When financial planners talk about what pre-retirees should do to get ready to leave the workforce, they focus on the quantifiable and financial aspects: Determining your spending needs, evaluating your pension and Social Security choices, or preparing to manage your portfolio to produce income.
The Mental Side of Retirement
But there is a very important psychological component to retirement that is often overlooked. It goes beyond looking forward to retirement. To be in the retirement mindset, you need to think through what being retired really means and know that you are ready to take that step not just financially, but psychologically and emotionally.
Things to Consider Before You Retire
Having a retirement mindset may be as important for a happy retirement as knowing your finances are in order. Here are some things to consider:
- Why do you want to retire? We often meet with folks who think they should retire because they’ve reached a particular age. There are any number of valid reasons to retire, but you should know your reason. Is your job physically demanding or stressful? Are there ways to remove those stresses without fully retiring? In this situation, often the financial side of retirement planning helps us understand the emotional side. Some clients who were frustrated with their jobs found the stress manageable when they knew they could retire at any time. (For related reading, see: Journey Through the 6 Stages of Retirement.)
- What are you going to do with your time? Having your days to do as you please sounds great when you’re working hard at a job you’ve done for a long time, but retirement may be almost as long as your career. Think about what you will do to fill your days, and remember that it may be thirty or more years’ worth of days. Again there are plenty of good answers to this but you should know what they are. Write them down if necessary.
- Does your career define you? For better of for worse, we live in a culture where who we are may be tied to what we did as a career, and letting go of that identity can be more difficult than some of us realize. For some retirees, a second mini-career of volunteer work, mentoring, teaching, or consulting can help ease the transition. Working part-time during retirement is not necessarily about money. (For related reading, see: Planning Your Second Career.)
- Take a trial run. If you can, try mini-retirements before you actually retire to see what it might be like. Use your vacation time as a trial run. If your vision of retirement includes relocating, spend as much time as possible in new locations first to really see what you like. That condo in the Keys where you took the kids over spring break 20 years ago may have seemed like an ideal retirement spot when you had to go back to work the next week. However, it may not live up to the memory or be the right place to retire.
- Stay flexible. New retirees should rent for a while and move around a bit. Don’t buy that condo unless you’re sure you want to stay there or you're sure you are getting a good deal. And if you’ve always pictured touring the country in an RV as your ideal retirement, rent one first and try it out. For three generations we’ve been told to always own real estate rather than rent. But the money that is not going to build equity when you rent is buying you the flexibility to pull up stakes and move on down the road, and that should be worth something.
- Work these ideas through with your spouse. If you are married or have a significant other, retirement is a team sport and you need to be on the same team. That does not mean you need to retire at the same time or have identical visions of retirement, but you do need to understand each other’s retirement mindset and be ready to accommodate differences. Also be ready to suddenly be together a lot more. Retirement can be a great opportunity to be together but for many couples this is the first time in decades that they’ll both be free to be in each other’s company all the time, so be ready to adjust and give one another space when necessary. Consider retiring at different times—even waiting six months can give the first retiree time to get their feet under them and make the transition easier for both. (For related reading, see: Retirement Planning for Couples.)
Enjoying retirement is much more than circling a date on the calendar and putting a bunch of projections and numbers in a financial plan. It requires a state of mind that is ready for what will be one of life’s biggest changes.
(For more from this author, see: 7 Tips for Tax-Managed Investing.)