When the ins and outs of the daily work grind start to mount, our minds often drift to the future and the promise of freedom that retirement can offer. On the surface, the idea of retirement —the constant state of relaxation, void of obligation — may seem like a dream. But that dream can quickly turn into a nightmare for anyone not fully prepared for this new stage of life.
For many, a successful retirement can be achieved through proper financial planning. It is an important aspect of living the retirement years fully. In a survey conducted by HSBC nearly half (49 per cent) of those surveyed planned to travel during retirement years. Another 36 per cent planned to use retirement to take on home improvements or gardening projects. In any scenario, retirement activities require money.
With the help of a qualified financial advisor, you can create a retirement plan that will suit your lifestyle and living expenses in order for you to enjoy your retirement years.
Most advisors will recommend saving early and regularly to get the most return on your investment.
“In your 20s or 30s, retirement can seem a lifetime away,” says Tom Mueller, Financial Security Advisor with Freedom 55 Financial, “but that’s the exact reason to start saving. Putting time to work for you is one of the cardinal rules of successful retirement planning.”
Some people make the mistake of depending on their pension as the main source of retirement income. “Pension plans are great, but if there are any employment changes down the road, you may not be financially prepared for retirement.” says Mueller.
When in the latter half of your career, and starting to inch closer to retirement, Mueller suggests re-evaluating your retirement financial plan. “With three to five years before retirement you should review your investment portfolio, maybe even consider shifting to lower-risk investments.” It’s not just your portfolio that may need adjusting, Mueller suggests a lifestyle change may need to happen, especially when it will effect living expenses and income needs.
A solid financial plan will help ease your worry about income when into retirement. Although money is a very important component of retirement planning there are other factors that shouldn’t be forgotten.
“Money is good, but you have to be psychologically prepared for the biggest challenge of your life,” says Dr. John W. Osborne, author of Essential Retirements: Psychological Concerns, a book about the transition into retirement.
Osborne has done extensive research on the topic and in the paper, Psychological Effects of the Transition to Retirement, he focuses on the early stages of transition, from disengaging from work life and engaging with retired life. He touches upon the idea of loss being a natural part of this transition.
“For those with highly skilled and management careers, the loss of their status can leave them feeling like nobodies.” They may struggle with only having use of their ‘low-level’ skills in a volunteer position and can no longer make use of professional skills and tools. These feelings can bring on a sense of grief once the initial excitement of retirement has died down.
The decision to retire is one of the most important decisions we make in our lifetime. Osborne found that those who have a positive worldview, good family relationships, a robust and diversified identity and involvement in meaningful activities apart from their job, are likely to have an easier transition.
This transition phase is enough of a growing concern to hatch a developing industry revolving around it. One website, Retirement Coaching Canada, offers seminars, workshops, coaching and online discussion forums to help new retirees ease into their new life. The site was created “to help people experience and prepare for an energizing and fulfilling retirement.”They understand that retirement is about more than quitting the 9 to 5.
There are other factors that need to be addressed including sense of identity, change in social circles and of course, financial concerns. Having a retirement plan that extends beyond your bank balance will help make a smooth transition into retirement.
References:
1. Brandon, Emily. 2013. USNEWS. Ten things to do in retirement. http://money.usnews.com/money/blogs/planning-to-retire/2013/03/01/10-things-to-do-in-retirement (July 2013).
2. Osborne, John W. 2012. “Psychological Effects of the Transition to Retirement”. Canadian Journal of Counselling and Psychotherapy. 46:1 45-58.
3. Osborne, John W. 2009. Retirement Psychology. http://retirementpsychology.ca/index.html (July 2013).
4. Dack, Kate. 2013. Website. Retirement Coaching Canada. www.retirementcoachingcanada.com. (July 2013).