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01 - The Psychology of Retirement

If you ask me, the whole concept of retirement is weird.

If you look back a century, no-one retired. We worked until we fell dead on the job. If you were lucky enough to be wealthy, you didn’t have to work like this as you hired people to work for you – there was a big divide between the rich and poor.

But now times have changed. Workers have been encouraged to save a portion of their income so they didn’t have to work until their last day. When they reached an older age, if they had savings that could replace their income, they were encouraged to stop working, live off their savings and enjoy a slower pace of life. Companies even facilitated this with pensions – if you worked for a company long enough, they would pay you a portion of your salary when you decided it was time to stop working.

Now it’s been taken to the extreme. It’s celebrated if you can retire “early” (who decides what’s early!?), everyone apparently has a “number” and one of the concerns we push on 21 year olds coming out of school is that they should start saving for retirement. Even though that might be 40 years away at the earliest.

But before I go off on a tangent here, I do believe that retirement is something that has lost it’s real meaning. I don’t believe there is such a thing as a true “retirement”. Instead, I believe that life has phases, and for one to remain healthy, both physically and mentally, you must always be involved in some sort of work. Work in “retirement” can be whatever you want it to be – volunteering in the community, consulting in your field of expertise, or trying to start a business in a passion you’ve held for the last 20 years. It can also be assisting in raising your grandchildren, or a healthy mixture of all of these things.

Having my education in psychology, it’s fascinating to see how different clients approach retirement – some see it as a defining moment in their life where they can do the things they’ve been waiting to do for decades, while others view it as a non-event as they’ve been living their “ideal life” since they were 35. Most worryingly, others view it as something they’ll never achieve because they don’t believe they’ll have enough money to do so – even if they have more than enough. It’s not a one-size-fits-all approach anymore.

But for those who are approaching retirement, in a traditional sense, what should the non-financial preparation look like?

Untie your self-identity for your job

A problem, found more in men than women, is finding an identity when their working career is over. So much of one’s self-worth can be held in the activity that takes up most of our time (work), that when that activity is given up for good, a sense of self-identity is lost as well.

For clients that have identified that this will be a problem, I suggest they speak with a mental health professional before their retirement date so they are prepared for what emotions will come with this event. It doesn’t have to be a prolonged engagement in therapy, but even a conversation acknowledging that you are feeling this way can help alleviate some of the concern. Most likely, it will not be something that can be fully resolved before the retirement transition but by having someone to listen to your concerns (financial and emotional) can help the transition happen more easily.

Find hobbies now

Let’s not avoid the main issue: one day you’re leaving the house before 7am and not getting home before 6pm, and the next day you’ve got those 11 hours back and a huge gap of time to fill. What will you do!? It’s no wonder people struggle with this transition given the amount of time they now have on their hands.

You’re also left with the knowledge that you do not have a paycheck anymore, and are living off Social Security, pension(s) and your investments. Even that transition from a career of saving as much as you can to now living of those savings can test even the strongest of nerves.

For lovers of expensive hobbies (golf, sailing, flying, traveling) that took place on weekends or sporadic occasions throughout the year, filling your now-empty time with these pursuits can stretch your retirement budget. Filling each day with golf outings can cause you to burn through your old monthly allocation in a week. While there’s nothing wrong with taking more time to pursue these things, throw in some new, cheaper hobbies to ease into retirement phase and keep the budget in check.

One way to ease the potential psychological turmoil that retirement can pose, is to try out these hobbies while you are still working. In the last few years of employment, try out some new hobbies and see which ones you enjoy. Once you then enter retirement, everything won’t be new all at once – you can fall back on the hobbies you have been enjoying in the years prior.

It may take longer than 12 months to find your groove

Leaving work to enter this next phase of life can be un-nerving. The (potential) losses of income, self-worth, water-cooler-conversations, and things to do can be a huge shock to the system. It’s not surprising that, according to the Bureau of Labor Statistics, around 60% of people go back to work after entering retirement. For those not wanting to return to the workforce, it can take a while to find a pace of life that feels natural. Getting into a rhythm of a new time to wake up, relaxed breakfast routine (instead of making a coffee for the road), and a daily routine at your discretion can take some fine-tweaking in order for it feel natural.

Don’t worry if you’re still unnerved after the first few months of retirement – you’re adjusting to the next 30 years of life. Getting it nailed down in the first month or so shouldn’t be normal. Take some time to find what you enjoy doing, what pace your body requires, and how much you want to fit into your day. Experiment with your time, and enjoy the exploration!

It’s time to let loose!

You’ve worked hard all of your career, now it’s time to enjoy this hard-earned free time! For many – and I would suggest this – make a bucket list of the things you want to accomplish in the next 12 months. Don’t worry about the budget just yet, but make a list of the places you want to go, people you want to see, and things you want to do. Then sit down and calculate how much that will cost and if it fits into your retirement budget (if you’re not sure what that budget should be, I can help). If it overshoots your intended budget by a little bit, that’s ok – this first year is a blowout!

I have a client who retired and stated that she wanted to travel. By the end of her first 12 months, she had been on double the amount of trips she intended to go on, and had filled her passport with stamps from various new countries. The joy on her face, and calmness in her demeanor made it worthwhile for her to spend a little more than expected in those first 12 months.

What is your next step?

If you’re not sure about this whole “retirement” thing, then you’re not alone. Many people go through trying to understand if they have enough money, but not spending much time preparing for the change in their lifestyle. In my role as a financial advisor, I take people one step further than understanding if they have enough money – I also take them through the journey of understanding if they’re prepared for retirement. We explore if they have hobbies already in place, or what ones they might like to explore. We discuss their family and how many trips they might be taking to strengthen the bonds that may have been weakened through the last few years of hard work. We also discuss the meaning of retirement – I always ensure that my clients have something to explore when the first day of retirement comes and encourage every client to be doing something charitable or meaningful with their time by the start of their 2nd year. If that’s something you’d like to explore in conversation, as well as understanding your finances, then let’s talk.