Most major life-changing events, such as marriage or divorce, involve an ongoing process of emotional adjustment. Retirement is no exception. But while marriage, divorce and other family-related issues have been the focus of decades of research and analysis by both clinical therapists and religious institutions, the emotional and psychological frontier of retirement has remained virtually unexplored until recently.
Financial planner Jane Nowak, CFP®, with Wealth and Pension Services Group in Smyrna, Ga, says: “Helping clients answer real post-retirement planning ‘lifestyle’ questions ends up being an important aspect of full retirement financial planning. A few of the questions I ask to help clients explore their post-retirement identity are: How do you plan to spend your time? What are your hobbies? What activities will fill your days? Are people in your social circle already retired?”
Nowak adds: “Not surprisingly to me, more than a few clients, when asked these questions, realized that even though they might have been financially ready, they had not thought through some important non-financial aspects of creating their happy retirement. These folks opted to postpone their retirement by months or years.”
While research on this subject has barely begun, it is clear that the psychological process of retirement follows a pattern similar in nature to the emotional phases accompanying other phases of life.
Retirees must face what is essentially the last transition in their lives. The first transition comes when we leave the security of home to begin our school life, leaving us the later afternoon and evening to ourselves. Another major transition comes when we join the working world; now we work all week but still have the weekend to ourselves. Then finally comes retirement, a time when careers are done – and we have the rest of our lives to themselves.
Financial advisor Diane M. Manuel, CFP®, CRPC, with Urban Wealth Management in El Segundo, Calif., says: “We all think that shucking a routine, especially one that may only marginally make us happy, will be easy. Think again. This routine probably began in kindergarten – 60-plus years of the same thing. Get up. Get dressed. Get lunch. Go out. Come home. Eat. Go to bed. Repeat."
Manuel adds: “My recommendation to my clients is this: As you plan for retirement, think about what it looks like. Talk to your friends. Write about it. Create a storyboard. Be imaginative. Your financial plans and your day-to-day retirement plan should go hand in hand. This is your retirement identity.”
Let's take a closer look at each of the six phases of retirement.
During the working years, retirement can appear to be both an oncoming burden and a distant paradise. Workers know that this stage of their lives is coming, and do everything they can to save for it, but often give little thought to what they will actually do once they reach the goal – the current demands that are placed upon them leave them little time to ponder this issue.
Many people face retirement like a running back on the football field who dodges or plows through one defender after another until reaching the end zone. It's hard for many workers to think seriously about what their lives will be like in 20 or 30 years when they are trying to stay on top of their mortgage, put their kids through college and have a little fun in the meantime. They want to reach the end zone, but other issues will tackle them long before then if they don't take immediate action. (See: "Retirement Investment Strategies by Age," "The Complete Guide to Retirement Planning for 30-Somethings," and "The Complete Guide to Retirement Planning for 40-Somethings.")
“Life is not measured by the number in your bank account, but the memories you create. Therefore, focus on how your finances can maximize your life, not the other way around,” says Cooper Mitchell, financial advisor, Dane Financial, LLC, in Springfield, Mo.
By far the shortest stage in the retirement process is the actual cessation of employment itself. This is often marked by some sort of dinner, party or other celebration and has become a rite of passage for many, especially for those with distinguished careers. In some respects, this event is comparable to the ceremony that marks the beginning of a marriage.
Of course, honeymoons follow more than just weddings. Once the retirement celebrations are over, a period often follows when retirees get to do all the things that they wanted to do once they stopped working, such as travel, indulge in hobbies, visit relatives and so forth. This phase has no set time frame and will vary depending upon how much honeymoon activity the retiree has planned.
This phase parallels the stage in marriage when the emotional high of the wedding has worn off and the couple now has to get down to the business of building a life together. After looking forward to this stage for so long, many retirees must deal with a feeling of letdown, similar to that of newlyweds once the honeymoon is over. Retirement isn't a permanent vacation after all; it also can bring loneliness, boredom, feelings of uselessness and disillusionment.
Shanna Tingom, co-founder of Heritage Financial Strategies in Gilbert, Az., says: “The toughest transition most of my clients make is the one from working and saving to retirement and spending. It can be emotionally and financially harder than they ever expected. If they are younger retirees, and they have friends and family still working, it can also be very lonely, especially if they don’t have a plan.”
Tingom adds: “A proper retirement plan includes three things: a financial plan, a budget and a FUN plan! The fun plan includes things that they want to do, places that they want to visit and how much money is included in the budget for those things.”
Fortunately, the letdown phase of retirement doesn't last forever. Just as married couples eventually learn how to live together, retirees begin to familiarize themselves with the landscape of their new circumstances and navigate their lives accordingly. This is easily the most difficult stage in the emotional retirement process and takes both time and conscious effort to accomplish.
Perhaps the most difficult aspects of this stage to manage are the inevitable self-examination questions that must be answered once again, such as “Who am I, now?” “What is my purpose at this point?” and “Am I still useful in some capacity?” New – and satisfying – answers to these questions must be found if the retiree is to feel a sense of closure from his or her working days. But many retirees cannot achieve this and never truly escape this stage – make sure you do.
Finally, a new daily schedule is created, new marital ground rules for time together versus time alone are established and a new identity has been at least partially created. Eventually, the new landscape becomes familiar territory, and retirees can enjoy this phase of their lives with a new sense of purpose.
“When you are newly retired, it can seem like you are riding on a roller coaster," says Kimberly Howard, CFP®, founder of KJH Financial Services, Newton, Mass. "Peaks and valleys require attention and patience to manage. In time, the new norm will be your new reality."
Life planning is an important key to successful retirement. Workers who have given serious time and thought to what they will do after they retire will generally experience a smoother transition than those who haven't. Dreams and goals that cannot be achieved with a single trip or project may translate into long-term, part-time employment or volunteer work. But it is never too soon to begin mapping out the course of the rest of your life.
As with all emotional processes that can be broken down into separate phases, it is not necessary to completely achieve one phase before beginning another (except, of course, for the actual cessation of employment). But virtually all retirees will experience some form of this process after they stop working. Their ability to navigate these uncharted waters will ultimately determine how they live the last phase of their lives.
For a sense of how these phases might affect you financially, see "Three Stages of Retirement: A How to Guide to Plan for Them."