What would you do if you didn’t have to work?
At first, you’d probably celebrate your newfound freedom – sleep in late, go out more, travel. You’d partake of the pleasures you didn’t have time for before. Maybe you’d even tackle all those home projects you’ve been putting off for years.
But after the excitement wears off, what then?
Retirement offers a sense of freedom that most people yearn for their whole adult lives. People look forward to having fun after years of managing a work-life balance that was anything but balanced. But when that freedom lacks clarity of self-identity and purpose, it creates a void.
As humans, we’re purpose-driven, and that purpose is often tied to our careers. When work consumes us, we fall into the habit of going to work, eating, sleeping, and going back again. You take work out of that equation and the absence creates the kind of void that going to the beach just can’t fill. So, as you approach retirement, start thinking about what you’ll do later in life to generate purpose.
We work with a couple who plans to work into their later years but they’re talking with us now to plan what retirement will look like for them when they finally get to that point. Focusing on their community and their family are the most important parts of their retirement plan. Both want to get plugged into charitable initiatives because volunteering brings them joy. With family close by, they also want to stay involved in their children’s lives. Now that they have more financial freedom the husband has also gone back to school, taking the kinds of courses he always wanted to explore when he was younger.
Knowing what they want their lives to look like in retirement enables them to make better financial decisions now to ensure that they’ll be able to achieve their plan. They’ve taken the time to make a fulfilling, energy-giving transition plan so that their lives will have purpose when they’re done working.
Too many people make “having more money” their financial goal. But, simply focusing on having enough wealth in retirement is like building a home and focusing on the supplies rather the dream home you want. Money can’t provide happiness on its own, but it can support your ability to live out your purpose, set a direction for your life, create your core identity, and sustain your values.
People can’t thrive without the energy-giving activities that build our sense of self, which is why planning for retirement is so important. When people aren’t engaged in stimulating activities in retirement, they end up floating from one day to the next looking backwards at the glory days of when they were working. But that’s the opposite of what should happen! A Harvard Business Review article explains, “Our theory is that a later retirement may actually delay when your physical and cognitive functioning starts to decline, because work keeps your mind and body active. If you stay active and socially engaged, it helps maintain your cognitive and physical abilities.”
In retirement, many people also find community hard to come by. The kind of social engagement that happens in a community, especially a work community, keeps us connected to each other. These connections are incredibly important to our mental health – they challenge us, support us, and give us a reason to be the best versions of ourselves. A Forbes article adds, “If you’ve retired recently, think back about your life at work. You were needed, valued, respected and a contributor. You exchanged feedback and advice, praise and criticism. You were part of something larger than you. Now think about what provides that feeling of purpose in retirement. The place to look is within.”
The Consequences of Not Planning
Planning for retirement too late in life (or not planning at all) can leave you unable to pursue the dreams you’ve long held. This gap between your expectations for retirement and the reality of your retirement can make you wonder, “Why did I bother working all those years?” Retirement should continue your progress in life – providing the next step for defining who you are and the impact you want to make.
Your Money in Retirement
The earlier you can start planning for retirement, the better. A longer time horizon provides more investment opportunities.It also provides the ability to reduce your retirement tax bill and shape many other areas of your planning. Most importantly, it allows you to cast a vision for your future and work toward that goal. This big picture anchors your financial decisions throughout your life. Then, as you approach your last three to five years working years, it’s time to refine your income plan, determine what accounts you’ll take income from and start transitioning risk in your investments.
Your Purpose in Retirement
Figure out how you’ll replace the community, mental stimulation, and sense of accomplishment you had at work with something else in retirement. A great book to read on this topic is On-Purpose Person by Kevin McCarthy. It’s short, easy to read, and provides useful planning tools.
Explore what truly gives you energy, whether it’s a hobby, quality time with family, community, or a charity. Draw out the important parts of your life to create a picture for your retirement. These “life accounts” will offer insight into your health, financial status, spiritual needs, community involvement, friendships, and family dynamics. Then talk to a life coach or therapist, journal about it, start a dialogue with your spouse, or consult with a strategic planner to figure out what your life will look like without work in the picture. Do whatever you need to do to understand what will give you the feeling of fulfillment that you’re seeking in retirement and draft a plan for how you’ll achieve it.
Don’t enter retirement before you’ve put in the time and effort to take these steps. Remember, just because you’re financially able to stop working does not mean you’re emotionally ready.
The “Alterra” name was coined by joining the Latin roots “alter”, the origin of the word “altruism” with “terra” meaning earth or land. This name reflects the company philosophy of “clients before profits” and providing firmly grounded advice.