Retirement! What Now?
When we meet with clients to discuss their financial picture, our conversations naturally gravitate toward tax-focused financial planning, portfolio performance, and market trends. It’s easy to focus primarily on the mechanics of retirement. However, the numbers tend to only tell us part of the story. Achieving a successful retirement transition depends as much on intentionally planning how to spend your time as it does on managing your money.
The Problem
A recent Kiplinger article introduced the Rule of 1,000 Hours1, which disputes the idea that retirement is an endless, carefree weekend. The Bureau of Labor Statistics’ American Time Use Survey shows that the average adult has about five hours of leisure time each day, totaling roughly 1,800 hours annually1. Yet, that leisure isn’t always high quality. The data clearly shows that the average American watches nearly three hours of daily TV daily, while retirees spend over four hours1. This is how we get from 1,800 hours of annual free time down to 1,000; without the routines, social interactions, and mental engagement that work offers, retirees often fall into a psychological trap called, “future time slack”. This is simply the mistaken belief that there will always be plenty of time ahead of us. But in fact, we have roughly 1,000 hours per year of truly discretionary time that can be purposefully spent on passions, travel, volunteering, or learning new skills.
The main issue is that pre-retirees often expect this transition to be easy, but the reality is that the sudden loss of work-related structure makes this major life milestone quite challenging to navigate. Yes, retirement means no longer making money in the traditional sense, but, just as importantly, retirees are also losing their built-in structures and routines they’ve become so accustomed to. According to the Retirement Coaches Association, 51% of retirees say it takes more than a year to settle into their new lifestyle, and 76% have seen a peer struggle with the change2. This tells us that proactively addressing the non-financial aspects of retirement (instead of simply reacting to them) is just as important as the money in their retirement account.
To add more fuel to the fire, psychological research shows that having excessive free time isn’t necessarily advantageous. According to a study by the American Psychological Association, human well-being peaks at around two hours of free time daily and declines when that time exceeds five hours. The new-found lack of structure experienced by retirees partly explains why 45% of retirees who re-enter the workforce do so mainly for social and emotional reasons, not financial necessity3. To put it bluntly: too much unstructured free time can diminish a retiree’s overall well-being.
This information isn’t intended to strike fear in the hearts of retirees or those nearing retirement, but rather to emphasize the importance of proactively planning for retirement.
The Solution
The good news (yes, there is good news) is that a solution exists. To address the leisurely elephant in the room, we recommend proactive lifestyle planning to make sure your 1,000 hours are used purposefully. Below are practical questions you should work through before filing those final retirement papers.
Identify your Identity
No matter how hard we try, many times what we do becomes who we are. For example, if you are an accountant, you’ve most likely built your life around being an accountant. You’ve marketed yourself as such, invested time and resources in your business, and it’s become a key part of who you are. When you retire, that identity is thrown out the window. Combat this by building a purpose statement for yourself and then align what your retirement will look like with that purpose statement top-of-mind.
Discover your Passions
If you were told you had a year to live, what would you fill that year with? What do you love to do? What do you do that makes you lose track of time? Maybe it’s music, maybe it’s painting, or maybe it’s finally putting those dusty power tools to use. Whatever it is, work hard to find a community related to that passion, and join in the fun.
Leverage your Knowledge
During retirement, many people are drawn to finding purpose in something bigger than themselves. Just because someone retires doesn’t mean they have nothing left to offer; in fact, it’s usually the opposite. They can offer their knowledge and services towards a church, a non-profit, or a part-time work they believe in. Most retirees have a lifetime of experience and knowledge that they bring to the table, and volunteers usually get more from the experience than the people or causes they serve. Ask yourself, where can you give back?
Invest in your Relationships
When you take a job, you rarely get to choose who you’re spending 40+ hours a week with. In retirement, that choice is yours. Truly investing in relationships means being part of a network of people with common interests, and build a bridge for two-way traffic. Research suggests there are real health risks for those with low social interaction. Ask yourself, who are the people you have, and can continue to have, a healthy relationship with? How will you find (and keep!) those relationships through retirement?
Exercise your Brain
The workplace is an area where intellectual stimulation comes naturally, but when retirees lose that outlet, they need to find new and different ways to keep their brain active. Keep your mind sharp and active, whether it’s through learning a new hobby, getting involved with volunteer work, traveling, or doing puzzles. Whatever it may be, work hard to constantly stimulate your brain.
Exercise your Body
We have talked about building and maintaining healthy attitudes, healthy relationships, and healthy brains, but we can’t forget about our bodies. When the alarm clock gets ceremoniously unplugged in retirement, we lose one of the catalysts that truly get us up and moving. Determine which forms of exercise you enjoy and decide how you will incorporate them into retirement.
Take a Team Approach
Bring your spouse into the conversation. How do they view retirement for you two? This is especially important when one spouse retires and the other remains in the workforce. What are you giving up as a couple when those natural networks and events are no longer on your calendar? What will you two do together and what things will you do separately? And don’t be afraid to ask the hard question: do you two want to be around each other 24/7? Make sure you’re on the same page going into retirement.
Identify the Structural Changes
Retirees are naturally embarking on major life changes. What things do you want to start doing, and just as importantly, what things do you want to stop doing? What parts of your life do you not want to give up? Give this some real thought, be honest with yourself, and don’t be afraid to take a trial run. If your retirement plans include golfing every day, take a week away and play every day. You’ll learn pretty quickly if it’s something that will truly meet your needs when your calendar clears up.
Final Thoughts
Retirement is supposed to be enjoyable, but discovering your life’s purpose outside of work is often more difficult than people expect. We encourage you to thoughtfully consider these lifestyle questions to cover as many bases as possible.
Transitioning into retirement means leaving behind a routine you have known for decades, and it’s perfectly normal to feel a sense of loss or uncertainty when that structure is removed. Retirement is sold as a reward for a lifetime of hard work, but finding your footing and establishing a new identity takes deliberate effort.
Our goal is to ensure you are fully prepared for both the financial and personal realities of life after work. We encourage you to spend time reflecting on these questions with your family.
Please reach out to us if you would like a copy of the retirement readiness worksheet we use with our clients. We would be happy to walk through these concepts with you to ensure your financial plan supports the lifestyle you intend to build.
Sources
https://www.kiplinger.com/retirement/happy-retirement/the-rule-of-1-000-hours-in-retirement
Questions from, “Your Complete Guide to a Successful & Secure Retirement” by Larry Swedroe and Kevin Grogan
Disclosures
Investment advisory services offered through Elevate Wealth Management, LLC, a registered investment advisor. The firm’s ADV Brochure and Form CRS are available, at no charge, by request at information@elevateasset.com or 307.461.5550 and are available on our website www.elevateasset.com. They include important disclosures and should be read carefully.
This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for accounting, legal, investment, or tax advice. No investment decision should be made based solely on information provided herein. There is a risk of loss from an investment in securities, including the loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for an investor’s financial situation or risk tolerance. Before investing, consider investment objectives, risks, fees, and expenses. Elevate does not provide tax or legal advice.