You may find it hard to believe but retirement can mess with your mind. The transition out of working life to our hard-won retirement freedom can be a bumpy ride. We leave behind the only life we have known where we earn income through working and save for our retirement future. We set into motion our plan for this milestone, pull the trigger, and all of a sudden everything changes. Here are 4 Must Dos for Making the Transition from Work to Retirement to maximize your chances for a smoother path to early retirement bliss.
Maximizing Your Chances for a Smooth Transition from Work to Retirement
#1- Establish your retirement income plan before you retire
If you are retiring with a Pension and/or Social Security and it covers all of your expenses then your income plan is for the most part covered. But many folks retire needing more income than even their Pension and/or Social Security will provide. Then there are others like me who retire earlier than Social Security age and without having a monthly pension check. Creating a retirement income plan from our portfolio is a very important part of our transition from work to retirement.
Figure Out Your Portfolio Withdrawal Strategy
There are many ways to handle this. First off, depending on your portfolio and your age at retirement, you may have retirement account early withdrawal penalty rules to work around.
If your portfolio generates enough passive income in dividends and interest then you have an easy target for harvesting retirement income. If you don’t and will need to occasionally sell assets to meet your income needs then develop your portfolio rebalancing strategy to know which assets to sell.
All of this should be done within the safe withdrawal rate guidelines. For example there is the 4% safe withdrawal strategy and Bucket strategies to consider. This may be an area where you want to consider getting professional advice.
Address Your Budgetary Income Needs
When you were working you probably received a paycheck at specific intervals. Your bills are going to continue arriving just as they always did and with the same due dates. Decide how you want to receive your portfolio income. Will it be easy to handle your retirement lifestyle budget getting a monthly transfer? Perhaps you prefer a quarterly transfer.
I was used to getting paid on the 1rst and 15th of the month when I was a working stiff. But my retirement funds are distributed once a month on the 23rd into my Credit Union Savings Account. At first it was hard for me to easily handle my budget, at least in my head. I unnecessarily restricted my spending early in the monthly distribution period.
To allow myself to live my budgeted and planned early retirement lifestyle I decided to transfer ½ on the first and the other half on the 15th from my savings account to my checking account. It was a simple mind trick.
Now that I am a fully transitioned and experienced retiree I just transfer to my checking account once a month for the amount needed. I still have a budget but I now know that some months will come in below and some above. But by keeping spending discipline throughout the year the budget stays intact. Decide how you want to receive your portfolio retirement income.
#2- Wrap your mind around going from saver to spender
The transition from being a saver to spender of the portfolio messed with me and most everyone else I know who have retired. After years of adding to our portfolio along with reinvested interest and dividends we see the opposite occur. Seeing a monthly subtraction on our statement for our retirement lifestyle funding can and will mess with a retiree’s mind.
Expect the saver to spender mental challenges
This had never crossed my mind before I retired the first time. I was surprised by these feelings. My initial reaction was that I needed to pull back on my budget even though it was all planned out. My lifestyle budget was fine-tuned over many years and the retirement calculator results were all good.
When logic and calculations fail to relieve our saver-to-spender financial funk then find peace of mind through affirmation. I just repeated to myself that this is what the portfolio is for. It is only a tool created to be used for just this purpose.
Give yourself time to adjust your mindset
Nothing happens overnight. The journey to retirement took many years to accomplish. We have to give ourselves some time to adjust our thinking. It took me about 4 or 5 months before I was able to start developing a long-term retirement spending mindset within my portfolio.
Mentally ditching the working life and saver mentality is a gradual progression. Just stick to your retirement lifestyle budget and long-term portfolio investment and income strategy. And of course, enjoy your retirement.
#3- Know and embrace what you are retiring to
The celebrating of your retirement will only last for a short period of time. At least relative to how long you will be retired.
It is then that you understand that for retirement happiness it’s not about what you are retiring from but what you are retiring to which matters most.
