Prepping for Retirement, Financially and Emotionally
Retirement is a significant chapter in a person’s life, but few people do a really good job preparing for the transition. We spend a few years in college to prepare for a job, or we work as an apprentice to start in the trades. We might meet with a counselor as we prepare for marriage. And how many books are out there on preparing for your first baby? There are tests and checklists and resources galore. But when it comes to retirement, we tend to focus on whether we’ve saved enough, and usually that is all.
Working with clients, I have heard quite a few stories of “what I wish I knew” and think it is important to share. You might spend 20-30 years in this new chapter of life. Don’t you think it is worth digging a little deeper and making a plan that works best for you – both financially and emotionally?
Your work is your identity
It doesn’t matter what industry you are in or how long you have been with your current employer, you will quickly realize how much of your identity is tied to your work. You are a person who gets up at a certain time and has your coffee a certain way. People depend on you to do a good job and to carry out your responsibilities. You work to get paid and that is tied to your value as a person. Once you retire, this all stops.
When I had my first child, I needed to look at what it meant to me to be a mom and how it fits into my identity. And it did need to fit into my identity, not become my identity. I am made up of so many ideas, dreams, values, and thoughts, so being a mom needed to fit into my vision of myself, and not become the only thing that I identify with. It is the same for retirement. You are a multi-faceted individual, so how will retirement fit into your current identity?
You will have a lot of time without purpose
This leads to the next topic that no one seems to be talking about when it comes to retirement: you will have a lot of time without a purpose. Just as work becomes your identity, it also becomes your purpose. Your whole day is scheduled around work, and you fit vacations in between meetings. You might have some personal goals, but maybe they are all around growth and success at work. You will now have large blocks of time without a boss watching over you or deadlines to keep you motivated. You are now the master of your calendar, so what do you do?
An easy first step is to plan the first few weeks of retirement. Maybe it starts with a vacation of doing nothing. Then, start scheduling time blocks for things that interest you. It could be as simple as two hours at the library on Tuesday and an hour on Wednesday to get your nails done. Then, schedule three hours with the grandkids on Friday afternoon with a trip to the theater on Saturday. You are used to working with a schedule, so start retirement the same way. After a while, you will naturally work into a schedule that fits your retirement style, but until then, force yourself to follow a routine.
Transitioning from saving to spending is hard
Most of us spend over 40 years working. We have income coming in and we can budget our annual expenses. We know that as long as we keep working, the income will be there, and we can continue to cover our expenses. We have also been taught how to save for the future so we consistently add to our retirement and savings accounts. Life is good and you have a feeling of control over your money. But then you retire, and the income stops, and you have to spend some of the assets you have saved over multiple decades. Your sense of control quickly disappears.
At this stage, it is important to have a cash flow plan. Up until this point, your retirement plan was about how much you needed to save and in what account. Now you need to flip the planning. Your cash flow plan needs to focus on how much you can withdraw and from what account. As you enter retirement, it is important to start your own personal paycheck. Set it up so you are receiving money in your bank account on a consistent basis as soon as you leave your job. Having this money come into your account will give you a sense of security that you will be able to fund your lifestyle. A trusted advisor can help you determine how much you can withdraw and what account it should come from each year.
The most important thing to keep in mind is that retirement is not an end. It is the beginning of a new and exciting chapter. A little bit of planning could make all the difference!
Anne M. Mank
Director of Financial Planning