has become one of the more common calls we get, and it’s part of what sent us looking harder at a specific question in our latest Money & Meaning survey. 

We asked, even if you feel financially secure, how often in the past year have rising prices or market swings made you feel less free to enjoy retirement the way you want?

Two-thirds of the people said at least sometimes. Nearly a quarter said always.

Of the people who had pulled back, most pointed to inflation or general economic uncertainty, not a specific loss.

That’s a gap worth considering. Most of the people telling us they feel less free are not, in any measurable way, less free. Nothing changed in their situation, but the news and all the noise made them feel like the ground was shaking under their house that is still standing strong on its foundation. The perception of the shaking is the issue.

There’s a version of caution that’s merited, built into the plan, and actually protects you. And there’s a version that’s disguised as caution but actually subtracts from the life the plan was built to fund.

I think of that kind as a sort of ‘fear tax’. It gets paid in the form of a trip that never gets booked, a grandchild’s birthday gift scaled back out of a caution nobody asked you to exercise, a year lived a little smaller than the plan actually requires.

The people I’ve worked with who avoid this tax are not the ones with the most money. They’re the ones who know what their plan can absorb. When the market moves, they have already answered the question the headline is trying to get them to ask.

A good plan doesn’t promise the market won’t move. It promises you’ll know ahead of time exactly how much of that movement is actually your problem. Most of the time, it turns out to be less than it feels like in the moment.

So I’ll ask you what I’d ask any client sitting across from me right now: in the last year, did you need to cut back, or did you just feel like you should? And if it was the second one, what did that feeling actually cost you?

If you don’t know if or when you need to cut back, we’re here to help.