Before retiring or at least very shortly afterward look at what it is you want to do with your time. Think about hobbies, volunteering, sports, part-time work, encore career, starting a business, travel, improving our health, and any other kind of retirement projects. Consider including things that push you outside of your comfort zone to add excitement and learning.
Protect your mental health by creating a retirement activity schedule
Nothing causes more retiree anxiety and unhappiness than retiring into a void. There is only so much day-time TV, boredom, and loneliness a person can tolerate. Anxiety is common to many who retire. Much of this can be alleviated by doing what we all have done for many years. That is our having a schedule. But this schedule isn’t dictated by some job or boss. It is ours.
By setting a schedule or list of activities and things we want to accomplish we have a way to feel productive and purposeful in our retirement.
Even if we don’t have much to plug into it, having some structure helps our brain cope with our transition from work to retirement. Freedom takes some getting used to after decades of working.
My schedule isn’t a hard schedule. It is just a list of goals for the day and the week that I want to accomplish and for some they’re to cross off from my overall retirement bucket list. It isn’t precise scheduled activity either. There is room for spontaneity and variety. None of it is carved into stone.
Use a schedule to transition your brain until it readjusts to a freedom lifestyle.
Let go of your work identity and embrace your retirement identity
Many people will feel a loss of identity once they retire. It stands to reason that after years of thinking of ourselves as our career or title that there will be a feeling of something missing. That is why it’s important to understand and embrace what you are retiring to.
Making the transition from work to retirement is much easier when we can let go of our past identity and those efforts should start before we retire. There will still be some feelings of identity loss but this is another mental progression over time.
Figure out what you are retiring to and proudly identify with it. Retirement is the all-time best opportunity for us to reinvent ourselves. Reinvention is changing something to be better. Figure out what it is you are looking forward to becoming. Identify yourself as your better reinvented version of you.
#4- Inventory your friends and social life before retiring
Retirement happiness is easier to have when we have a robust social life. It is important to sit down and list the people who we consider as those we are closest to.
- Who do you want to be part of your retirement life?
- Look at how many of these friends are work related.
- How many friends do you have outside of the work you did?
- Also look at those folks you may not want to be part of your retirement life. Most of us have someone who we tolerate in our social circle but could use some space from in our retirement.
It is also important to identify all of your non-work related social activities. Will you have easy opportunity to meet with people you enjoy? Will there need to be a plan to expand your social circle?
Work to keep relationships with people you enjoy from your old work life
When we spend so much of our lives on the job it should be no surprise that most of our friends are work related. But what started these friendships may be the bond of our shared labor through both accomplishment and workplace misery.
It is far easier to keep these friendships when you are on the job. Once we retire it will require an extra effort to keep these friends close. Always remember that they are still in the grind. If that grind is our only common bond then you will feel as an outsider soon after retirement.
Many of my friends who are still on the job have slowly become less close over the years since my retiring. I didn’t feel comfortable when all the talk turned to work. I didn’t want to hear about all the corporate BS and I didn’t feel they wanted to hear about how glorious retirement life is. It was then that I realized we only had the job as our connecting bond.
Others have however stayed in my social circle. That is because we share outside interests.
Look at your working relationships to understand your work related friendship bonds and what it might take to keep them as close friends.
Make new friends in your retirement
Friends within your social circle outside of work should still be your friends after retirement. In fact you will have more time to be an even better friend. However if your social circle is limited or you just wish to expand it, then you should find a way to meet new people and make new friends.
Always be open to people. You never know who may be someone you really want to get to know and begin a friendship. Look at places you enjoy going where you will meet other friendly people. Places you may frequent like the gym, church, coffee shop, volunteer activities, clubs, etc. are logical places to start expanding your social circle.
When I first retired I had few friends outside of work. But it only took a little concentrated effort to make many new friends in the town I live in.
Most of us concentrate on all the financial aspects of retirement while we are still in the working world. From saving enough to retire to how we will handle our health insurance.
Retirement is a major life changing event. Making the Transition from Work to Retirement can be a lot easier by considering the above retirement must dos.