Champagne bottle in ice bucket
The Setting
You've been looking forward to retiring for ages. You have mentally switched off from work and now spend your day day dreaming about all the fun and games you're going to enjoy during your new found freedom.
You can't wait and then it happens. You finally retire. You might even have a small party at work to celebrate. Your neighbors are jealous. Your landscaper is nervous.
Your spouse is petrified!
Even you start having some doubts. The only one truly happy is your dog.
You realize that retirement is something new. It's a transition to something else. What exactly, you don't know, but it must be good because everybody is doing it, right?
A couple of months go by. It's really nice not having to wake up at 6 AM and slug through the morning commute. But there is something missing, a void that you didn't expect. Your old HR manager certainly did not tell you that this would happen.
What is it? Is it just me? You start asking yourself questions aloud as you play your 13th round of golf (over the last 2 weeks). Now even the caddy looks perplexed which in turn makes you anxious and your game suffer.
- What did you expect?
- Did you really know what you were getting yourself in?
- Or, maybe you assumed some things that just were not true?
Retirement is a huge transition. Maybe your journey needs to start off with shedding some commonly held assumptions about this next phase in life.
Here are five often held assumptions that might be holding you back from truly enjoying a new beginning to your life in retirement.
You cant' teach a dog new tricks, right?
You've always been this way, right? Why should you change at this stage of the game?
A lot of people hold this opinion of themselves and others. In fact it is not unusual for people to look at others the same way they did many years ago.
Have you ever had the feeling of going to a class reunion and still thinking about people in the same way you did back in high school?
Perspective Change #1 - You decide who you want to become
Some parts of people’s personality remains the same but there is no reason why people can’t grow and learn new ways of being. You can too. Research on brain plasticity supports the idea that people can change and learn new things even at an advanced age.
You don’t have to assume that the way you think and behave is fixed at birth. Plenty of research confirms our great ability to adapt and change our thoughts and behaviors over time.
What type of person do you want to become? Is your old identity holding you back?
I know all about retirement – I saw how my parents did it
Of course that is one approach, but circumstances have changed dramatically even from a decade or two ago. The world has changed and so have the range of possibilities.
Chances are your parents might have had a pension that supported their lifestyle. Unless you are one of the lucky ones you probably have to rely on a combination of your savings and social security to fund your lifestyle.
Chances are that the type of lifestyle you parents sought in retirement was quite different to what most people today would find interesting.
Am I right?
Perspective Change #2 - It's up to you to design your lifestyle
Retirement today is a la carte. You decide what works for you. The options are almost infinite.
With more options comes more complexity. You’ll have to figure out what lifestyle works for you. You’ll have to figure out how to turn your portfolio into an income generating machine. You’ll have to figure out how to work on meaningful goals with your new found time.
Retirement today requires planning ahead. It requires customizing a plan that works for you. It requires you to take action and not wait around for a cookie cutter lifestyle that no longer fits today’s world.
The quality of my retirement depends on the size of my portfolio
Financial security is important. After all you need to take care of your basic needs and not live in fear of not having a roof above your head or sufficient medical care.
You need money to enjoy your journey, but money is not enough to pursue a life of joy and fulfillment.
Money can't buy you health or good social relationships. It can't buy you time when you're running out.
Money is fuel for the ride, but do you know how much you need to take you where you want to go?
Perspective Change #3 - You need more than money to be happy and fulfilled
Research by Nobel Price winner Daniel Kahneman highlighted that past a certain level of income ($75K in his study) having more money does not buy more happiness.
Having more money allows you to do more things and buy fancier homes and cars, but if you don’t use your time wisely and surround yourself with family and friends you won’t see much incremental benefit.
There are many other dimensions to leading a fulfilled life in retirement besides just money such as your health, social connections, hobbies, work activities and lifestyle.
A balance among all of these contributors of your happiness is essential. Focusing just on money won’t do it.
I have my financial plan in place and I now we are all set
Planning ahead is commendable and you have a huge head start compared to most of your peers. You probably worked with a financial planner or investment professional in evaluating your ability to fund your desired lifestyle.
You slugged through inputting all kinds of projected expenses, income, capital market returns, inflation, and tax rates. Then your financial professional ran thousands of Monte Carlo simulations to assess the probability of running out of money given some reasonable assumptions and you passed.
Congratulations!
In all likelihood you are probably headed to a financially comfortable retirement, but the problem with any sort of plan is that the real world has a way of intervening.
Perspective Change #4 - Even your best laid plans will need to be updated
Your plan while perfectly logical at inception may start looking a bit outdated if any of the assumptions (and there are many) on which the plan was build prove to be wrong.
Maybe inflation turned out much higher than expected, or the second home on Deer Island did not fetch what you expected a few years back when you formulated your retirement plan.
It could also be the case that stock market returns have been much lower than expected but your living expenses have actually turned out to be significantly higher due to a medical emergency and higher property taxes.
Not only are plans only as good as their execution, but plans also need to be updated to reflect changing circumstances as well as potentially new priorities on your part.
Planning for retirement is an ongoing process
Finally, I can now be happy!
Many people look at their job as what is preventing them from being happy. They somehow expect that everything will fix itself when they are no longer working fulltime.
"If only I did not have to work with such difficult people". "If only, I did not have to do sit in this sea of grey cubicles". Everything would be great!
Too many people wait for the ideal circumstances to present themselves before pursuing a life of joy and fulfillment. They expect the skies to miraculously open up.
Perspective Change #5 - Your circumstances do not dictate your happiness
Professor Sonja Lyborsmky has found that about half of your happiness level is pre-determined. She calls this your happiness set point. Her research shows that about 10% of your happiness is determined by circumstances and the rest (40%) is up to you and how you lead your life.
Your job is part of that 10% accountable to your circumstances – changing your job or quitting altogether will barely move your happiness needle on its own.
A more fruitful way to increase your happiness is to focus on that 40% under your control. Your lifestyle and daily habits drive the quality of your life whether you're working or not. Don't use your job as an excuse!
Retirement today is about freedom of choice
Retirement today does not look like anything in the past. Our families have changed. The economy has changed. Societal norms and expectations have changed.
The old model of stop working at age 65, move somewhere warm, and pursue a life of leisure with a bunch of fellow retirees applies but to a minority.
You can see change all around us, but the biggest change that we often don’t talk about is internal. Our expectations for what we want out of life are different from previous generations.
Retirement today is a la carte. You can't rely on outdated models or a cookie cutter approach to retirement. It's up to you to figure out what you want and how to make it happen.
Have you figured out what you want out of your next phase in life?