The Psychology of Retirement

| June 05, 2014
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By Michael Leanza, CFP®

It is all too often that pre-retirees focus solely on the financial aspects leading up to retirement rather than the emotional impact of leaving the work force. There is no doubt that proper financial planning is needed to reach your retirement goals, however, preparing for the emotional change is also important. Here are a few things to consider if you’re planning to retire in the near future (or even the not-so-near future!):


•         Set goals and milestones to help utilize your newly found free time

Retiring from the work force can cause you to lose a sense of identity. The professional achievements and relationship building of a successful career can be difficult to leave behind. There is also a sense of “worth” that can be associated with having a job.  


•         Strive for a balance of time spent with your spouse 

It’s likely you’ll spend more time together during retirement. For some couples, this “togetherness” will be a welcome change to the fast-paced life of work and raising children. For other couples, it will be difficult to have so much “togetherness” and to lose some of the independence once enjoyed as a working individual.  Maintain your separate interests, friendships and personal passions while enjoying the time you have together.


•         Choose the right financial plan for you and your family

As you approach retirement, you’ll be asked to make financial decisions that will affect you for the rest of your life. Deciding between the potential “comfort” of a guaranteed pension or annuity vs. the potential “growth” of an individually managed IRA will have a profound impact for you and your family.


•         Become comfortable with drawing down on retirement balances, rather than contributing funds

Retirement often leaves clients with large account balances through an employer 401(k) or lump sum pension payout. The performance of your “nest egg” during the first six to twelve months becomes a barometer for your investing appetite during retirement. It is crucial to balance risk and volatility against long term growth by discussing such funds with your financial advisor.  Developing a plan is crucial to having “peace of mind” when your retirement day comes.

Even the most financially prepared clients can find themselves ill equipped to handle the psychological changes of retirement. In many ways, you are entering a second phase of life that while very different from your previous working years, still offers the prospect of being very rewarding. Talking about these issues with your family, friends, and trusted financial professionals can go a long way in preparing you mentally for the retirement you’ve worked so long to enjoy.


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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  No strategy can assure a profit or protect from loss.

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