Preparing yourself for the financial changes of retirement

The Psychology of Retirement

by Gary Foreman

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You've been working for over 40 years and now you're approaching retirement. You have friends who have retired. Some seem happier than others, and you wonder what it will take for you to be happy in retirement.

To help us understand the psychology of retirement, we contacted Dave Grant. Not only is Dave a Certified Financial Planner, but also his background in psychology helps him guide his financial clients into retirement. Dave is the founder of Retirement Matters, Inc. in Barrington, IL.

Q: In your article on the psychology of retirement, you talk of phases of life. How does that apply to retirement? 

Mr. Grant: As a society, we've built up "retirement" to be this fixed thing that we're working towards. Everyone is told since the first day of their first job that they need to prepare for retirement, but no one is actually given in any education into what retirement is and how it's a very fluid part of life. When I've worked with clients who are retiring, they often feel like they're too young to be retiring. For others, all they can think about is the 40 years of the rest of their life that they now have to fund out of their retirement accounts. Retirement is just another phase like getting married and having children, sending your first child on their first day of school, or watching your children graduate. They're all very important moments in people's lives, but like retirement, they're just temporary milestones.

The Psychology of Retirement

Q: There was a time when 65 was considered retirement age. Today, there seems to be a range of ages for retirement. Has that made it harder to perform retirement planning for clients?

Mr. Grant: 65 has always been the age that's been pegged for retirement due to Social Security and Medicare benefits. Now people understand that they can save above-and-beyond what Social Security can provide, and as there are now health care options other than Medicare, it makes the retirement age more dynamic. It does add some challenges when the retirement age is younger than 65, but it's definitely not a game changer. One might have to find other options for healthcare or understand how you'll be living on your portfolio alone before being able to collect Social Security, but if these things are planned out well in advance, it doesn't typically cause much of a problem.

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Q: You write that you find some people fear that they'll never save enough for retirement no matter how much they have. Is there a way to address that fear?

Mr. Grant: The fear clients have of not having enough is one of the major challenges in my job. It's not one that's easy to reverse either given how deep in a person's psyche this fear runs. As I'm educated in psychology, I have some vague ideas about where these fears come from, but it requires a trained mental health professional to be able to influence someone's thoughts and emotions. While I can show someone numbers until I'm blue in the face about how successful their retirement will be, it typically doesn't make a difference if the problem is not the numbers themselves. The only way I know how to address it is to come at it from a numbers perspective, be the best listener I can be, and if the fear is paralyzing and causing inaction, then refer someone to a mental health professional.

Q: Many people identify with their careers. What can they do to re-identify once they retire?

Mr. Grant: This is typically a problem I see in men, as women typically have no problem moving on and filling their free time with what they want to do! However, for men or women who have trouble in losing their identity when they leave their jobs, I encourage them not to retire. If after a short period of time in retirement someone is really struggling with their self-identity, I encourage them to go back to work in at least a part-time capacity. If someone is working part-time, it has a number of positive effects. For one, there's extra income. Also, they get to keep a social circle around a common goal, there's a renewed sense of purpose, and while some time is spent working, there is also free time (but not too much) for someone to explore the person they want to become.

Expert Interview: Launching a Successful Part Time Business in Retirement without Jeopardizing Your Savings

Q: How long should it take to adjust to retirement?

Mr. Grant: How long is a piece of string? All joking aside, it can take some people more than a year to adjust to their new pace of life and the fact that they have to design this new phase. For most people, they've been working for 40 years, so to expect someone to reverse their way of life and be okay with it within a matter of months may not be realistic. I also encourage people to change things slowly as they're adjusting to retirement. The fact of not working at all is a big shock to the system, so picking up five hobbies in the first month and trying to become an expert is a road to frustration.

Related: Your Strengths Don't Retire When You Do

Q: You advocate that the newly retired create a bucket list and pursue those goals. How important is that? And, why do you feel it's important? 

Mr. Grant: There's so much emotion around the transition to retirement that when you're finally in it and the transition has been made, you need to blow off some steam. For that reason, I encourage people to list a number of important things they want to accomplish within the first 12 to 24 months of retirement. By having some initial extravagant travel goals or purchasing a second home and spending time exploring a new area, it can alleviate some of the nervousness that people may be feeling when going into the retirement phase. I had one client who had a bucket list of five places she wanted to travel in her first year. When we sat down 12 months later and had a long conversation, those five places had become 12. She was excited that she got to see so many things and was also happy that she got to see these places before any health issues prevented her. We plan our whole lives for retirement. Therefore, when we actually get there, doesn't it make sense to have a prolonged celebration?

Reviewed March 2018

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Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. Gary is available for audio, video or print interviews. For more info see his media page.

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