There are numerous articles that discuss retirement (literally millions- try Googling the term). Unfortunately, the vast majority of them are only focused on the numbers- the financial side of retirement. These articles typically frame the topic in terms of the amount of money accumulated or a particular date- usually the date is an age such as 62 or 65. But there is also a non-financial side of retirement that also needs to be planned for.
In a recent report from the Alliance for Lifetime Income, one of the more interesting survey results reported that 91% of employed Americans age 61-65 expect to retire at a certain time based on meeting planned milestones (which I assume means a certain asset level or income in retirement). In other words, the combination of age, portfolio size, and certainty of income in retirement is driving the decision whether to retire.
As a retirement coach, what concerns me about this statistic is the percentage (91%) of people that are ready to “check out” at a predetermined time. Many people would probably make the decision to retire today if they had met these milestones. That is a bit frightening- particularly given that longevity is increasing- and knowing that people should be aware of the many things that can sabotage a retirement when it has not been planned out- particularly on the non-financial side.
Retirement doesn’t just work out because it is retirement! It might for some, but wouldn’t it be nice to have a vision of what this time can look like with a little planning? Wouldn’t it be better to decide what is important to you and how you want to spend this time doing things (both work and play) that are meaningful and connecting how your money will support this lifestyle in retirement?
The idea for this blog came from a recent article from Morningstar titled A Retirement Readiness Checklist. The article is part of Morningstar.com’s 2020 special report, “Are You Able to Retire?”– a great series of articles– but missing something important that could really help answer the question for retirement.
Again, to reiterate, the focus of these and many other articles says…if you do these financial steps, you can retire. But that provides only part of the answer.
What I believe is missing from these types of articles (yes, I understand that Morningstar is a financial/investment research firm and publishes this type of content) is an equally important discussion of the need to also plan for the NON-Financial aspects of retirement- the mental, physical, social, and spiritual– and how the money side of retirement supports each of our NON-Financial wants and needs- topics people have not thought of let alone planned for.
If the financial services industry only talks about the financial factors that make a retirement successful, people begin to believe and overlook the NON-Financial side (The Other Side of Retirement). They begin to believe retirement will just automatically work out to be happy, meaningful, and yes, successful, simply because we have accumulated a certain level of assets or have reached a certain age. This must be true if the financial advice industry is telling them this, right? WRONG. BOTH sides of retirement need to be planned for to have the clarity, confidence, and control- which leads to creating your ideal lifestyle in retirement.
Here is my NON-Financial checklist for retirement. Using both Morningstar’s checklist and my checklist as you plan your retirement transition will give you greater clarity for who you will be, what you will do, and how you will finance your ideal lifestyle in retirement. Combining both checklists will help ensure that you are ready for retirement.
A Retirement Readiness Checklist-For An Ideal Retirement Lifestyle
Determine Your Labor/Leisure Balance
Retirement, at least in its traditional form, tends to be thought of as a stopping point from work and transitioning into a life of leisure. Traditional retirement says we go from mostly work and little play to mostly play and little work. With increasing longevity, the new retirement is lasting much longer than previous generations. People, in general, are also living healthier and more actively during retirement than in the past. This allows people a longer time in retirement to finance as well as still having vitality- wanting to contribute in some meaningful way. The new retirement is more of a transition.
Consider your financial situation in retirement and decide if you need to work, if you want to work, and what you would like to do. Work can be for pay for what you do (working for a company), work for what you create (starting your own business), consulting, or volunteering. Also consider the amount of time you want to (or need to) work and how this fits with your leisure activities you want to pursue.
Also spend time mapping out your leisure activities- what will these include? Many people, for instance, intend to spend more time travelling. When and where will you travel may have an impact on what you can do for work.
Access and Attend to Your Physical Well-Being
If we know we might live longer in retirement and want to continue to be active and engaged, it only makes sense to look at our current health situation and what we need to attend to be able to participate in the labor and leisure activities we want to do in retirement.
