For many of our clients, early retirement may sound like a dream come true. But early
retirement may not be as simple as it seems. Not only do you have to consider the
financial cost of early retirement, you also need to determine if you are emotionally ready
to retire.
The transition from a structured to an unstructured lifestyle can be unnerving if you are not
prepared. When our clients retire, they often feel as if they are on vacation for the first
month or so. After that, the realization that they are not returning to work may cause
anxiety. However, the process of adjusting can be far less stressful if you establish a plan
well in advance.
An Emotional Plan for Retirement
A plan should be created long before you decide to retire. You should decide what is
most important for your retirement - leisure time, volunteer work, establishing a legacy? In
addition, have you established a plan for both the financial and non-financial aspects of
retirement?
Here are some key issues to consider for retirement.
Set Lifestyle Goals
Make a list of 10 things you would love to do if you could afford to retire. Next, write down
how much time you currently spend on these activities. More than likely, you have a
retirement dream that includes a lot of exciting pursuits. But if you are not pursuing these
activities now, what makes you think retirement will change this? According to the
experts, most people make the time to do the things they love no matter how busy they
are. As a result, consider how realistic your retirement pursuits are and just how much
they mean to you.
If you have spent the last 20 or 30 years of your life being a workaholic, determine how
you can best use the energy you put into your career into your retirement activities. This
may help you offset feelings of boredom or uselessness.
Build a Network
Studies show that a person may spend as many as 30 to 40 years in the retirement stage
of life. As a result, it is vital that you have a good support system for this next phase of
your life. Make time to socialize with your friends. In addition, talk to friends and
colleagues who have already made this transition to find out what activities they have
found enjoyable and how the adjustment process was for them.
Consider Your Spouse’s Feelings
Retirement may also be an adjustment for the spouse who is either continuing to work or
already staying home. Talk with your spouse candidly to see if they have the same ideas
as you do about what will happen during your retirement years. It is quite common for
only one person in the marriage to retire early. This may cause some uneasiness for the
person retiring or the one staying in the work force. For example, the working spouse may
expect the retired spouse to be responsible for more of the household chores. Or, the
working spouse may resent the freedom the retired spouse has. According to a Cornell
University study, friction is most common when the husband retires before the wife retires.
To ensure your piece of mind, as well as your spouse s, work together and establish a
game plan that makes you both happy.
Love Your Dream.
Consider pursuing things you have always wanted to do, but never had the time to really
enjoy. A retired executive I know always wanted to learn carpentry because his father
was a carpenter. Now, he volunteers building houses at Habitat for Humanity. Perhaps
your goals include gardening, exercising, playing with your grandchildren, learning to play
a musical instrument, or taking a class or two at a community college.
Your Financial Needs
With the help of a financial planner, determine whether or not you have the financial
means to retire early. Your Social Security payment is based on the average of your
highest 35 years of earnings, adjusted for inflation. So, if you retire too early, some of
those 35 years will be computed as zero. In addition, the full retirement age of 65 for
Social Security benefits applies to those born in 1937 or earlier. If you were born after
1937, your full retirement age moves up on a graduated scale. For example, the full
retirement age for people born in 1960 and later is currently 67 years of age. Regardless of your retirement age, you can start collecting Social Security at age 62, although your
benefit is reduced five-ninths of 1 percent for every month you are younger than 65.
Another financial consideration to address is health care benefits. Make sure you check
with your current employer to see how long your medical insurance will last. You may
have a gap between your medical insurance and the time Medicare kicks in at age 65.
Rising health care costs can make considerable dents in your overall budget if you are not
prepared for them.
Consider Another Option
Have you considered semi-retirement? Working part-time or part of the year may provide
the financial stability you need while removing some of the undue stress in your life. For
many of our clients, this option provides a great transition into full retirement.