Retirement is a feeling.
When a person enters retirement, they believe they are on the precipice of one of the greatest events of their life. It’s a badge of prestige, an all-access pass to follow their dreams and interests. Play with their grandkids, travel the world, or even retire abroad—it’s supposed to be a magical time.
But that’s not necessarily the case.
It doesn’t take long for new retirees to come down from the high of this new milestone. The fact is, the transition to retirement is more complex. And it can become a mental challenge. According to one study, 28% of the retired population struggles with depression.
How does one go from the feeling of success and achievement to depression or disillusionment?
Let’s dig in.
Two Types of Retirement Mindsets
There are two mindsets when it comes to retirement.
The first one is a carefree, ecstatic outlook. As this individual goes into the transition, they are thrilled. They have so many ideas for what to do, so many things they want to try. Or maybe they are just excited to finally be able to relax, sit at home, and sometimes go out to meet friends.
These individuals often don't have a financial plan in place. They may even believe that their social security and savings will be enough, regardless of the amount and their retirement goals.
Usually, this fixed mindset brings several challenges:
- If they haven’t prepared financially, they can’t actually run after their dreams.
- Without a clear sense of social role or purpose, it can be difficult to give your time meaning—thus leading to depression.
- An over-reliance on physically-demanding hobbies or interests can lead to depression when you can no longer pursue them.
- Loss of regular social interaction with friends and loved ones can feel isolating.
- Lack of a leadership position can result in feeling directionless and disconnected from your network.
Meanwhile, the second mindset is more cautious and can actually benefit retirees. Being realistic about the potential challenges regarding the change, whether they be financial, social, or health-related, can help you prepare for the worst (and enjoy the best). This mindset doesn’t translate into being sad or scared of retirement but thinking practically.
Developing a Healthy Retirement Mindset
A healthy retirement mindset centers on introspecting. You should celebrate retirement, but you realize that it helps to have a plan B in place—just in case.
Consider asking yourself these questions before you retiree—ideally, years before the big day:
- What in life gives me meaning today?
- What do I enjoy and how can I do more of this in a purposeful way after retirement?
- What do I absolutely hate and how can I minimize this in retirement?
- Will I be able to pursue my interests if I am unable to be physically active and are there alternatives?
- How much money will allow me to live the life I want?
- Would I consider continuing to work or volunteer, perhaps in a different field, even if I don’t need the money?
- How will I make time to see current friends and make new ones?
- Who can I trust to help me make challenging decisions in retirement—such as choosing to move, try a new medical treatment, or make another significant life decision?
- Will I have enough money saved if I get diagnosed with dementia?
- How should I take money out of social security, my Roth IRA, and other accounts to prevent running out of money early?
- If I don’t have a lot of money saved for retirement, is there a way I can reduce costs without sacrificing my flexibility?
It’s also important to have a team of people around you to help you prepare for retirement in advance and navigate the transition successfully. This group can include family, close friends, retired colleagues, doctors, lawyers, and financial advisors.
With a plan, you can set up your golden years for success and enjoyment instead of uncertainty.
6 Tips for Financial Security in Retirement
When you finally retire, you’ll want to enjoy life. But, typically, you’ll need financial security, or at least stability, to get the most out of your retirement.
- Determine how long you expect retirement to last. This is a bleak topic—but you need to be prepared for when you may pass away. One out of every four 65-year-olds will live past 90. You may need to account for 30-40 years of living without a regular income.
- Decide when you actually want to retire. You may want to work for a few more years, even if it’s just part-time, to improve your financial prospects. Giving yourself a few more working years can also provide more time to figure out what you really want once you fully retire.
- Revisit your plan regularly. Make sure to review your plan over time, even well into retirement, as things change. You may want to move closer to your grandchildren, join an assisted living situation, or try a new but expensive hobby.
- Tap into your network. Have a group of people you trust to help you make decisions and figure out your retirement life. It helps to have a few professionals you know, as they can provide high-quality, specific advice.
- Learn from those already in retirement. You’ll want to have friends young and old, but forming relationships with those already in retirement can help you prepare for the big transition. Not only will they give you a glimpse of what life is like, but they can answer your questions or introduce you to lawyers, advisors, doctors, and other fiduciaries.
- It’s okay not to retire fully. Some people just enjoy work. And without it, they can find it difficult to enjoy life. It’s okay not to retire completely. Working as a consultant or taking up a part-time job in an industry you enjoy can help you reduce work stress while you explore potential hobbies and build a new identity.
Preparing for the future.
The last thing you want to do is make decisions based on knee-jerk reactions and emotions. This applies not only to retirement but also to your finance portfolio In retirement, when your entire income is dependent on your savings, careful decision-making is essential to protecting your interests.
For example, when interest rates started rising, many individuals decided to sell their bonds out of market anxiety. As a result, they lost money. If they had held onto their bonds until maturity, assuming they were from a reliable issuer, they would have kept their principal.
At Encompass Advisors, we know the struggle retirees face - from optimizing their social security benefits to adjusting spending and managing their retirement income to meet their goals.
Book a call today to learn about our approach to retirement planning and whether we are the right fit for you.
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With over 40+ years of experience in the financial sector, and as a licensed fiduciary, founder Jon Green can help you look over your retirement plan and understand whether you are on track.
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