I believe I have written about this topic before, but with the amount of conversations I have been having with many clients and friends on this same subject over the last 12 months, it feels appropriate to raise it again.
Retirement usually involves one or a combination of the following:
- Sale or transfer of a business asset;
- Sale or transfer of a property asset;
- A significant influx of cash proceeds;
- A significant reduction in working hours.
The general perception of retirement from all the marketing and advertising material you see is retirees spend the rest of the years playing golf, bowls, fishing, travelling overseas, caravanning, smiling and laughing and visiting their financial planner regularly for a coffee (whilst still smiling and laughing!) to review their investments.
Whilst this may be true for some, the reality is retirement can be very different and very difficult!
Early Retirement – The Afterglow!
It is a natural human emotion to have feelings of relief, elation, even triumph when successfully managing the sale or transfer of a significant asset or reaching the end of your working life. In many instances this event represents 4 or 5 decades of dedication, toil, stress, blood, sweat & tears so it is no surprise for the next few months the new retiree is on a natural “high”. They may now be debt free, have money in the bank they never thought possible, have so much spare time to do all of things they have dreamed about doing for the last 20 years. The overseas holiday is planned, the new golf clubs purchased and you never have to work again. Life just could not be better!
Next Stage Retirement – The Challenges!
It is common for us to see some clients experience a sense of loss, sometimes grief after the initial novelty of retirement has worn off. For many there is a significant change in lifestyle and this adjustment is the most challenging to deal with. Some examples of these challenges include:
- Loss of self-esteem – having gone from a work pattern where something is achieved each day, with tasks continually crossed off as they are completed, retirees can lose their sense of identity. Without these challenging tasks to complete, there is no sense of regular achievement. I have some clients who simply cannot retire completely, which is great. They need to be working in some capacity each day as this why they get out of bed;
- Massive lifestyle change – for many a full time working life could mean anything from 40 – 80 hours per week where they are “switched on” thinking about their role as an employee or business owner. This involves making decisions every hour which will impact the success of the business they work in and may also have an effect on their income. Once retired, this decision making routine has now disappeared. You would think this could only be a good thing, but for many this leaves a huge void, as they have been “wired” into this pattern of thinking for so many years. In many cases it is better for the process of retirement to be a gradual scaling down of workload over many years.
- Couples now spending so much time together – for some, this is what they have aimed for in retirement, to spend more time together. But if you have spent 50 years of your life working separately (eg saying goodbye to each other in the morning and not seeing each other until the evening meal each day) then spending every hour together every day is not always easy;
- Relocation – a typical example is we have many farmers who have lived in the same house they grew up in as a child. Moving to town into the house of their dreams sounds unbelievable, but if you’ve been used to endless space on the farm and you now move into a 600 square metre block where you can see into your neighbours kitchen from your house, this can be very confronting. It may also require introducing yourself to a new community, which can be difficult. Your existing community, where you have moved from, is often your “safety blanket” as you have achieved a strong sense of familiarity with so many close friends over a long period of time.
How to try and address these issues
When clients talk to us about winding down their business or working life, which may involve ceasing work completely, in the majority of cases their initial need for advice is around managing the tax consequences of these transactions and making sure they have enough money to live on for the rest of their life. In the majority of cases these issues can be addressed.
But it is also important to ask the following questions:
- What are you going to do with your time?
- Have you got something that will give you that regular sense of satisfaction, achievement, maybe even a small amount of stress which will motivate you to get out of bed every day?
- Will you be in each other’s way now that you have more time to spend together?
- Is it still important to you to stay involved in your business or area of employment.
For some retirees they will be satisfied fishing, golfing, bowling, travelling, volunteering and spending time with the family each day – which is great. This is what the brochures tell you retirement is.
But for others retirement is different. The challenge is to recognise what you want your retirement days to look like (aside from the money) prior to the big event happening which will hopefully make retirement easier to deal with.