Preparing mentally for retirement

Retirement planning is more than simply paying into a pension. It could be the biggest lifestyle change you have faced since starting your career, moving into your own home, or becoming a parent. This is not an adjustment that can be made overnight.

With all the focus on financial planning, it’s easy to neglect the emotional upheaval that comes with such a significant turning point in your life. For many people, work is their identity, their social hub, their purpose in life. Retirement doesn’t change your basic human needs. We need connection, to feel useful, and to know that we have a place in the world.

If you are starting to think about retirement, this guide offers some tips to help you mentally prepare for this monumental life change.

Set your Goals

The first step towards any life event is to understand what you would like to achieve. Ideally, you should have a vague idea of your retirement goals when you first start to pay into a pension. Over time, these general aspirations gain clarity and colour.

When starting to think about your retirement, consider the following:

• Where will you live?
• How will you spend your days?
• Who will you spend time with?

These ‘soft’ goals can help to inform the more concrete decisions, for example, how much you are likely to spend, whether you should downsize your home, or if you should consider making gifts.

If you start from the factors that are most important to you, setting goals becomes easy. The earlier you start, the more time you have to make your dream retirement a reality.

Wind Down Gradually

Suddenly hitting the brakes after 40 years of 40 hours per week will be a shock to anyone’s system. Boredom, frustration, and even depression can quickly set in after such an abrupt change.

You might want to start transitioning towards your retirement at least 5 years in advance. This could involve:

• Taking on less responsibility.
• Moving to a less demanding role.
• Gradually reducing your hours.
• Training and mentoring your replacement.

Of course, if you are happy to leave work on a Friday and never look back, the gradual route may not suit you. Instead, a change of scene could offer an alternative transition. A part time job or a lifestyle business may help to ease you into retirement, while providing an income to top up your pension.

Keep Busy

We all have an endless list of jobs and obligations to fit into our busy lives. It’s easy to think that work is the main obstacle to having a clean, well maintained home, blooming garden, or sparkling social life.

When you retire, you have all the time in the world. But the reality is that once you have ticked off your to-do list, you will still have time on your hands. Every day, for the rest of your life. At this point, retirement can feel anti-climactic, or even downright disappointing.

This is why it’s important to approach your retirement with purpose. We all need a sense of identity beyond our own front door. Family responsibilities, volunteer work, community engagement, sport, and creative arts could help you to find a new sense of self in your post-work world.

Maintain Social Connections

For many busy people, after work drinks, lunches, and chats at the coffee machine can form the majority of their weekday social interactions.

Without these daily opportunities to connect with people, we need to be more intentional with our social lives. Loneliness is a major issue for retired people, particularly for those living alone without family nearby.

To combat this, a strong social network is important. Making new friends can be daunting, but how about re-connecting with old ones? Or joining a club and bonding over shared interests?

Stay Healthy

To get the most out of your retirement, you need to be well enough to enjoy it. With extra free time, there are multiple things you can do to improve your health. For example:

• Learning new recipes and eating healthily.
• Joining a gym. Many offer discounts for retirees and your new flexible schedule will allow you to attend any classes that appeal to you.
• Taking up new active hobbies.
• Attending regular medical check-ups.
• Getting a dog. The training process can keep you mentally and physically active. The reward is a loyal companion who will insist on daily outdoor exercise.

Prepare Your Finances

Dealing with your finances will also require a mental shift when you are thinking about retirement. Saving and spending will take on new meaning.

On the one hand, by the time you retire, the aim is to have achieved financial security. This means that you no longer need to pay into your pension, although it might still be a good idea for tax reasons. At the point you retire, it’s likely that the kids will be financially independent and that the mortgage will be paid off.  Many expenses incurred through your working life, such as travel costs and some types of insurance, will no longer apply. If you have a steady income coming in, chances are you can spend it without worrying.

But on the other hand, money is finite. When you are working, you can always earn more, save more, or spend less. If you are reliant on your capital to cover your lifestyle costs, you will need to keep a careful eye on your cashflow to ensure that you don’t run out of money.

You will also need to balance the risk and reward profile of your investment strategy. Preserving the capital becomes more important than achieving growth, but you also need to make sure that your money holds its value when inflation is taken into account.

A financial planner can help you manage your cashflow and investment plan so that you can concentrate on enjoying a happy, busy, and fulfilling retirement.

For further information or advice please contact one of our Wealth Managers or call us on 01395 207350.