In my nearly 30 years helping people with their retirement planning I haven't met many, maybe none at all actually, that don’t know how important it is to plan ahead and save all they can for their future retirement years. Most also have a good sense as to how much they have in their retirement funds, how it's generally invested and whether they feel they are “behind” or not in meeting their overall retirement savings goals. Right or wrong, most feel they are behind, no matter what they have saved or how close they are to their target retirement date. More on that later.
I suppose that sense of being “behind” is what brings people to us in the first place. As financial advisors, it’s our job to help people save more, manage their investments better and ultimately guide them towards achieving the retirement lifestyle they envisioned. But that’s where things get a bit sticky, the envisioning part. (For more, see: Saving for Retirement: The Quest for Success.)
Having a Sense of Purpose in Retirement Is Important
A crucial aspect of retirement planning that all too many retirees, near retirees and many financial advisors fail to account for is purpose. What are you going to do to fill all those leisure hours once you quit your job?
This isn’t an idle question. Having a sense of purpose helps us thrive. It might even help us live longer. According to a 2014 study in the journal Psychological Science, setting a direction for your life and creating goals for what you hope to achieve is correlated with increased longevity.
In our view, having enough money to live comfortably isn’t likely, in and of itself, to bring happiness - especially if your sense of purpose stays at the office after you’ve packed up your desk or hung up your tool belt for the last time. The key is to have enough money to engage in the meaningful activities that interest you and to reach the retirement lifestyle goals you set for yourself.
Of course, in some cases, the activities that give you purpose may not cost anything at all. For example, many retirees find they are energized and inspired by volunteering for a local nonprofit organization. Their volunteer activities lend meaning to their lives each day. For others, finding purpose might entail moving closer to family members to help raise their grandchildren. Some might want to mentor young entrepreneurs or return to school themselves. Still, others might find that some part-time work is just what the doctor ordered. For inspiration, check out these second-act careers that have changed lives all over the world at Encore.org. (For more, see: Journey Through the 6 Stages of Retirement.)
Don't Only Let Finances Drive Retirement Planning Decision Making
The thing is, all too often people let their finances drive their retirement decisions. They focus their energy on saving more and investing smarter without giving much thought to the specific ways they will utilize that money in retirement to provide them true happiness. As a result, without focusing on the “what” they will do in retirement, it’s difficult to accurately determine whether they are “behind” or not in their retirement savings. Maybe they are ahead and don’t even realize it.
As advisors we often see people arrive in our office after decades of working and saving for retirement who look or sound, shall we say, less than enthusiastic about their first few years of their new found freedom. Retirement isn’t what they thought it would be because they never really gave it much thought. The end of their working life just happened and they find themselves thinking, “Now what?”
It doesn’t have to be this way. Whether you’re already retired or you see retirement on the horizon, it’s not too late to plan for a purposeful second act. The best place to start is by taking the time to reflect on what matters to you. What’s missing in your life that you would like to remedy now that you have the time to do so? Think about the things - activities, adventures, hobbies - that excite and motivate you and that make you want to get out of bed each day. Consider how you want to be remembered when you're gone and then create an action plan to ensure you are striving for those attributes each day.
Consider Making An Action Plan Today
Start writing down your thoughts to clarify and focus them. Get specific about the things you would like to accomplish. Break them down into the steps you’ll need to take to make them happen. Then determine whether you need to adjust your estimated retirement income needs as a result. And finally, make a plan to revisit your retirement goals often, making sure they’re still meaningful to you and adjust as necessary. Then, and only then, can you begin to align your retirement and investing decisions to achieve the retirement lifestyle you envision. Call it purposeful investing.
Start planning now for a retirement with purpose. It may allow you to live longer and at the very least, provide you more happiness. (For more from this author, see: How the Unexpected Can Drain Retirement Income.)
Disclosure: Securities and Investment Advisory Services are offered through Signator Investors, Inc., Member FINRA/SIPC, a Registered Investment Advisor. AspenCross Wealth Management is independent of Signator Investors, Inc. 1400 Computer Drive, Westborough, MA 01581.