Reaching retirement can feel like crossing the finish line at the end of a 30-, 40- or even 50-year-long marathon. Retirees are so used to running the race that when they get to the finish line, it can take a while to adjust. There is much to look forward to in retirement. No alarm clocks, endless vacation days, and all the rest and relaxation you desire.
But making the switch from regular employment based income to getting income from your investment accounts is a MASSIVE switch. And making that switch can be harder than we realize.
If you’re retired (or nearing retirement), you’ve dealt with many changes around money and work. What cost a nickel when you were a kid now costs way more due to inflation. The economy has moved from manufactured based to more information/service based. Technology has changed everything. And with the exceptions of public-sector jobs, pensions are virtually a thing of the past, which has put saving for retirement squarely on YOUR shoulders.
Things have changed greatly over the course of your working years. How you think about money has probably changed along with it. The only constant is change, so those economic and technological factors are guaranteed to continue to change our relationship with money and work into the future.
So, yes, how you think about money is very likely to change when you decide to retire.
How to Mentally Prepare for Retirement Before and After
Before: You used to ask yourself if you were saving enough money.
After: You’ll ask yourself if what you have saved will last.
Before: You used to set retirement savings goals.
After: What you spend matters more than what you save.
Before: You used to optimize your portfolio to reflect your growth needs and risk capacity.
After: You still should do that. But a likely downshift has probably occurred in your risk tolerance.
Before: You (probably) used to work full-time for your primary source of income.
After: Your investment are most likely your primary source of income.
When you think about it, suddenly moving from working 40 hours a week to zero can be a real shock to your system. Although it may sound great in theory, the truth is that we’re creatures of habit—and we don’t always react well to quick and dramatic changes.
Some employers will allow you to ease into retirement by gradually shortening your workweek over a year or a couple of years. This can be a great way to get your toes wet before diving right into full retirement. Use your days off to discover new hobbies, start volunteering, meet with friends and begin developing a new routine you can expand on throughout retirement.
There is also a bit of a misnomer that happens during retirement planning. You should plan for the next 30-40 years of your life after you stop working. But just because you make a plan, doesn’t mean you can’t make course corrections along the way. Ease into it. Figure out what works. And what doesn’t work.
The first few years of your retirement are likely to look much different than the last couple. Your retirement plan should not be a set and forget type thing.
The point of this post isn’t to scare you into not spending during retirement. You should spend as you please, within reason. You worked hard to get to this point and should enjoy it! But things will change. And how you view money is likely to be one of them.
How you view your assets and expenses will change from your working years to your retirement days. Knowing that this shift will occur is the first step in preparing to live with this retirement reality. Thinking about money differently is a feature, not a bug of retirement.