Younger people are often excited by the prospect of retirement planning and dreaming of life after work. However, for those nearing the final phase of their careers, retirement can be a frightening prospect. You’ve worked incredibly hard to get to this point but now what? How will you spend your time? What will you say when people ask what you do? Do you have to learn to play golf?
The truth is that people are living longer and that can mean 30+ years in retirement. Not only does this stress your portfolio but also your state of mind and sense of purpose. Those that are succeeding in this stage of life aren’t measured by bonuses and job titles but the ability to connect to their true passions. But what if you’re just starting to figure out what those passions are?
Traditional retirement planning hasn’t included these kinds of conversations but it’s clear that advisors have the unique opportunity – and responsibility – to help their clients transition emotionally as well as financially into retirement. Conversations about what clients’ savings mean to them early in the planning process can not only provide motivation to save more but also encourage clients to develop a more specific picture of life in retirement.
1. The Emotional Part of Retirement Planning
- Acknowledging the Loss
Neubauer points out that retirement is a major change and change is generally accompanied by a sense of loss. If you avoid dealing with this loss, you can easily feel “stuck” and even bitter that you were “forced” into this position.
- Manic Defense vs. Holding Still
A common response to fear of the unknown is the compulsion to keep busy, known as a “manic defense.” You tell yourself that it’s better than “holding still” but you’re not actually processing the normal feelings associated with loss such as sadness and anger. The manic defense is only a short-term solution and can quickly cause very real exhaustion.
- Old and New Passions
Neubauer suggests that a method for moving forward can be to think about forgotten passions to see if they are still relevant. Finding a way to connect with your current self helps you focus on discovering the activities that bring you happiness now, which may be different from those that defined you 10 years ago.
- Removing the Limitations
Neubauer also identifies how our internal language can prevent us from moving forward. How often do you use words like “should,” “can’t,” “don’t,” “must” or “not?” Paying attention to these words can help you realize how often you limit yourself and therefore give you back the power to explore new things.
2. The Risks of Not Emotionally Transitioning to Retirement
Holding on to your old way of life for too long often means maintaining a more expensive lifestyle than you need. Actively managing your transition will allow you to right-size your expenditures sooner, extending the runway of your retirement.
Being stuck and using a “manic defense” approach is stressful. Fear is driving this behavior and alongside stress, can pose significant health risks. Moving into the “holding still” stage and acknowledging the emotions will reduce the stress and allow you to move on. Discovering (or rediscovering) your passions will lead you to activities that improve your health whether they are new forms of exercise or mental release like art or volunteer work.
Quickly moving past the sense of loss and fear may also create new sources of income. Many retirees are starting new businesses and with today’s access to technology and services, it is far easier to turn your passion into a for-profit activity.
3. Strategies to Help with the Emotional Transition
Nancy Schlossberg, a Professor of Counseling Psychology at the University of Maryland, interviewed over 150 retirees and found that many had prepared financially but most hadn’t prepared psychologically as part of their retirement planning. In order to start addressing the psychological transition, Schlossberg recommends focusing on three areas of your life:
What words do you use to define yourself to the world around you? Schlossberg suggests thinking about what you would put on a business card or a tagline in your email signature. Many find it helpful to seek out a definition for themselves beyond “retiree.”
Related to your identity, your purpose or mission is what motivates you to get up in the morning. When you don’t have a company’s mission driving your daily activities, it can be helpful to create your own mission statement for your life in retirement. This will also help you set goals and commit to achieving them.
Ending your work life often means that you lose touch with many of the people that were once a part of your everyday life. While you can always stay in touch with your past colleagues, you might find that you have less in common than before. It’s important to build new connections with people who share your current interests. Whether it’s volunteering or taking an art class, new activities will allow you to meet new groups of people who will see you for who you are right now instead of limiting you to who you once were.
It’s imperative to find a financial advisor who will make sure you’re financially prepared for retirement but finding an advisor capable of helping you plan for the emotional transition can be just as important.