5 major mental shifts of retirement and how to prepare for them

They say, ‘You’re a long time retired,’ and while that adage is often reserved for sporting retirements, it’s true for retirement from the workforce, too. 

Many athletes have problems transitioning into retirement after giving the majority of their time, focus and energy to one thing for so long. And the same is true for many retirees moving into the ‘post-work’ phase of their life.

Five big mental shifts are needed to make a smooth transition. Awareness of and preparation for these shifts can make a big difference in retirement.

Mental shift 1 – Am I even ready to retire?

Figuring out whether you want to retire and what you will do with your days is hard.

How can you be sure you’re ready?

Try taking an extended period of leave a year or two before retiring. It might be as short a period as 8 weeks off. How do you feel? What do you do with your time? (Does it disappear, are you bored?) Do you start dreading returning to work around week seven, or are you excited by the engagement with peers and keeping your brain active?

Mental shift 2 – Feeling comfortable you can fund your retirement

You don’t want to make the shift into full-time retirement only to find you can’t enjoy it because you’re stressed about money all the time, wondering how much you can actually spend and whether you might actually run out of money at some stage. 

How can you feel comfortable and relaxed in retirement?

I know we’re in the advice business, so there is a bias here. But having worked with many grateful people over the years who are thoroughly enjoying their retirement because they’re not worrying about money or being unnecessarily frugal because they’re worried about running out, we know the value of getting financial advice about this.

There are many ways to get financial advice to ensure a comfortable retirement:

With some aspiring retirees, we’ve found that once they know they can afford to retire, they start enjoying going to work more—because they know they’re continuing to work because they want to, not because they need to.

No matter how close to retirement you are, professional advice will be valuable. It’s hard to put a value on the peace of mind you get from a sense check that the numbers stack up and you’ll be able to live comfortably.

Mental shift 3 – Going from being a saver to drawing down on assets over time

A specific example of something I see regularly is retirees who have savings accounts with bonus offers of adding $200 per month. Making sure the account balance grows each month is great for the accumulation of wealth. Once you move into the draw-down phase, it can be tempting to keep on saving. While these interest rate offers are great, if you ever access the money in the account (draw down), you typically forfeit that month’s interest. This means 1/12 of the interest is gone and makes the annual rate less attractive. 

While we encourage clients to hold accounts with a high interest rate where possible, it’s important to know that when you’re in the draw-down phase of retired life, the particular kind of account above may not be the best for your needs.

More generally, how do you shift from always saving money to drawing down on assets? A good formula for success is getting help quantifying your financial needs for retirement, creating a plan to fund those needs, and then sticking to the plan or seeking professional help when circumstances change.

Mental shift 4 – Adjusting your cash flow in retirement

Moving into retirement requires changing how you structure your cash flow (primarily, the places your income is coming from).

The people I’ve seen make this transition smoothly are those who make those structural changes before retirement. This means that when they do end up pulling the plug on paid employment, they understand how things work and have already adjusted to the cash flow change. Restructuring cash flow in advance also enables you to identify any tweaks that are needed and make those prior to retirement.

Moving into full-time retirement is a huge change in itself. Anything that reduces the amount of change you’re experiencing in one hit is a good thing.

Mental shift 5 – Spending more time with your significant other, with less to do

Sometimes retiring at the same time as your significant other makes sense. Sometimes, it makes more sense to retire at different times as there can often be a ‘grieving’ process attached to the change in work status – and it might be easier to support each other through that process if you do it one at a time.

Retiring at different times also allows you each to decide what to do with your time independently, be it time with grandchildren, time in the garden, going for more walks, reading more or literally anything that you want to do!

What’s important to know is that it’s totally normal for your relationship dynamic to feel a little weird to start as you both navigate this new phase in your lives. As with all relationship challenges you’ll have faced to this point in your life, the best way to work through it is with open communication and understanding of each other.

Information on this website is of a general nature only and has not taken into account your particular circumstances.  Before making any decision to act, you should consider whether the strategies are suitable for your personal situation and needs.

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