“Have I saved enough? How much money am I going to need? Living annuity or life annuity?” When facing retirement, these are the types of questions one typically has on their mind -and rightly so. With only 6% of South Africans able to retire comfortably, making sure that you have sufficient financial resources is of prime importance. However, as research shows, a successful retirement is not only down to the pennies in your pocket: it also requires a stockpile of emotional reserves.
This is because, despite the stereotype of retirement as a time of relaxation, the reality is that it also presents people with a number of significant adjustment challenges. These challenges are not only financial, but social, psychological, and emotional, and affect those facing retirement as well as their families.
The good news is that it is possible to live one’s retirement by design, rather than default, given the right mental preparation. With that in mind, here are some of the important questions that are useful to consider as part of a holistic planning process:
1. How do I really feel about retirement?
While this might be so obvious as to seem stupid, the fact is that few people actually explore the question of emotional adjustment. Like with all life stages, most people automatically assume that their personal experience will more or less mirror societal norms. For instance, the normative portrayal of young adulthood is a time of independence and upward mobility (think TV shows like ‘Friends’ where the young and underemployed can magically afford prime New York real estate). Hence, many young adults have expectations in line with these imaged. However, the reality is often far from this truth, with a significant portion of young people finding themselves overwhelmed and unprepared for life’s harsher realities (like unpaid internships and skyrocketing rental prices). And it’s this disconnect between expectation and reality that can cause stress.
Likewise, most retirees focus on an idealised image of retirement in which they are happy and fulfilled. The problem then is that when perfectly normal feelings such as isolation, boredom, even regret creep in, such feelings are experienced as overwhelming or a sign of failure. And instead of dealing with them openly, people cast these ‘taboo’ feelings aside, causing a persistent sense of unease in daily life. These feelings may also distort their perception of reality, and motivate them to make poor financial decisions.
A good way to prepare for these feelings is to acknowledge well in advance that responses to retirement are both individual and complex. Write up a list of anticipated positives and negatives and discuss them with family or friends. That way, you can plan ahead for potential challenges, and have a strategy for dealing with discomfort if it happens to arise.
2. How will I adjust to less time away from home during the day?
While many people look forward to increased time with loved ones, most are well accustomed to a daily routine in which they spend a significant portion of their time away from family members at home. And even though most find this transition from less family time to more positive initially, as time goes on many find that independent activities become increasingly important to maintain a sense of individuality, and preserve the healthy boundaries between personal time and family time.
3. What will define me instead of my career?
Even if one’s work isn’t of the vocational variety, most people are identified by their career. For example, a teacher’s identity might be linked to their role as an authority figure and mentor, and when they retire they might feel invisible or diminished in those aspects of themselves. A good way to address this is to think about what your career means to you in terms of your personal roles and identity, and think of alternative means of expressing these aspects of yourself. For example, the teacher could become involved in a community group in which they contribute their skills and knowledge, or take a more active mentoring role in their grand-children’s lives.
4. What will be my new sources of social interaction?
For many people, a large portion of their daily social contact happens in the workplace. While colleagues may not be as close as bosom buddies or family members, these daily interactions can be beneficial in ways we don’t realise until they are gone.
If you are person who enjoys the social aspects of your work, a good way to deal with this transition is to join groups or clubs prior to your retirement, so that you can have a social network outside of the office and family. Even if you ultimately decide that being a homebody is more for you, you will still have the option for social interaction during your adjustment phase.
5. How do my feelings affect my finances?
It’s no revelation that money is emotional, and everyone has deeply-held and often subconscious beliefs about it. While we may experience our financial decisions as logical or rational, the truth is that we are more motivated by our feelings than we think.
An example of this would be portfolio selection. As a retiree with 20 or 30 years to live, you would be a long-term investor. You would thus be suited to a high equity portfolio that would maximise your long-term return. However, because high equity comes with short-term volatility, a person who is fearful or insecure might opt for a low equity portfolio due to the fact that it has less volatility. And while their mind may be put at ease by doing so, they have in effect compromised optimum investment outcomes in the process, because despite the decreased volatility, low equity also provides lower and slower growth.
The bottom line
Retirement is a time of major change that affects almost every aspect of our lives. In order to enter this new phase well prepared, a holistic planning process is required in which we evaluate both our material and psychological resources. The most important outcome of this planning process is to be able to identify the relationship between our emotions and our decisions, and to assess whether our actions are indeed in our best interests, or simply just reactions to our changing circumstances.
Don’t let unmanaged emotions get in the way of the retirement you deserve. Start your plan today with one of 10X’s Retirement Experts, for an objective take on your financial future.
Put me in touch with a 10X Retirement Expert
