I have been considering retirement for a few years. Not that I am ready to retire, financially or psychologically, but I am getting close to the point where I could retire. At the same time my best friends are starting to retire, and our conversations often migrate to “When do you think you’ll retire” or “I plan to retire when….” Much of the discussion is, while respecting each other’s financial privacy, frequently focused on the financial and “I should have enough to live on” or “my pension will be sufficient when…”. However, most planning for retirement is based on money and not on time and a wholesale change from one type of life to another. It is also often a static plan based on the day following someone retires - R+1. But a career is not subject to a static plan, and neither is retirement.
Every journey is unique, but some things are predictable, and some are not. A retiree of 55 may have stable income and robust good health but things may change due to a variety of factors including some that are controllable and some that are not, like market returns, unexpected health setbacks or even family issues that can have unplanned impacts on a well-thought-out retirement plan. Retirement planning should be dynamic and flexible to the degree that your circumstances could change because they will change.
There are two main issues surrounding a “Retirement Planner” focused retirement plans:
1. It often, and naturally, focuses solely on financial risk vs return.
This is not unexpected; a Certified Financial Planner or other financial professional has a fiduciary responsibility to plan for income stability and balance risk tolerance and return for retirees to maximize lifetime income with acceptable risk of loss of capital/reduced income over expected life expectancy. While the purpose of this article is to illustrate the huge influence that planning for health, housing type and location, lifestyle and interests have on setting a financial plan, A well-thought out and supervised financial plan and investment strategy is Mission Critical and integral to all other aspects of planning!!
2. Most non-financial planning is Ad Hoc
Unlike a career which takes education and vocational preparation, job search, interviews and career planning even after assuming a role to ensure professional advancement, retirement is an independent decision followed, very quickly in most cases, by a change in status. There is no mandatory preparation. While the majority of middle-aged retirees have thought to accumulate personal savings and/or defined benefit, defined contribution or other government pensions to provide some financial certainty in retirement, most have likely have not taken a systematic approach to really considering personal priorities, dreams and ambitions using those as a foundation for a personal plan for retirement and really looked at the many, many, many options available.
A Retirement Plan should include:
1. What am I going to do Retirement Day +1?
How am I going to manage my finances and fill my days now that my working career has ended? For some, through planning, hard work, or possibly good fortune, nothing needs to change for them. Their finances are sufficient to comfortably maintain their pre-retirement lifestyle and focus on replacing work with post-career pursuits. For others, and likely most of us, income that is 40, 50, or even 80% of our pre-retirement salaries is need for reflection and adjustment. The urgency of addressing these changes in living arrangements and/or spending habits may differ based on personal situation.
2. What is my ideal situation for how I feel now?
As we adjust our lifestyle to reflect our retirement income and personal goals, there is an opportunity to broaden our thinking. “How do I stay in my home?” may become, “Should I stay in my home”. “Should I move into or out of the city” may become “Should I move to a different city, or Country?”. This type of broad thinking does not mean you should move, but by incorporating this kind of thinking in your plan, a decision to remain in your home long-term is going to be associated with a greater sense of confidence than not fully exploring the alternatives.
3. How can I adapt that situation to inevitable expected and unexpected changes over time?
The unfortunate and great truth in life is that change is inevitable. While all of us know this, not everyone prepares for it. Many of us know that we will have health issues, either pre-existing ones or new ones but still fail to prepare. There are many other predictable but uncertain changes that can occur related to finances, family members, or even changes in interests that can affect us. It is not necessary or even possible to have a contingency for every situation but it is important to consider those likely to occur over time and how to deal with them.
A Good Retirement Plan Should Include the Following:
A Flexible Financial Plan
Enough said (for now).
Physical Wellness
If you are one of the majority of people that enters retirement relatively health, congratulations! This is a blessing and one that you will want to maintain for as long as possible. Many retirees aggressively pursue their physical wellness by more attention to consumption, exercise and personal care than they ever did in their working lives.
Emotional Wellness
The good news is that multiple studies indicate that retirees are happier and more content than their younger working counterparts. The bad news is that there are a lot of factors that can undermine that positive state of mind. One of the most common is stress. Stress can be caused by financial concerns, relationship or family concerns, loss of identity or meaning that can come with retirement or countless other factors.
Accommodation and Lifestyle
Now that you are retired, what needs to changes? What do you want to change? These are both relevant but different questions. In some cases, nothing needs to change except that work activity needs to be replaced other activities.
Recreational Interests
What to do for fun? This is one of the most focused on parts of retirement. For golfers, this may mean, how much golf can I fit in? Great question. However, for others, so much effort is often spent on career, kids, cleaning the house and doing chores that very little time was devoted to personal leisure activities. For many of us, we will need to discover our passions.
Professional and/or Charitable Interests
Finally, leisure activities are great, but they may not fulfil the need to contribute to people and society and satisfy the need to have purpose and a sense of accomplishment. Many retirees find this through continuing to work either full or part-time. This has the added benefit of providing additional income and possibly health and other employment benefits, as well as job satisfaction. Others choose charitable pursuits. There are thousands of registered charities in North America and an opportunity to volunteer wherever your passion lies.
RetirementGoat
RetirementGoat is an on-the-cusp-of retirement, retirement-obsessed individual who has been talking and dreaming about retirement for number of years alongside his like-minded friends. Frustrated by lack of resources that failed to look at retirement from more than one perspective, and often focused on the financial, he has started writing and reposting interesting content and offering courses dedicated to thinking broadly about retirement and sharing articles and positive experiences with and from more like-minded friends.
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