What areas of your physical health need your attention? What might you need to see a doctor about to either monitor or make changes to? How does your diet and how might it need to change?
Access Your Mental Well-Being
This means three separate things. First, is how do look at retirement- do you have a positive or negative outlook on this time? Do you view it as a time where you can’t do the things you once did, or do you view it as a time to explore new interests and activities? Our mindset is extremely important during this transition. Positive is good, negative is bad!
An area that isn’t talked about enough is what happens when people lose their purpose and identity, don’t have something to look forward to (labor and leisure), don’t stay active, and lose their connections. Depression can creep in. Two of the more common ways we try to overcome this is by making expensive purchases (often related to housing or travel) or turning to alcohol or other things that mask our unhappiness.
Our mental well-being is also monitoring our ability to stay mentally sharp as we age. It includes looking for ways to continue to challenge our minds. Find activities or work that allow you to continue to exercise your mind.
Evaluate Your Values and Beliefs
Typically, our values and beliefs guide us in what we decide to do and how we decide to do it. Sometimes, we may not even be aware of our guiding values and beliefs. In retirement, we have more freedom to do or try different work and leisure activities. Identify your values and beliefs to help focus your time and energy in areas that are meaningful to you.
I will go into greater detail in a future post about how to identify your values and beliefs. Stay tuned! If you need something right now, send me an email reid@mylifesencore and I will provide some suggestions.
Determine Your Purpose and Identity
One of the most important things to do as you make this transition, is to figure out who you are now that you aren’t identified with your career. This is connected to Determine Your Labor/Leisure Balance above- the first one on the list. It relates to your decision about the labor part of the equation. What will you do and what do you want to be known for and devote your time to now that you may be doing something different? Who do you want to be and to stand for now that you have more freedom to decide what you want to focus your time and energy on?
Pay Attention to Your Connections
Having connections is one of the most important decisions to make during this transition. When we are involved in our full-time careers, much of our social interaction and human connection comes from those around us at work. When these are no longer part of our day-to-day lives, we need to fill this part of our lives with other connections. Do not be fooled into thinking that you will stay in contact with your former work colleagues. This happens very rarely from my experience working with clients.
This also takes us back to the labor/leisure equation that started the list. What we decide to do in terms of work and play in retirement often helps us fill in our connections- those personal connections that we need as human beings.
Consider Your Legacy
Simply put, what do you want to pass on to future generations that isn’t money? This can be your history, values, and important events that shaped your life. It can also be your industry or career specialty that can be passed on to your industry, company, or to younger people interested in your field. You can also pass on your expertise by sharing your passion and knowledge with another organization that is creating change in a particular field of knowledge or area of the world to make a difference. These are three of the main ones to get you thinking- you have a lot to contribute and pass on to make the world a better place.
Craft a Vision of What Your Ideal Lifestyle In Retirement Looks Like
The final piece of the checklist is to put each of these pieces together to create a vision for what your retirement will look like. The Morningstar author’s story of how her mother planned for a trip when she was younger is a great analogy story and excellent reminder. Think about how much time you have spent planning for a vacation or trip. People often spend more time planning their one-week vacations than they do their 30+ year retirement. Don’t make this same mistake.
By deciding where you are going, why you want to go there, what you will be doing (and how you want to spend your time), and who you will be sharing your trip with, reduces the anxiety, heightens the anticipation, and generally makes the trip much smoother. The vision created for the vacation usually plays out due to the planning involved. Same is true about planning for the non-financial aspects of retirement- the physical, mental, social, and spiritual.
The Morningstar article(s) offer(s) a great financial checklist for the financial side of retirement. This detailed planning also needs to also be done for these NON-Financial aspects of retirement.
Financial advisors can get a copy of my white paper, The Strategic Value of Helping Clients Plan Their Ideal Lifestyle In Retirement (Planning For the NON-Financial Aspects of Retirement In An Age of Longevity). I can help you add this service to your firm to differentiate your firm.