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Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Monday, April 5, 2010

Are You Psychologically Prepared for Retirement?

As the baby boomers prepare for retirement, many worry about having the financial resources needed to live a comfortable lifestyle. The recent turmoil in the financial markets, the burst of the real estate bubble and the credit crisis have everyone unnerved. While there’s hope that the worst is behind us, many worry about the commercial real estate market, other global economies, the declining dollar and a possible double-dip recession. Traditionally, those nearing retirement have focused primarily on the financial aspects. In today’s chaotic economy, the emphasis on financial needs is probably even greater. Many are scrambling to recover from horrendous losses in the market.

Yet financial preparation, as important as it is, is but one aspect you need to plan for as retirement nears. According to an article published on the American Psychological Association (APA) web site: “You also have to plan in terms of developing other interests and making a gradual transition in terms of where you derive your self esteem.”

Nancy K. Schlossberg, EdD, author of Retire Smart, Retire Happy: Finding Your True Path in Life, published by the APA, says there are three basic areas of change at retirement:

1. Change in identity - when people retire, they often have to change how they define themselves.

2. Change in relationships – social interactions at work will be replaced with new relations outside of work. Your spouse may find it difficult having you around more. Close work friends may have years until retirement and be unable to spend time with you.

3. Change in Purpose – the office no longer needs you. You need to develop a new sense of worth through new activities.

You can see that you need to give serious thought to what you will do when you retire. Many retirees we know claim that now that they are retired they are so busy they wonder how they ever managed to get anything done around the home when they were still working. Yet others have few, if any hobbies. Their work is their life.
One of our clients recently expressed how she felt immediately after retiring. She said:
“I was like a fat lady who was let out of her girdle and couldn’t get it all back in.”

We all have known people who became ill soon after retiring and in some unfortunate instances have died. We wonder if this is caused, in some cases, by the combination of the drastic lifestyle change coupled with the added stress of no longer receiving a paycheck each week.

Before retiring, give some thought to what things you are passionate about. What have you always wanted to do but never had the time? Read some books or take a course or two in those areas of interest. Perhaps you’ll be able to start a business or work part time doing something you truly love to do. This will help you adjust to the loss of self esteem from your job and at the same time, perhaps, generate some extra income to lessen the worry about running out of money.

Give consideration to volunteer work and take the opportunity of having more time to lose a few pounds. According to the APA, “A balanced portfolio of activities is important –travel, hobbies, volunteer work, exercise, continuing education, are all activities that retirees find rewarding. “

Whatever you do, don’t wait until six weeks before retiring to plan for the non-financial aspects. With corporate buyouts so very common, a hobby you love just may become your next job when your employer suddenly downsizes and you are forced to retire early.

Note: We originally published this article back in June of 2008. We feel the issues are even more important today as more people have been forced into early retirement in an incredibly stressful environment. We updated it to reflect recent events and concerns.


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