Easing into RetirementFinancial Planning Retirement Planning
For many people, crossing the bridge into retirement is a big step. If you’re approaching retirement, it’s time to develop a strategy to facilitate a smooth transition from the more structured world of work to one of leisure.
After spending years building your professional career, you’ve accumulated assets along the way. While retirement planning usually focuses on preparing for your financial future, nonfinancial matters may also need to be addressed. When retirees feel dissatisfied, it’s often the lifestyle changes that accompany retirement living that tend to create difficulties with self-esteem and identity associated with ending one’s profession.
One possible solution for managing these challenges may be to ease into retirement. Some individuals may welcome the opportunity to continue some form of work, such as consulting, job-sharing, mentoring, or back-up management. Mentoring, in particular, enables you to transfer a lifetime of learning and experience to a friend, relative, or younger colleague. Phased-in retirement provides an “anchor,” allowing new retirees to explore other activities while also maintaining their role at work.
Since some people may have more of an emotional reaction to the separation and disengagement from working than they expected, taking between two to five years to “decompress” may be an appropriate option.
Maintaining a Healthy Perspective
While “retirement” suggests the end of your working life, a more positive perspective to take could be that it’s the beginning of a new phase of life—when you can do all the things you never seemed able to find the time for while you were working. For example, volunteer work can allow you to make a valuable contribution to a charitable cause and meet new people. Taking courses in subjects that interest you can sharpen your intellect and help maintain your cognitive abilities. If chosen thoughtfully, these activities can be enjoyable and fulfilling.
Obviously, it’s a lot easier for a retiree to consider other pursuits if financial considerations are secondary. People may think that it costs less to live in retirement. However, it’s actually common for retirees to increase, rather than decrease, their expenditures, especially in the first few years of transition. Without working full-time, retirees may have more energy and time to enjoy entertainment, dining out, travel, and recreation.
On Spending and Inflation
During the working years, it’s common to take a certain lifestyle for granted. In retirement, however,you may need to change your priorities or consider budgeting depending on your circumstances. On the other hand, you may find that you no longer need or want to do some of the things that seemed so important when you were working. Additionally, be sure to keep an eye on the effects of inflation after retirement. For example, an item costing $100 when you are age 65 will cost $180 at age 80, assuming a 4% inflation rate compounded annually. Therefore, it’s important that your retirement plan be not only a plan “at” retirement, but also a plan continuing “through” retirement, which may require revision on a regular basis.
If you view retirement as your opportunity for growth and exploration, you can make this transition exciting and enjoyable. Your horizons are limited only by your imagination. After all of your hard work, you’ve earned this opportunity—enjoy the freedom!