As a financial adviser, I regularly encounter people who believe they are still several years away from retirement. They are shocked when, after a careful review of their accounts, I tell them that they have sufficient funds to retire today. It’s a privilege to be able to inform a client who has spent a lifetime working to reach this moment that it has arrived. I tell them, “You did it. You won.”
However, just because you’re financially ready to retire doesn’t mean you’re mentally ready. People who have spent their entire lives accumulating wealth have also spent their whole lives training a mindset associated with frugality. How is someone who has scrimped and saved for four or five decades going to change the way they view and utilize their assets?
It is a difficult transition into a different mindset and lifestyle, and a process that takes no less time and effort to execute properly than when one was saving money.
To make the leap, focus on your goals
The most difficult mental adjustment for clients who are ready to retire is from thinking far in the future to thinking of themselves in the present. The first—and perhaps most important—question for them to ask themselves is: “What have you always wanted to do?” An even better question might be, “What drove you to work so hard, and for so long?”
For those who are unsure of what is next after retirement, I discuss their options and opportunities early on in their planning process to help clients develop a clearer vision of what is next for them. I’ve found that showing clients where their income is coming from in retirement is useful for people to understand how to finance a life that no longer involves working.
Even though new retirees may have had to abate their more luxurious desires during decades of work, many will have a very clear vision of why they did so. Perhaps to support their family, to pay off their house or to fund their children's college tuition.
Simply verbalizing these essential goals and realizing that they have now accomplished them tends to lift their burden of responsibility, allowing them to begin accepting the idea that their work might be finished and to establish a life outside of that.
From work to retirement
Now, of course, the decision whether to further pursue one’s career can be quite personal. However, if they feel as if they would like to retire at this time, that is another mindset shift they will need to make.
After decades of pursuing a career, it can feel intimidating to stop working altogether. If this feeling is especially daunting to someone who derives a lot of their identity from their careers, I would recommend taking a more gradual separation from working full-time. Opportunities to incorporate part of this work identity could be working part-time or volunteering.
Another option is encouraging a client to mentally shift their work-life balance attitude in advance to focus more on hobbies, family or travel, which helps them to more positively accept retirement. Everyone needs to get in the mindset that life doesn’t stop when you retire.
Becoming spenders rather than savers
People also encounter other mental transitions when they enter retirement—becoming a spender after always trying to save their income. Although a retiree is not receiving a paycheck from an employer anymore, I like to re-create a paycheck in a way for my clients from existing assets. That goes a long way psychologically. This flow of income should be spent, too.
For clients who were so set on saving, I advocate for them to spend more than they previously would be comfortable with because they worked hard to get to retirement. Once a new budget is established, I recommend they spend in their new means, because people deserve to enjoy their retirement.
Enjoy retirement... but not too much
Once a client has accepted that they no longer need to worry about essential responsibilities that previously drove them to continue working, it is important for them to discover what they would like to have or like to do going forward.
Perhaps after retirement, they always wanted a particular car, better clothing, a house expansion or even a second home in a nicer area with better weather. It is time to set these plans in motion to ensure that they live the happy life they had always envisioned for themselves and the one they worked so hard for.
More importantly, clients must understand that their “job” now is to ensure the prudent and enjoyable use of their accumulated funds.
A helping hand at the finish line
A financial adviser is not meant to just serve as a wealth of information for clients interested in improving their financial future. On the most rudimentary level, an adviser is a human being trying to help other human beings to become happy and prosper in the world through financial guidance.
Retirees who navigate this journey, especially those who cross the finish line called retirement, know the importance of getting help along the way. By working with a trusted adviser, retirees can deviate from a mindset of "going without" to connecting with their deepest wants and desires.
In this way, they can finally begin to live the retirement lifestyle they’ve always imagined.
Jeff Bush is an investment adviser representatives of, and securities and advisory services are offered through, USA Financial Securities Corp., Member FINRA/SIPC. www.finra.org A Registered Investment Adviser located at 6020 E. Fulton St., Ada, MI 49301. Informed Family Financial Services is not affiliated with USA Financial Securities.
Jeffrey E. Bush is the Managing Partner and Chief Operating Officer of Informed Family Financial Services and has been dedicated to providing high-quality service to his clients since 1994. Jeff received his MBA in Finance from St. Joseph's University and graduated magna cum laude from Alvernia University majoring in Business Management. He holds professional licenses, which include Series 6, 7, 63, and 65.
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