While most of us (to a greater or lesser extent) plan financially for retirement, we often don’t think to devote the same amount of time and effort to plan emotionally for the day we transition from employee to retiree. It is important to keep in mind retirement planning involves much more than simply aligning your expected income sources with your anticipated lifestyle expenses. You also need to consider:
Perhaps more than any other nation, Americans tend to define themselves by their professions, job titles, and how relentlessly we all work. When your work identity suddenly disappears, it can be a genuine struggle to redefine who you are.
Redirect your energies
One of the key things you can do to psychologically prepare for the changes retirement will bring is to start looking now for new intellectual challenges and ways to engage and give back to your community, such as:
When you finally turn the page on retirement, activities like these can provide a much-needed substitute for the human connections, mental challenges, and intellectual stimulation your career previously provided. Failing to plan for life after work, unfortunately, often leaves a void that no amount of travel or tee times can ever fill. It is one of the chief reasons so many successful professionals decide to keep working late into their 60s and early 70s—long after their peers have retired.
Scale back gradually rather than disengage suddenly
In addition to mentally and financially preparing well in advance for your upcoming retirement, another approach many choose is a slow glide path towards retirement. In other words, many pre-retirees prefer to retire in stages over a multi-year period. This enables them to remain mentally and socially engaged for longer and also helps them better manage the financial challenges of what could be a 25 – 30-year retirement. Even just a year or two of part-time work before full-retirement can dramatically help you fund a lengthy retirement and may also provide you some needed and appreciated financial flexibility.
If you are a small business owner or self-employed professional (such as a physician, attorney, or CPA) you may be fortunate enough to have the flexibility to gradually scale back your work hours over time. Rather than flipping the switch from 40+ hour work weeks to nothing overnight (which can trigger a profound feeling of being adrift), reducing your schedule can make easing into retirement far less jarring.
[box] In 2022, just 45% of U.S. 65-year-olds were retired, compared to 58% in 2000.1[/box]
As an added benefit, the longer you are earning income the greater ability you will have to maximize catch-up contributions to retirement accounts which can boost both your 401(k) and IRA balances and delay your reliance upon these accounts to fund retirement. For the 2023 tax year, anyone age 50 or older can contribute a maximum of $30,000 to their 401(k), and $7,500 to their IRAs. Continuing to generate income beyond your full retirement age (FRA) also provides two additional benefits. It may:
Prepare emotionally and financially
Leaving a profession and a job you have excelled at for decades can initially feel like being set adrift in a vast ocean. Not only does it require stepping out of your comfort zone, it also means letting go (to some extent) of the day-to-day interactions and friendships you have built with co-workers and clients. It is critical, therefore, to prepare yourself emotionally and seek out other ways to socially engage with the outside world.
Whether for a sense of personal fulfillment or to build an extra financial cushion, a ‘second act’ career could offer an incredibly rewarding alternative to full retirement. Just don’t wait until you retire to start preparing. Like any type of planning, the earlier you begin, the greater your chance of achieving a successful outcome. So, take time now to give some serious thought to what second career you might like to pursue. Talk with friends and relatives who have pursued this solution. Ask them about the emotional challenges they faced and the strategies they employed to protect their emotional well-being. Ask about any missteps they made along the way. And then start seeking out and cultivating relationships in areas that interest you—so you will have a solid network in place when you finally decide to transition.
Retirement provides a unique opportunity not only to rediscover what you love but to reinvent who you are. Whether your goal is to generate additional income to fund a better retirement lifestyle, to stay more actively engaged, or to give back to your community, a second career in retirement can be an immensely rewarding undertaking.
Don’t wait
Whether you plan to step away all at once or gradually ease out of your career, the sooner you start planning for life after work, the better off you will be and the less unsettling your transition. Don’t wait until retirement is just months away to start exploring, discovering, and engaging with future passions.
Shedding the corporate yoke should never mean disconnecting from the world. But filling the sizable gap left by your career will require as much continuity as possible. Even though you have been working for the past 35+ years, don’t forget that your retirement might last nearly as long. Grab this tremendous opportunity not only to rediscover your passions but to reinvent who you are. It all starts with a plan!
Ready to achieve a more fulfilling and enjoyable retirement? Start thinking less about what you will be retiring from, and begin focusing more on what you want to be retiring to. Talk with your BLBB Financial Advisor (215-643-9100). He or she can help you address these and other critical retirement questions so you are able to approach the future more confidently.
1 “Who’s not working? Understanding the U.S.’s aging workforce,” Minneapolis Federal Reserve Bank, February 2023
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