Retirement — a word that can ignite thrilling excitement or utter anxiety. No matter how it’s viewed, retirement is on people’s minds long before it arrives. Some people discover their retirement years to be a deeply fulfilling time of life. Others, however, experience disappointment and feel a loss of purpose.
So how can you set yourself up for a successful transition into retirement? The short answer is by planning now. Long before you walk away from work, you can prepare yourself emotionally for life after your nine-to-five.
A Strong Emotional Transition
Meaning and purpose are vital to human existence in each stage of our lives. Our working years provide a sense of purpose in each day, and the relationships we experience through the workplace offer meaning as well as a sense of community. Retirement signals a transition into a new stage and should be viewed as an opportunity to define the next phase of purpose. Keeping a few things in mind can help you retire with emotional strength.
A Healthy Identity
It’s common for both men and women to experience a loss of identity at retirement. No matter how well we think we have our professional identity in check, it can be a big change to shed that part of who we are. Those who have poured much of their time and lives into their work have an especially hard time transitioning away from their professional identity.
Maintaining work-life balance during our working years and pursuing interests outside of work helps to develop a holistic identity instead of a singular identity. A challenging and engaging work environment is a gift. But by pursuing interests outside work, we create a multifaceted life that is interesting at every life stage, including retirement. When you seek to nurture habits of curiosity and build patterns of multiple interests, you’re less likely to be defined solely by your career.
Wall Street Journal reporter Rachel Feintzeig recently reported on this very topic in an article titled “Stop Telling Everyone What You Do for a Living.” She stated that one of the primary ways we get to know about someone is to ask the question, “What do you do?” She suggests that not leading with our professional selves allows us to get to know the many interesting things about people, as well as reminding ourselves to form an identity that is more than our job.
We are social beings needing community and relationships. The Centers for Disease Control lists social isolation as a significant indicator of premature death, 50% increased risk of dementia, and increased risk of heart disease and stroke as well as higher rates of depression, anxiety, and suicide. Building healthy relationships in all phases of life contributes to a more fulfilling life. And building new friendships in retirement years can be especially meaningful because these relationships are often grounded in similar interests and values.
Both a healthy identity and meaningful relationships can be achieved by getting involved in things that matter to you. Volunteering for an organization, getting involved in a church group, playing a group sport, and other opportunities can help build lasting friendships.
In our working years, our time is generally very structured with defined days and times we work. The freedom of setting our own schedule can be exciting at first. However, the lack of structure can also turn into boredom and squandering time. Many retirees benefit from having some structure to their day. A set wake-up time, gym time, coffee with friends, volunteer hours, or even part-time work can help with the transition to retirement as well as add purpose to your day.
The Shift From Accumulation to Decumulation
In addition to managing the emotional transition into retirement, you must master an equally challenging mental shift — learning how to spend your savings. From the time you first earned an allowance or paycheck or contributed to a 401(k) at your first grownup job, you’ve been saving. Of course you did some spending along the way, but for the most part the emphasis has been on saving for retirement.
Watching a retirement account grow over time is a satisfying experience. It feels good to see our hard work pay off as the line of our account balance steadily increases over the years. But the day comes when we must start spending down our retirement savings, i.e., decumulation.
Accumulation vs. Decumulation
Accumulation is the period when we save to build our retirement savings. Decumulation is the period when we live off our retirement savings. If for over 40 years we maintain a savings-focused mentality and see upward movement on the retirement graph, it makes sense that re-orienting our minds to start drawing down those hard-earned savings might come with some challenges. So how do we save intelligently in our working years while preparing to make the switch to spending and drawing down (a.k.a. retirement decumulation)?
What is your perspective?
Remember, there is purpose in our savings. Perspective is the ultimate driver of our everyday state of mind. If we don’t think outside everyday patterns, we might tend to believe our purpose for saving is only to accumulate. But there are reasons why we save. Considering what our purpose for saving is and mentally attaching the reasons (our goals) to it can help us prepare for, and even get excited about, the eventual shift to drawing down our retirement accounts.
A question to ask is “What am I saving for?” and write down your hopes and dreams in retirement. Think about who and what brings richness to your life. Travel? Spending time with friends and family at a lake house? Experiences and events? Taking or teaching classes? By keeping our goals in mind, saving becomes less about the money itself and more about the reasons. And that establishes a framework for spending in our retirement years.
What might you be leaving on the table?
Indeed, there is purpose and preparation in our saving, but an accumulation-only mindset can come at the expense of present experiences and memories. Life is about balance. And it’s important to balance the here-and-now with the future. That kind of balance allows you to develop relationships and create experiences for a full life today. Don’t leave current dreams on the table. We never know the turns life will take, and prioritizing our dreams helps us live a life of joy every day.
How do I know if I have enough money for the retirement I want?
This is where the value of a relationship with a financial planner makes a difference. We can work with you to define your goals and carve a path to achieve your dreams now and in retirement. There are ways you can begin to set yourself up for the emotional and practical preparation of retirement. Contact us to learn how we might be able to help you.